Anastas Kokkin: Modernization means a competitive advantage
What are the advantages of "Container Terminal Odesa" (CTO) that make it competitive enough in the market?
Firstly, SC "CTO" is the largest terminal in the market. This is further helped by the construction of the new container terminal at the Quarantine Pier which will become the more modern, high-tech part of the terminal. Due to the availability of an additional waterfront, we can maintain performance at a level that satisfies our customers, global container lines, despite the fact that the Black Sea container market is not their key sphere of interest. Our capacities allow us to maintain flexibility in handling ships without creating queues. Flexibility is important, as idle ships come at a huge cost.
Secondly, modern high-tech equipment and technology, as well as professional, experienced staff provide us with the highest fleet processing performance.
Thirdly, we are, in fact, the only public terminal - a "common user terminal", if to speak in professional jargon. We provide equal working conditions for everyone: from the smallest container vessels to large vessels of the leading world companies, taking into account the relevant container traffic flows.
Fourthly, we do not spare money to meet the requirements of sometimes rather capricious customers and always stick to a customer-oriented policy.
The Maersk company terminated its partnership with CTO a year ago. Despite the considerable loss of cargo turnover provided by Maersk, this did not significantly affect the growth rate of the CTO. How did you manage to equalize the turnover rates and overcome the loss of a high-profile client?
In spite of Maersk having left, CTO growth this year is more than 12%. Two factors have contributed. The first is that our large customers, such as the German company Hapag-Lloyd, or the Israeli ZIM, have boosted their cargo traffic. The second is that we have attracted new customers. In particular, YangMing, one of the leading companies in the world, and the Japanese giant carrier Ocean Network Express (ONE).
As for Maersk, according to statistics, the company has lost a significant share at the Ukrainian container market this year. We cannot say this is connected directly with its exit from CTO and transition to the "Yuzhnyi" port, but industry experts are likely to reach this conclusion rather soon.
How much has the corporate parent HHLA already invested in CTO?
HHLA has been functioning in the Odesa port as an operator since 2001. Serious investments started in 2009-2010 with the construction of a new container terminal at the Quarantine Pier jointly with USPA. Thanks to German investments, an additional 19.3 hectares were prepared, the state constructed a pier. The total investments of HHLA since its entry into the Ukrainian market amount to more than $150 million. Taking into account the growth of freight traffic in recent years and the construction of the new terminal, CTO has paid taxes worth more than a UAH 1 billion to budgets of different levels. And we continue investing.
Would you mind sharing some information on the investment plans to be implemented in the Odesa port?
The investment program up to 2044 has already been approved. It is updated annually depending on the market needs. Since summer we have begun to develop the rear territories - the newly prepared 19 hectares of the Quarantine Pier. We are constructing the first container storage and handling platform. We plan to complete the construction and commission the platform by next summer.
We are planning to work quite seriously on improving the railway infrastructure at the terminal, and contemplating over the prospects of building an additional railway branch line.
The programme also involves investment in the IT sphere. Creating a modern WEB-platform and going fully electronic will significantly improve the quality of our work.
We have the opportunity to develop what is called a multifunctional terminal. We have the deepest pier in the Odesa port, so we can even offer our neighbours to work with their cargoes: to pass the grain, to load large Panamaxes at our terminal etc.
What trends in the development of the marine industry, as well as the Ukrainian economy in general, give you the confidence to stay optimistic when implementing large-scale investment projects and to predict their success?
Even with all the crises our country has already experienced and is still going through, Ukraine's economic development potential is enormous. Accelerating reforms in all the spheres will provide even more ground for optimism.
The cargo flow containerization rate in Ukraine is extremely low - less than 1%. Just to compare: leading European countries have a rate of over 40%, the Netherlands have over 50%. But here is an interesting fact: despite the fact that starting from 2014, Ukraine’s seaports do not serve the territory of the Donbass, container traffic is still on the increase since 2016. Imagine the potential the container market has in the future, considering the further containerization of available freight flows. This is what motivates us.
How do you assess the competitiveness of Ukrainian ports in the Black Sea?
Historically, Ukrainian port fees have been the highest in the region. This year they have been reduced by 20%. This has not yet produced a global effect, but we have marked the trend.
As for their competitiveness in general, there are objective factors giving grounds to expect the stable developments of Ukrainian ports: no other regional port can handle the export-import flows to Ukraine. Moreover, the modernization and the construction of modern port infrastructure, mainly with foreign investments, is the key factor that makes our ports equally technologically developed as other ports in the Black Sea region. This is a fairly serious competitive advantage.
How do you go about establishing cooperation with state authorities concerning the implementation of infrastructure projects?
In 2009-2010, we established a long-term public-private partnership with Ukraine represented by the USPA on developing the "Quarantine Pier" project. The foreign investor has since fully met their obligations. Unfortunately, the same cannot be said of our partners: the piers were built well, but problems arose with the breakwater - it has deformed. These construction works were carried out by the USPA, we could not control them. For more than three and a half years there were continued trials, commissions and criminal cases. Finally, due to the powerful support of our corporate parent HHLA and the German government, the issue is, in fact, resolved. In particular, HHLA expressed its readiness to consider, together with the Ukrainian government, the issue of a target loan from Germany to Ukraine for the construction of the breakwater. Following the approval by the Ukrainian government of the modified breakwater construction project in December 2017, the construction works started this spring.
The fact that CTO is ready to work at a serious worldwide level is already quite clear. But to what extent is the infrastructure out of the terminal ready to support your success?
Taking into account the most recent improvements, CTO at this stage is satisfied with the Ukrainian infrastructure capacities. I am talking in particular of the railway infrastructure. The launch of regular container block-trains to Dnipro, Kharkiv and Kyiv gave us a huge positive impetus. Companies in Europe work exclusively with routed railroad transportation using container block-trains. This is the most efficient way of organising shipping. Try to imagine the situation: a regular train would deliver a container in 8-10 days to the Dnipro river, while a container train can get the same task done in a single day. Time is money. This is especially true when it comes to transit time. Moreover, the customers may be assured of the timely delivery of their cargo.
Today, intermodal logistics, provided by the terminal together with the state structures, allow us to work at a satisfactory level. However, additional infrastructure investments and technological improvements are needed to handle prospective traffic flows. So we are already working on this.
“Additional infrastructure investments and technological improvements are needed to handle prospective traffic flows”
As for the roads, half of a very serious project to thoroughly reconstruct the carriageway leading to the Odesa port has already been implemented by the USPA. We, the stevedoring and freight forwarding companies working in the port, are pleased to see this progress. After all, it is precisely us who provide huge profits to the budgets, including the USPA.