Ukrainian company Informall BG, a cargo analytical and consulting bureau based in Odessa, suggests another way to address both, the humanitarian crisis in Ukraine and the food crisis in the world.
Ukrainian seaports have been blocked since the beginning of the Russian invasion of Ukraine on 24 February 2022 up until the ‘Black Sea Grain Initiative’ made it possible for the first bulk carrier to safely leave the port of Odessa on 1 August.
Economic warfare
Naturally, the blockade of sea transport routes for months significantly affected the country’s economy and its ability to quickly respond to nationwide humanitarian needs.
“Ukraine’s economy is suffocating over blocked seaports today,” said Daniil Melnychenko a data analyst of Informall BG. “Although grain and vegetable oil shipments have resumed in the ports of the Odessa region for a period of time, a number of other key export commodities are restricted to alternative export routes only. At the same time, import shipments via the Black Sea ports of Ukraine are still fully suspended for both container and bulk carriers. All traditional container routes to the Ukrainian Black Sea ports are blocked since 24 February and container terminals remain to be cut off from international liner services.”
Alternative shipping routes are not a solution for Ukrainians
“Despite the international shipping community’s efforts to accommodate Ukrainian container traffic via alternative routes during the last eight-month period, there is still no better logistics solution than to reopen Ukrainian container terminals on the Black Sea and restore direct liner service to our ports,” noted Daniil Melnychenko.
According to Informall BG data, laden container turnover of Ukraine in 2021 was up to 70,000 TEU per month, however, since Ukrainian Black Sea ports have been blocked the country’s turnover dropped to a level of avg. 6,500 TEU per month, a significant decrease of 91%.
Below is a map developed by Informall BG that displays emerged container shipping routes in Ukraine not existed prior to the war – with an exception of Poland. Indeed, little container traffic between ports of Poland and Ukraine existed before the war, however, today Poland plays a much more significant role in moving Ukrainian containerised cargo. According to the company analysis, around 60% of container traffic is moved via Romania, another 35% of containers are delivered via Poland and the remaining 5% have been transported via alternative routes since the beginning of the war.
Extra extra-costs for consumers
Container transportation was an efficient and affordable solution for Ukrainian importers and exporters for consecutive years. Between 2013 and 2021 the total container turnover of Ukraine has substantially increased by 30% from 780,000 TEU to over 1 million TEU per annum according to Informall data. Today, as the full-scale war unfolds container shipping in Ukraine became an extremely complex and expensive way to deliver commercial goods and importantly humanitarian aid to Ukraine.
Informall BG spoke to leading freight forwarding agencies in Ukraine finding out that container logistics to/from the country has substantially increased in cost since the beginning of the war – by around 25-40% depending on the final destination in Ukraine.
Vassiliy Vesselovski, CEO of Informall BG, explains, “Obviously if Ukrainian container terminals would be open today ocean freight rates to/from Ukraine would not be identical to neighbouring Romania as it was in pre-war times. Indeed, insurance premiums and common feeder operators’ sea freight appetite will be the main factors influencing the final shipping cost to Ukraine. However, direct container shipping to the Black Sea ports of Ukraine would allow saving 25% and more on each shipment owning to affordable domestic truck rates, shorter ‘last mile’ delivery distance and absence of over-land cross-border transit procedures.”
Black Sea “Container Shipping Initiative” is the next step
Informall BG consultants suggest that a new Black Sea “Container Shipping Initiative” could be the next step in mitigating the effects of the war while reviving some seaports of Ukraine.
The “Container Shipping Initiative” might work following the model of the “Grain Deal” where Turkiye and the United Nations played mediating role between Ukraine and Russia. Although, this time the initiative is meant to support the most vulnerable in Ukraine, civilians suffering from the war.
Humanitarian aid in ocean containers is currently being delivered to Ukraine only via foreign ports followed by overland transportation by road and rail. The unsustainable logistics on the routes is inefficient, costly and most importantly – time- and resources- consuming.
On top of the humanitarian aid, Ukraine requires tons of construction materials, building tools, heavy-duty equipment for building repairs and, importantly, civil infrastructure restoration. Considering the approaching winter time period and the nature of damages caused by the war so far, Ukraine is in dire need of building materials such as wall insulation materials, window glass and frames, roofing materials etc. in large quantities. Moreover, recent Russian mass cruise missile and kamikaze drone attacks on power plants across Ukraine provoked a country-wide power outages meaning, power generators and inverters need to be supplied at soonest.
Naturally, the most efficient and cost-effective way to deliver large amounts of cargo to Ukraine in a short time would be ocean containers. Considering currently congested cross-border points in Ukraine for both trucks and trains – traditional container shipping via seaports of Ukraine would streamline essential aid to those who is desperate for help.
In a view of economic struggles, all parties would benefit well from restoring direct container shipping which will provide financial relief to Ukraine, its allies and sponsors who supply humanitarian aid and other essential civil goods to the country via costly alternative routes.
“A cut in shipping cost on account of optimization of container logistics is an important contribution to increase of aid volume and decrease in delivery time,” pointed out Vassiliy Vesselovski.
The logistics model of the “Container Shipping Initiative”
Important to remember that before 24 February the vast majority of ocean containers destined for Ukraine were delivered via Greece, Egypt and Turkiye, the main regional container hub. Only two direct vessel services existed in Ukraine in 2022, CMA CGM “Bosporus Express” and Maersk “ECUMED Service” while the remaining volume has been shipped to Ukrainian seaports via various feeder connections.
Informall BG experts suggest that Turkiye is in a position to arrange an inspection of ocean containers with humanitarian aid and other non-military civil goods destined for Ukraine during the transshipment via one of its seaports. Moreover, Turkiye is able to “free two birds with one key”, while accommodating direct ocean container transportation to Ukraine, feeder vessels will be reloaded with export containers that carry Ukrainian grains in return.
Alexander Khromov, a project manager of Informall BG, shares, “It was a common practice in Ukraine to export small shipments of grains in ocean containers – 10 to 50 TEU per one lot. Naturally, depending on the harvest season, the monthly volume of shipments is fluctuating. For instance, as per our data, Ukraine exported 6,000 TEU of various grains and vegetable oil in containers during August 2021 only [assuming 1 TEU equals 24 metric tons]. In addition to grains, products such as meat, eggs, milk, beverages, fruits & vegetables, etc. accounted for another 2,650 TEU in that month”
Amid dropping ocean freight rates today and the rising cost of food worldwide, the restoration of direct container service to Ukraine would make sense from both – humanitarian and business points of view. At the same time, the initiative would allow addressing food-crisis in those countries which used to receive Ukrainian grains, flour and vegetable oil in ocean containers before the war: Oman, Yemen, Sudan, Kuwait, Somalia, Cameroon, Nigeria, Lebanon are a few of them – experts suggest.
In order to arrange for the soonest inspection of Ukrainian import and export traffic X-ray scanning is to be utilized in the port of transshipment. Informall experts say: X-ray scanning practice is proven to be effective and such a security method is commonly used in the container shipping industry in many countries including the USA. X-ray screening allows to quickly identify and isolate suspicious shipments in the port of transshipment for an additional scanning or in-person check, before the cargo ever reached the final destination.
In our case, containers will be scanned in the port of Turkiye in order to ensure only NON-military goods are shipped to Ukraine under the new “Container Shipping Initiative”. Finally, once clearance is obtained, containers are loaded onto feeder vessels proceeding to the ports of the Odessa region via the ‘Black Sea Safe Corridor’.
Restoring direct container shipping to Ukraine is a matter of political will
“Similarly to the ‘Black Sea Grain Deal’ arrangement model, Ukraine needs to appeal to the United Nations for the soonest restoration of direct container liner service via container terminals of Ukraine,” said Vassiliy Vesselovski. “In turn, the United Nations shall initiate the negotiation process of a ‘humanitarian corridor’ with Russia, Turkiye (or other container-hub country of goodwill) and Ukraine in order to ensure safe container shipping to and from seaports of Ukraine.”
The coordination of categories of goods that will be covered by the ‘Container Initiative’ in import and export must be a part of the negotiation process as well. Essentially, the ‘Container Initiative’ that is suggested is the replication of the already existing ‘Grain Deal’ that is adapted for the container shipping industry. Providing United Nations’ involvement in the talks and Turkiye experience in the ‘Grain Deal’ – the ‘Container Shipping Initiative’ is a matter of political will.
Shipping lines that are currently involved in moving containers to and from Ukraine have already established certain rules and procedures that allowed them to balance the risks and costs of shipping model in Ukraine. Importantly, that there are no mandatory procedures to inspect each ocean container shipment destined for Ukraine during the transshipment via foreign ports. Various kinds of cargo are free to be delivered to Ukraine from foreign ports without physical or x-ray inspection.
Informall BG data shows, that container turnover of Ukraine [during the in-war period] is slowly growing month over month, although it is largely attributed to the incredible amount of effort and resources each participant of the supply chain put in. “Those efforts, resources and funds that are currently wasted on exhausting and complicated intermodal container logistics today can be and need to be diverted towards the soonest restoration of the traditional direct container shipping to seaports of Ukraine,” believe Informall BG experts.
Contributors of the article:
Vassiliy Vesselovski, CEO of Informall BG
Alexander Khromov, Project Manager of Informall BG
Daniil Melnychenko, Data Analyst of Informall BG
Informall BG accommodates foreign investors in business set up and development in the Black Sea countries: Ukraine, Romania, Bulgaria, Russia (Black Sea), Georgia.
