Aleksey Vadaturskyi: «The state’ task is to create conditions for the river shipping development, then the business will began to invest in the industry»

Larisa Yeroshkina 

Nibulon is a leader in the market of transportation by river and in the agricultural sector of Ukraine. By growing and exporting grains, building the own tonnage and restoring the shipping potential of Ukrainian rivers our enterprise creates, step by step, the innovative model of running business in Ukraine.

Mr. Aleksey Vadaturskyi, Director General of the company shared the algorithm of the company’s success and the plans for a revolutionary renewal of the transport map of the country in his interview given to Shipping magazine. 

Aleksey Afanasiyevich, Nibulon actively renews river shipping in Ukraine and, simultaneously, develops the agrarian sector of the country. Which is more difficult: to build ships, dredge rivers or grow grain?

Today Nibulon is a leader on the grain market. To remain successful, it is necessary to hold positions in the other interconnected sectors of the industry. Therefore we faced a task to set up a reliable transport infrastructure in Ukraine – our own river fleet. I never thought that we’ll have to be engaged in shipbuilding. However, there was no other way for us: either to order new ships abroad or establish our own shipyard. That is how we began to build ships.
In Ukraine there are 30 shipyards, at some time they employed about 140,000 – 150,000 workers. Nowadays this industry employs not more than 3,500 persons, including 800 of them working in our company. The remainder just wait for their jobs at Nibulon. The majority of highly-qualified specialists work at the shipyards of the world.

The employment situation tells about great problems with shipbuilding in Ukraine. However, despite of that, it is easy to build ships than wok in the agricultural sector. Shipbuilding means enclosed shops, an accurate work schedule and deadlines while the «agricultural» shop is under a clear sky and it is very difficult to plan anything in this case.

The company mainly carries grains, metals, coal, construction materials and melons. Do you intend to extend your cargo range?

Today’s economy is not ready to reorient itself to river transportation. Besides there is no infrastructure required for the development of river waterways because the existing capacities have a zero efficiency coefficient. Thirdly, there is no fleet for carrying cargo by rivers.

Thirty years back Ukraine had 4,500 km of internal waterways. Nowadays only 1,500 km are safe for passage of ships. Statistics says that every year Ukraine lost 100 km of navigable waterways which means that the entire rivers disappeared from the geographical map of the country.

Currently transportation by rivers is loss-making as compared with road and rail transport. It is unprofitable for cargo owners to carry cargo by river, so it is difficult to extend the range of carried cargo in the short-term perspective.

Therefore, the economy of transportation by river is loss-making, there is no incentive to develop internal shipping and, consequently, there is no domestic shipbuilding.

In 2017/2018 MY Nibulon carried about 2.5 mln tons by river. What figures do you want to achieve by the end of 2019? 

Every year the company builds up the traffic volume by 500,000 tons. In the next marketing year – from 1 July 2018 to 1 July 2019 we plan to carry 3 mln tons of cargo, and in 2019-2020 – 4 mln tons. Besides, we are planning to carry approximately 1 mln tons of construction materials by Yuzhny Bug. To this end we will build a terminal capable of receiving crushed stones, gravel and sand near Voznesensk town. According to our calculations, the total load on roads and highways in Nikolayev region only will be reduced by 1 mln tons.

We have set still another hard task – to carry about 50-60% of grain cargo of our company by river. It is a challenging task because the silos, ships and cargo in Europe belong to various companies that coordinate their work. Such economic pattern is unprofitable in Ukraine that is why we have to start and develop all these activities inside our company.

You are criticized often accusing of being a monopolist. Is it true?

We are not a monopolist. The point is that almost all cargo that we carry belong to us while the share of cargo belonging to other companies whom we provide transportation services is of minor importance. The fact that we are not a monopolist was confirmed in one of his interviews the Chairman of the Antimonopoly Committee of Ukraine.

At the same time Nibulon is a leader in the sector of river transportation and shipbuilding and a leader according to the attracted investment. We possess the most modern automated fleet in Ukraine. Those Europeans who visited our enterprise got surprised because even they do not have such ships as ours.

There is no such notion in our company as “drift of staff”. Moreover, we have our own school of shipbuilders. We begin to work with people beginning from vocational schools and give them a chance to get practical training while continuing studies. Also we have opened a training centre where young people can learn their future trades.

Many a company complain that there are no adequate conditions in Ukraine for business development and believe that we are capturing the market. But our motto is: Want to work, then take and do, and do not practice crows-pleasing.

Your plans are to invest USD 2 bln since 2019 in the port infrastructure of Egypt. Why Egypt? Does it mean that Nibulon re-orient itself on the development of partner countries? 

Ukraine is oriented on export of grain while Egypt is an importing country as far as the food commodities are concerned. We have black earth – they have sands. Our Dnieper empties into the Black Sea, their Nile runs into the Mediterranean. On the Nile cargo is carried upstream in the hinterland. This is a ling between two countries.

Nibulon stays in the Egyptian market since 2004 and plays far from being the last role in the food security of the country. I am sure that investments in the Egyptian infrastructure will bring profits to the agricultural industries of both countries and, directly, to the grain market of Ukraine.

While doing so, we do not intend to re-orient ourselves in favour of other states. We continue to implement our large-scale investment program in constructing a network of cargo-handling terminals. Our shipbuilding capacity is aimed at developing activities in Ukraine and is scheduled for 3 years ahead. We have what to do here.

– Nowadays, the traffic volume in the rivers of Ukraine hardly reaches 7 mln tons per year while the total capacity of the market equals 61 mln tons. What is your opinion on the cause of such discrepancy?   

The global cause is in the general decline of the economy and the changes in the market situation when the infrastructure became very expensive and it became unnecessary to carry cargo by rivers.

Transportation by rivers became uncompetitive as compared with road and rail transportation. Today the Ministry of Infrastructure of Ukraine governs all kinds of transport; as a result, the industries do not develop as they should. The Ministry’s priorities are sea ports and rail transport while practically no attention is paid to the development of internal waterways that are competitors to sea ports. However, the Ministry of Infrastructure of Ukraine should and must listen to business that wants to develop internal waterways and create such conditions that transportation by rivers can develop and be in harmony with the sea port development. 

Who should be the main lobbyist in restoration of the Ukrainian rivers potential: business or the state?

The state should create conditions for the development of river transport and national shipbuilding. If the government defines river transport to be a priority for the next 10-20 years, and implement fundamental changes in the industry legislation, it will be a real contribution to its development – the business will do the rest. Development of shipbuilding should be the other priority.  After the appropriate favourable conditions are created, the business will re-orient itself.

What changes in the legal base are necessary so that the river transport becomes economically profitable option for cargo carriage?

First, do not allow of introducing a river charge. We always were against an additional charge, however, the Ministry of Infrastructure and the authors of the draft law dropped this idea only after the joint meeting in the EBRD.

Second, it is necessary to cancel or compensate the now existing excise on fuel for the river and coastal trade. Such measure will result not only in higher competitiveness of the Ukrainian shipowners with respect of foreign shipowners (nowadays a Ukrainian shipowner who legally buys bunker same as us, pays UAH 10,000 more per ton that a foreign shipowner) but will, also, nullify smuggling of fuel in Ukraine.

Apart of that, now the river transport carries a burden of lock dues, bridge raising charges and a rent for use of water resources. As soon as we launch a new ship, we are obliged to pay while this obligation does not extend on a foreign ship entering Ukraine; by the way, it also concerns excise on bunker because foreign ships do not bunker in Ukraine.

That is why, without the above issues being solved, there will be no development of cargo and, moreover, passenger transportation in Ukraine.

By the way, talking about passenger transportation by rivers. In 2017 your company launched voyages in the Dnieper and Yuzhny Bug. Is such activity profitable?

Carriage of passengers by rivers is loss-making as compared with road and rail transportation, therefore, it is our social project. We wish to attract the attention of the government and business to this sphere.

I’ll repeat again: until the excise on bunker, lock dues, bridge raising charge and rent for use of water resources are cancelled, passenger transportation will not develop and the river transport will not become competitive.

Nibulon does not just carry cargo and passengers but also actively builds its own ships. How you manage to hold the ground in being the leading shipbuilder of the country?

Uniqueness of the company is in its being owners of agricultural products and silos which we build ourselves, and of the own shipbuilding yard and fleet.

In order to ensure development of, say, one shipyard, it is required to invest USD 2 bln in the infrastructure of Ukraine. We have done it and today our own shipyard works at full capacity. We have already invested about USD 20 mln in it. I am sure it will be the best shipbuilding yard in Europe.

The government can take our experience as a model for development of the shipbuilding industry and internal waterways of Ukraine. It is necessary to give credence to our experience, take them into account and then not only Nibulon but also plenty of other companies will be developing.

Today shipbuilding in Ukraine is in crisis. What do you think, how the industry can be restored?

Now there exist several important legislative initiatives (draft laws Nos. 6732, 6733, 6734 and 6735) which can start up a process of shipbuilding restoration in Ukraine (the essence of the draft laws is described in No.6 issue for 2018 – editor’s note). Should they are not adopted, the industry will not come out of crisis and the river shipping will not be restored. I will add that these draft laws correspond to the EU standards and experience of the best world states. Ukraine should not invent something new, it is sufficient to apply the development model which the other states implemented during their historic development of 100-150 years.

Aleksey Afanasiyevich, please, share with us the investment plans of the company for next years.

First of all, I’ll point out that all investment plans are harmoniously linked to the company development and are in full correspondence with its strategy. After we accomplish 90% of our investment program, it will become an example for the development of the internal infrastructure of Ukraine and change the transport map of the country.

This program will also reduce technogenic and environmental pressure on the cities, highways and interregional transport routes. After Nibulon removes 4 mln tons of cargo from the road and commences to carry them by rivers, it will mean almost UAH 4 bln savings on the roads repairs.

As regards the projects proper, we are planning to construct two terminals in Ternovka town (Zaporozhye region) and in vil Marianskoye (Dnepropetrovsk region). In the long-term perspective two more terminals will be built.

Besides, we want to build up capacities of the existing silos complexes by almost 20,000 tons each – this is equivalent to construction of two new complexes. We would like also to construct an oilseeds processing plant in Nikolayev. Naturally, we will proceed with development of cargo transportation on the Dnieper and continue to build ships.

We are leaders in these two directions and will do everything so that reinforce our leading position in future.

 

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