General market situation and trends of competition

For the first nine months  of  2013, the containers handled increased by  8.68% over the same period of 2012. But this growth for the major players in the market was distributed very unevenly.

Major players of the Ukrainian market of container transshipment seaport

"TransInvestServis," (TIS), has grown at a phenomenal rate of 81.75%, ensuring development through the Maersk line

For instance, "HPC Ukraine" showed an increase of 17.54%, while the "Container Terminal Illichevsk" (CTI) and "Brooklyn-Kiev Port" (BKP) showed a drop of 6.23% and 5.18%, respectively .   During the same period, the terminal "TransInvestServis," (TIS), has grown at a phenomenal rate of 81.75%, ensuring development through the Maersk line. If such trends continue through the end of the year, the proportion of the volumes of the terminals will be as follows:

Estimations of Ukrainian container terminals market in 2013

the container terminals are not only competing with each other, but also with the lines, often drawing on recent individual cargo

In the above scenario, the cargo owners and forwarders have all the capabilities of the terminals, plus the additional benefits resulting from the competition between the stevedore companies. Thus, the container terminals are not only competing with each other, but also with the lines, often drawing on recent individual cargo. The above-mentioned, very significant increase in the volume of transshipment at TIS - is a clear confirmation.

Maersk shipping line has its own direct service from the Far East to Odessa and Ilyichevsk, and the ECUMED service from South America to the TIS. ECUMED accounts for 68% of imports from the Far East and 56% of exports to the same region. In this case, in fact, there is a competition between two related/affiliated services to attract clientele.

Competition is, on the one hand, for the container traffic, which, for the last three years has come to Ukraine through the Baltic Sea, and in 2013, according to our estimates, will amount to 100 thousand TEU. On the other hand, current handling rates for (THC) containers are still regulated by the state, though all market participants are waiting for the cancellation of this policy. Thirdly - state agencies did not contribute to enhancing the capacity of the terminals. Rather, the contrary - here we must mention the introduction of 100% scanning of containerized cargo, using GPS- tracking seals for containers moving through customs, and similar complications exiting the ports and inhibiting the movement of imports. Among market participants there is the opinion that all this is artificially created - (like the deficit of GPS-seals) - in order to reduce the quantity of imports in general, and improve the foreign trade balance of Ukraine ...

all the terminals use the possibility of negotiating directly with freight forwarders who control the cargo

In the case of THC-container terminals, competition is mainly within non-price parameters. Tough competition arises when the terminals have the right to influence the prices - for storage, stuffing and unstuffing, and other additional payments from customers, (such as a fee for using the infrastructure of the port). Also, all the terminals use the possibility of negotiating directly with freight forwarders who control the cargo. This allows them to negotiate a redistribution "by itself" container flows.

Capabilities of major terminals

Odessa Sea Port. This port has two container terminals - HPC and BKP. The first of these is a subsidiary of Hamburg Port Consulting, owned by HHLA group, the operator of a container terminal in the port of Hamburg. This relationship provides an opportunity to communicate with the top-management of container lines and use the latest theories and practices in terminal management. However, German business principles do not allow the level of flexibility necessary to solve local problems on the spot, using the entire "arsenal" of modern Ukrainian negotiators.

HPC's largest customers are MSC, ZIM and G5

The primary victory for HPC  in the past few years was attracting G6 service to the terminal. (In autumn 2013 it transformed into G5 - after line OOCL  moved to ZIM vessels in September 2013.)  HPC's largest customers are MSC, ZIM and again G5. With the expected opening of the P3 service, (which will consist of a joint ship calls of Maersk, CMA CGM and MSC), Ukrainian "Hamburg Port Consulting" risks losing volume at MSC to " Brooklyn-Kiev Port," because one of the owners BKP is a CMA CGM – P3 alliance member.

prospects for launching P3 remain murky

Of course, the prospects for launching P3 remain murky. But if it happens, and MSC joins this service and re-routes their container handling from the Odessa port to the BKP terminal, the "HPC Ukraine" will have to be focused primarily on the ZIM. (However, this is a significant quantity; only the joint volumes of G5 alliance members is larger than ZIM.)

BKP will be able to maintain P3 service in terms of volumes allocated to the Odessa seaport

So how can terminals compete for new container services? For performance, HPC exceeds the BKP, and with the introduction of the new quay with two super-post-panamax STS cranes, the company will be able to handle the newer container ships with 20 rows of containers on board. In return, BKP may offer the same price as the HPC. As for productivity, the BKP will be able to maintain P3 service in terms of volumes allocated to the Odessa seaport.

At the moment, there have been talks that in April 2014 the BKP will deliver another STS crane from Malta. After that, the stevedore will have three such cranes on the quay. (The two existing STS cranes can each reach 18 rows of containers.) At the same time, the company, despite the limitations of the port ground area, will still have opportunities to expand the area for container storage. This obviously would be a plus, if the BKP is still handling volumes of Odessa's P3 service.

Ilychevsk. In the commercial seaport of the city is the "Container Terminal Iljichiovsk," belonging to former shareholders of the NCC, which this year was absorbed by Global Ports. In addition, the segment also includes the container terminal of Ilyichevsk fish port, which had previously served several feeder services.

the choice of the main terminal for ships for P3 service could pass between Odessa BKP and the Illychevsk CTI

CTI has a 3-year option to purchase 50% of its shares. But due to the loss of market share and stiff competition with other terminals, it is doubtful that this option would ever be implemented. If this happens though, then the choice of the main terminal for ships for P3 service could pass between Odessa BKP and the Illychevsk CTI.   For example - as an "affiliate" -  one of Global Ports shareholders holding the said option is APMT - the terminals unit of Maersk Group, another member of the P3 alliance.

A cheaper option for customers could be Ilichevsk fish port

A cheaper option for customers could be Ilichevsk fish port, where, in principle, everything is ready for the berthing of container ships - in terms of the necessary equipment. Through the provision of tariff discounts and lack of infrastructure charges, the fish port has the potential to attract container lines. Currently, ZIM ships come once a month and unload imported car assembly sets, but regular service has not yet been announced. It is known that the terminal is actively fighting to attract container lines like CSCL, PIL, WHL, Kline, YML running on ABX service. YML line was selling slots to COSCO and Hanjin, but Hanjin will discontinue its service with ABX in Feb 2014. The future of ABX service is uncertain, and the outcome of the container terminals' struggle for attracting it has not been yet materialized in the specific vessel calls.

Yuzhniy Port is represented by container terminal of TIS; currently at TIS only ECUMED- line service from Maersk is operating. Service, however, is developing quite rapidly, and 24 % of the Ukrainian container volume of Maersk line passes through TIS. ECUMED was considering a direct service from South America, (the so-called "banana service"), but instead has been successfully used as a feeder for cargo from South-East Asia, which now amounts to 68% of the total containerized imports at TIS and 54 % of exports. Most of the major freight forwarders have had positive experiences with TIS, and the development of the TIS container terminal is constrained only by the lack of container services.

Most of the major freight forwarders have had positive experiences with TIS

24 % of the Ukrainian container volume of Maersk line passes through TIS

TIS can also compete for the P3, having, among their assets, better navigational conditions than the other container terminals and three STS super-post-panamax cranes with a range of 20 rows. Such range is available elsewhere only at Odessa's HPC terminal's new berth on Quarantine Mole.

Why P3 alliance is important for container terminals

Together, P3  provide more than 51% of the container traffic for Ukrainian seaports.

Aggregate volume of the container flows of MSC, Maersk and CMA CGM, which form this alliance, make up 53 % of the market in the Black Sea. In real terms for the first nine months of 2013 they amounted to 725.8 thousand TEU from 1.35 million TEU of total volume of the Black Sea. In this reporting period, the total for the three lines' flow increased by 5.55 %. Among the individual lines, the highest growth rates were observed in the MSC - 10,54%, followed by Maersk with "plus" of 3,29%. But through the first nine months 2013, CMA CGM, has seen a drop of 1.72 % from last year. Together, these three lines provide more than 51% of the container traffic for Ukrainian seaports.

Source: Informall