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The Port of Odessa is set to hold the top position in Ukraines maritime sector in terms of both total tonnage and container throughput in 2012 after overtaking the Port of Illichivsk in terms of boxes handled in 2010.

Odessa has a strong position to build on in 2012. The operator of the container facility at the port, HPC Ukraina, the Ukrainian unit of Germanys Hamburger Hafen Und Logistik (HHLA), is seeking to increase the ports role in the global container shipping sector by developing it into a direct port of call, thereby decreasing Ukraines reliance on the Romanian port of Constantza for its box transhipment. Over the mid term we project further growth at the port of Odessa. Illichivsk, which returned to positive growth in box throughput 2010, will struggle to compete.

Headline Industry Data

- 2012 Port of Odessa tonnage throughput forecast to grow 3%, over the mid-term we project a 21% increase.
- 2012 Port of Odessa container throughput forecast to grow 3%, over the mid-term we project a 13% increase.
- 2012 total trade growth forecast at 8.55%.

Key Industry Trends

Deep Water Port For Greater Black Sea Share

Ukraine is seeking to increase its market share of Black Sea shipping with the development of a deepwater port. BMI considers the countrys plan for such a facility a wise move, as the current trend in both the container and bulk sectors is to operate larger vessels. A port which strives to cater for this trend is likely to ensure its position in the global shipping supply chain.

Diversifying With Box And LNG Strategy

Currently geared toward catering for the bulk shipping sector, the Port of Yuzhny is likely to seek a role in the box and liquefied natural gas (LNG) sectors in the medium term.

Port Privatisation Bill On Hold

Ukraines president, Viktor Yanukovych, has vetoed a bill related to the privatisation of the countrys seaports. Several private terminals already exist in the country, with private operators managing between 35% and 80% of its ports.

Risks To Outlook

The base for growth at the countrys main ports stems from BMIs positive outlook for the Ukrainian economy. Container throughput will be driven by consumer household consumption, a section of the countrys economy that is still strengthening. We see Ukraine gradually rebalancing its economy away from the debt-fuelled consumer spending model seen over 2005-2008, as exports continue to drive the economy and consumer credit growth resumes at a sustainable pace. The countrys real GDP is estimated to increase by 4.1% in 2012.

Our Country Risk team sees some IMF programme implementation risks for the country: while our core view calls for Ukraine to adhere to the conditions under its IMF Stand-By Arrangement, a breakdown in relations between Kiev and the international lender would significantly undermine confidence in the domestic economy. However, we currently forecast investment expenditure in Ukraine to increase in the years ahead as the government and private enterprises finally focus on upgrading ageing Soviet-era infrastructure. This, coupled with deepwater terminals plans, creates longer term upside risks to our throughput forecasts for countrys ports.