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Thursday, February 21

Election Alert: Re-Privatizing PrivatBank Would be ‘Deal Breaker’ for IMF…Florida Investors Bet on Ukraine Sugar Revival…Corn Harvest Jumps 50% in 2018…India’s Cooks Save Ukraine’s Sunflower Oil Industry…ZAZ to Make South Korean Tractors?...Mariupol Gets New Mass Transit Fleet…Zaporizhia Opens $10 million Air Terminal in Summer
James Brooke
by James Brooke
UBN Morning News is reported and written by James Brooke, a former New York Times foreign correspondent and Bloomberg Moscow Bureau Chief

Looking at next month’s presidential election, veteran Ukraine analyst Timothy Ash warns that returning Privatbank to its former owner, Ihor Kolomoyskyi, would be a “deal breaker” with the IMF. Volodymyr Zelensky, leader in opinion polls, has had his comedy show on Kolomoyskyi’s 1+1 TV channel for over a decade. Yulia Tymoshenko, runnerup for second place, is rumored to also receive Kolomoyskyi funding. “There is concern that Tymoshenko and Zelensky are backed by Kolomoyskyi, and the price for that will be the return of Privatbank to former owners and then higher level personnel changes at the NBU,” Ash writes, referring to the central bank. “Returning Privatbank to its owners, after a cost of over 5% of GDP to the state in bailout costs… will be an anathema to the official creditors.”

Betting that world sugar prices will rise, Florida-based Kopernik Global Investors LLC has bought 12,947 shares of Warsaw-listed Astarta Holding, raising its stake over 5%. Between February 2017 and August 2018, the price dropped in half. Since then, sugar prices recovered slightly, to 13 US cents a pound. Dragon Capital writes: “Kopernik’s latest share accumulation may reflect bottom-fishing demand in anticipation of a bounce in the sugar market. Astarta’s shares slid by 59% in USD terms in 2018, hitting the lowest level since 2015 on a drop in global and domestic sugar prices.”

Ukraine’s sugar beet plantings are to drop 20% this season, to 220,000 hectares, S&P Global Platts reports from London, citing “a source close to the National Association of Sugar Producers.” Sugar experts forecast a similar drop in plantings in the EU and Russia. Platts notes that Germany’s Suedzucker, the world’s largest corporate sugar producer, said last month it is considering closing factories. In September, Tereos, France’s largest sugar producer, said it was planning to cut plantings to cut sugar beet production by 5%.

    Ukraine’s corn harvest last year was up 50% y-o-y, to a record, 35 million tons, reports the U.S. Department of Agriculture’s Foreign Agricultural Service. The Service reports that 5% of the corn may have been left to rot in the fields because silos were full. On Wednesday, the State Statistics Service reported that the nation’s capacity for simultaneous storage of grain, beans and oilseeds grew last year by 7.3%, to 78.3 million tons. Of this amount, farms owned 58%.

    Sunflower cooking oil exports could rise this year by 16% to 6.2 million tons, the USDA predicts. This follows a 15% rise in seed production last year, to 14 million tons. India emerges as the savior of Ukraine’s industry, Fiscal Service statistics show. Last year, India bought 45% of Ukraine’s total exports. Exports to the next 11 countries dropped.

    MHP, Ukraine’s largest agricultural producer, is obtaining a €120 million loan from ING Bank NV. According to Interfax-Ukraine, the loan is guaranteed by Zernoproduct MHP, the company’s grain unit with assets valued at €192 million. Based in Myronivka, 100 km south of Kyiv, Myronivsky Hliboprodukt is the nation’s largest chicken producer.

    Capital investments in farming hit $2 billion during the first three quarters of last year, Elena Kovaleva, deputy minister of Agrarian Policy and Food, tells reporters. A major portion went into two declining areas of animal husbandry – cattle breeding and pig production. About $500 million was invested in dairy processing and baby food production. Kovaleva called this investment volume “amazing.”

    Zaporizhia Automobile Plant, or ZAZ, has started assembling a test batch of South Korea’s LS Mtron tractors. LS, South Korea’s largest tractor maker, has factories in Brazil and China. “The creation of a joint venture with the manufacturer is not being discussed yet,” Dmytro Skliarenko, spokesman for UkrAVTO, the ZAZ parent company, cautioned Interfax-Ukraine. ZAZ has signed a distribution agreement with LS and has presented LS tractors at agro fairs here. Priced between $38,000-70,000, the LS models under study would go head to head with MTZ Belarus tractors, imports popular among Ukraine’s small and medium farmers.

    Despite Russia’s harassment of merchant ships in the Azov, Asket-Shipping increased its grain silo storage capacity in Berdyansk last year by 42%, to 100,000 tons, reports the Center for Transportation Strategies. Victoria Abreyeva, director of the Berdyansk branch, says of the export-oriented investments: “All our warehouses are equipped with truck weighing complexes and laboratory equipment.”  Asket has export warehouses in the ports of Kherson, Mariupol, and Mykolayiv.

    While the EU studies new road and rail aid to Ukraine’s Azov, two international financial institutions are loaning €25 million to Mariupol, the region’s largest city, for new buses, trams and trolleybuses. Located 30 km west of the front lines, Mariupol’s population has grown to 450,000, swollen by people leaving the separatist controlled section of Donetsk region. On Wednesday, the World Bank’s International Finance Corporation signed a €12.5 million low interest loan for Mariupol to buy 64 large buses and to rebuild the Soviet-era bus depot. Similarly, last summer, the EBRD approved a €13 million loan to Mariupol to buy new trams and trolleybuses. Largely powered by overhead electric lines, city’s modern mass transit fleet also is designed to cut carbon monoxide. Largely because of Metinvest’s Iron & Steel Works on the city’s eastern edge, Mariupol has the worst air pollution of Ukraine’s 39 largest cities, according to a study last year by Kyiv’s Central Geophysical Observatory.

    Zaporizhia, the closest airport to Ukraine’s isolated Azov coast, opens a $10 million steel and glass passenger terminal this summer. Last year, the airport handled 400,000 passengers, a post-Independence record. Flights were up 10% and passengers were up 15% to make Zaporizhia the sixth busiest in Ukraine. With two flights to Kyiv, on UIA and on Motor Sich, three quarters of traffic was international. Last year LOT Polish started flying to Warsaw. This year, SkyUp starts flying to Turkish and Egyptian resorts. This year, $35 million is being spent to upgrade the 223 km Mariupol-Zaporizhia road, cutting the drive time from the Azov to the airport to three hours. Road work is also trimming the Berdyansk-Zaporizhia airport drive time to three hours.

    Wizz Air, the airline with the most flights to Lviv, is expanding its flights by 17% this spring, to 30 per week. After launching flights to Copenhagen on March 1, Wizz Air will fly from Lviv to 10 EU cities.  Ryanair and UIA are tied as the airport’s second busiest airlines, five international destinations.