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Tuesday, July 16

River Cargo Jumps 40%...Corn Harvest to Match Last Year’s Record...Rail Modernization Needed...Oil Refinery Investment Needed...Football League Expanding back to Pre-War Size...Accor Building 3 New Hotels in Kyiv
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

River cargo along the Dnipro jumped by 40% to 4.2 million during the first half of this year, compared to the same period last year, reports the Ukrainian Sea Ports Authority. With trains struggling to move the 2018 bumper grain crop, river barges moved 1.7 million tons of grain, more than double last year’s tonnage. Construction materials, largely sand and gravel, grew by 7.5% to 1.8 million tons. Metal products rose by 45% to 647,000 tons. With larger boats on the river, the number of cargo trips dropped by 23%, to 4,453.

Ukraine’s largest river shipper, Nibulon moved 3.5 million tons on the Dnipro and Southern Bug during the grain marketing year that ended June 30. Nibulon moves grain, metal, coal, fertilizers, construction materials, and Kherson watermelons. Joining a growing movement toward private rail wagons, Nibulon started last week to use a specially commissioned fleet of 20-grain hoppers. Each is capable of carrying 120 cubic meters of grain, 26% more than standard Ukrzaliznytsia cars.

If good weather holds up through July, farmers will match last year’s record 35.5 million corn harvest, Tetyana Adamenko, head of agriculture at Ukraine’s state weather forecasting center, tells Ukrinform. Last week, the US Department of Agriculture also raised its Ukraine corn crop forecast to 35 million tons. The USDA also raised its corn export forecast by 1 million tons to 28 million tons.  In recent years, Ukraine has displaced the US as the top exporter of corn to China.

    For the early crops, farmers have already harvested about half of the land planted in wheat, barley, and peas. Already 10 million tons of wheat have been harvested.

    With Ukraine’s grain harvest expected to hit 100 million tons by the mid-2020s, major investment is needed to upgrade the ‘creaking’ state railroad, Worldgrain.com reports from the recent Black Sea Grain Conference in a lengthy article headlined: Ukraine’s meteoric rise in grain

    Although 20,000 grain hoppers – half of the national fleet – are privately owned, shippers have to rely on state railroad’s Soviet-era locomotives. Three have burned since May. Sergey Feofilov, director general of UkrAgroConsult, says Ukrzaliznytsia prioritizes the nation’s ‘50 to 70’ elevators that are capable of filling a 54-car ‘block train’ – a single commodity train that goes from one station to one port. Owners of hundreds of other elevators smaller operators are at the mercy of train schedules that are often ignored.

    Major investment is needed to modernize railroad freight stations at Ukraine’s big Black Sea ports, writes World grain, a US-based news site. Port stations date from the Soviet era, a time when they were  oriented to handling imports.

    Naftogaz’ Friday Eurobond placement of the equivalent of $1 billion echoed Monday through the analyst world:

    Concorde Capital’s Alexander Paraschiy writes: “The amount raised is more than the company was expected to raise from Eurobond placement…All in all, we consider the placement as being successful.”

    Dragon notes that the Naftogaz spreads were wider from the sovereign than the Ukrzalinytsia placement of two weeks ago. Dragon writes: “Uncertainty about the planned unbundling of the domestic gas transit system and unclear outlook for Russian gas transit from 2020 onwards probably affected investor sentiment.”

    Some bond money is to go for filling Ukraine’s natural gas storage reservoirs in advance of gas transit talks with Russia in September. On Monday, Naftogaz said the company has stored 14.5 billion cubic meters, almost three quarters of the way toward its goal of 20 bcm. Last fall, Ukraine stored only 16.9 bcm.

    Ukraine can cut household gas consumption in half, to 9 bcm, by winterizing Soviet-era apartment blocks, Gennadiy Zubko, Regional Development, Construction, and Housing minister, tells Novoe Vremya. To date, 650,000 homeowners have taken advantage of the government’s ‘warm loans’ program to invest in modern windows, doors, radiators and gas boilers. Last week, Zubko signed an agreement with the World Bank’s International Finance Corporation to extend the warm loans to apartment buildings managed by condominium associations.

    Ukraine needs to stop the smuggling of gasoline and diesel and attract investment into “two to three efficient refineries” Edward C. Chow, a Chevron veteran, writes for the U.S.-Ukraine Foundation. “In percentage terms, Ukraine today relies more on imported oil than on imported gas,” Chow writes as Ukraine’s first imported load of American oil flows by pipeline from Odesa to the nation’s lone working refinery, in Kremenchuk. “Most imported crude oil and refined products continue to flow from Russia.”

     Because of smuggling, “there has been no investment in Ukrainian refineries in the last 15 years for much-needed modernization,” he writes from Washington.The remaining idle refineries mainly serve as terminals for smuggled products…the answer here, as in gas and electricity, is to modernize the way business is done in oil so that Ukraine can integrate into the larger European market.”

    Due to a delay in receiving new jets, Wizz Air will cut 24 flights a week from Kyiv to slightly more than half of its 30 EU destinations. From Aug. 3 to 20, frequencies will be reduced to 17 EU cities, nine of them in Germany. For its Ukraine routes this year, Wizz Air has allotted 2.6 million seats. Wizz is considering re-opening its Wizz Air Ukraine unit, closed in 2015.

    In a sign of economic confidence, Ukraine’s football league is expanding back to 16 teams, the number it had until 2014. Ukrainian Premier League had 16 teams in 2013-14, but lost two based in Crimea after the Russia annexation. Ukraine’s Football Federation says the coming 2019-20 season will be the last with 12 teams. The league will expand to 14 for 2020-21 and 16 for 2020-22.

    At a site near the US Embassy, AccorHotels will open next year a 261-room ‘combo hotel’ – a 156-room Ibis and a 105-room Adagio apart hotel. The new hotel will be at 55 Peremohy, across the avenue from Beresteiska red line metro station and a 15-minute walk through Nyvky Park from the embassy. In 2021, Accor plans to open a 58-unit Swissotel Living apart hotel at Liuteranska 14, a short walk from Kreschatyk, Andriy Davydenko, general manager of AccorHotels Ukraine, tells the UBN. Accor already operates two 3-star hotels in Kyiv:  Ibis Kyiv City Center and Ibis Kyiv Railway Station.

    Editor’s Note: Ukraine Business News is now in English, Ukrainian, Russian and German. Check out our website – www.ubn.news. Share with friends and colleagues who want to follow Ukraine, Europe’s next Frontier Economy. Best regards Jim Brooke – jbrooke@ubn.news