17/04

The activities of the companies of the ORUM group meet the high standards and requirements of the transnational companies operating in the Mykolaiv port

The Mykolaiv port shows a steady growth in cargo traffic over the past five years, easily taking the second place in all of Ukraine in 2018, reaching a transshipment rate of 14 million tons. To a large extent, this became possible thanks to a number of features that favorably distinguish the port of Mykolaiv from other ports in the country.

Favorable geographical location made delivery and transshipment of cargo through Mykolaiv much cheaper in comparison to ports of Odessa region, and the depth parameters at the berths’ walls permit ships with high cargo capacity to enter the port, nearly eliminating competition from other ports of South-Eastern Ukraine. Significant difference in the railway tariffs and other land logistics, as well as sufficient depth created the conditions for establishing Mykolaiv as the key grain port of Ukraine. Not surprisingly, this is where the transnational corporations BUNGE and COFCO Agri built their terminals.

In Mykolaiv port, the state intervention into operation of stevedores is minimized - the state operator does not provide transshipment services, there is no state monopoly, regulation or fee levying for port services, such as railway spotting services, towing and mooring. Thanks to the policies of the port authorities, the support of the USPA and the Ministry of Infrastructure, it was possible to transfer the functions not inherent to public operators to private companies, while retaining workforce. Today, the regional branch of the USPA focuses on servicing the berths’ walls, maintaining the necessary depth in the port area and security, while the State Enterprise “Mykolaiv Sea Trade Port” is engaged in efficient property management, generating constantly growing rental income.

Effective partnership of state and private companies

Initially, stevedores in the Mykolaiv port had to face a situation when the state was not ready to meet the high standards of international companies and promptly resolve issues related to serving the growing cargo traffic. The solution to the problem was found by transferring some of the functions of the state monopoly to private enterprises.

Commercial service companies were forced to start a dialogue with transnational corporations and large national operators on purely contractual terms, which had to include clear and transparent methods of operation. Today, the lack of leverage available to the state monopoly motivates service companies to be more flexible in their communication with stevedores in terms of responsibility for quality, cost and timeliness of service as well as correctness of calculations and discounts, which state operators, tangled in bureaucracy, generally fail to provide with any reasonable measure of speed.

At the moment, the services in the Mykolaiv port are provided by private companies belonging to the ORUM group. The “Seaside Terminal” company provides spotting, dispatching and rolling stock repair services; the “Marconi” and “Ukrmorservice” companies provide towing and rearrangement of vessels, escorting them along the canal and sea, and providing ice pilotage services. The “Portoservice” company provides mooring, unmooring, shifting and other services in the Mykolaiv port. Shipping agency services and technical maintenance of vessels are provided by “Service Trans” and “Delta Shipping”. Stevedoring activities are carried out by “Stevedoring Plaza” and “Trionta Stevedoring”.

ORUM group was able to effectively solve the problems with dispatching and spotting services that existed in the Mykolaiv port. Previously, the confirmation procedure for train cars delivered to the port took a long time, requiring confirmation from dispatchers of the Mykolaiv branch of the USPA and additional coordination with PJSC "Ukrainian Railways". Now, the “Seaside Terminal” dispatchers promptly process any received queries utilizing unique proprietary software, circumventing state monopolies.

Thanks to the properly constructed intra-corporate communication channels, information between various enterprises of the group flows quickly, allowing for constant evolution of efficiency and quality of the services provided to stevedores. For example, with a growing number of port calls, efficient interaction between “Portoservice” mooring company and “Marconi” towing companies makes it possible to swiftly reallocate machinery and human resources speeding up ship servicing and cargo handling.

In addition to own resources companies of the ORUM group also efficiently operate state assets. Four diesel locomotives and six tugboats belonging to the “Mykolaiv Sea Trade Port”, were leased under a bareboat charter agreement. All diesel locomotives and tugboats regularly undergo maintenance. Current and capital repairs are carried out at the expense of ORUM group, with the cost of repairs annually estimated in tens of millions. The state-owned enterprise receives significant rental income, does not spend additional funds to maintain the technical fleet in working condition, instead optimizing the work of its staff and focusing on performing its key functions.

The ORUM management constantly analyzes the development of the port and understands the need to prepare the transport infrastructure in advance for the growing traffic. The “Seaside Terminal” company financed the development of a project for the reconstruction of the Mykolaiv-Gruzovoi station at a cost of about UAH 120 million and, thanks to the support of the administration of the USPA and Odessa railway, in March the project was included in the work plan of the PJSC "Ukrainian Railways" for the year 2019. It is planned that after works  completion, the throughput of the Mykolaiv-Gruzovoi station will be increased from 535 to 960 train cars per day, which will significantly increase the cargo turnover of the Mykolaiv port, and will provide additional multimillion revenues to local and state budgets as well as income growth of USPA and stevedores.

Such a function normally would have to be carried out by the state, but thanks to the transfer of the services provided to commercial operators - an opportunity to attract private investment appeared without spending budgetary funds.

Summarizing the above, it should be said that as a result of timely decisions taken by the Ministry officials and the USPA, everyone benefited from the partnership with the ORUM group enterprises: the stevedores received a reliable partner capable of bearing responsibility and providing high-quality and timely services meeting the high requirements of international companies, the USPA kept their workforce, was able to focus on running it’s primary activities, while allowing state-owned assets to operate more efficiently and generate profit.

Mykolaiv port continues to be attractive for international investors, as evidenced by the decision of POSCO DAEWOO to buy 75% shares of MBP from the OREXIM group with a planned transshipment of up to 2 million tons per year. In the near future, we should also expect new large investors to come to Mykolaiv, that will further increase cargo traffic, and tax income of local and state budgets.

For reference: ORUM is a group of companies providing a full range of services for port operators, cargo owners and vessels in the Mykolaiv port. In 2018, the companies of the ORUM group transferred about UAH 80 million of taxes to local and state budgets, while the total turnover of companies exceeded UAH 1 billion.