The global terminal developer and operator Hutchison Ports signed a Memorandum of Understanding (MOU) with Ukraine’s Sea Commercial Port Chernomorsk (formerly known as Ilyichevsk) on the Black Sea, as announced by the port’s press release.
The document was signed during the visit of the Ukrainian Minister of Infrastructure Volodymyr Omelyan to the UK, in particular to the country’s busiest container port of Felixstowe operated by Hutchison Ports.
The parties have agreed to close the deal in 2017, meaning that Hutchison Ports will become the Chernomorsk port operator already in the coming year. At a later stage, the Hong Kong holding may enter other markets of Ukraine, mentions the press release. It is also noted that Hutchison’s representatives have been examining the port’s capacities since November, 2016 following their visit to Chernomorsk.
Chernomorsk (known as Ilyichevsk until February, 2016, when it was renamed in accordance with the state law of “de-communization”) is located at the Ukrainian coast of the Black Sea, 20 km south of Odessa. The port handles grain, iron ore, Ro-Ro, general cargo and containers. In January-November 2016 its throughput was 14.3 mln tons.
Founded in 1957, Ilyichevsk used to be one of the largest and technologically advanced ports in the USSR and later on, in Ukraine. Thus, in 1972 the automated port operation system was put into operation. The container terminal of 120,000 TEU was opened in the port in 1976 and reconstructed in 1987 to increase the capacity up to 300,000 TEU.
Its relationship with investors is worth a special mentioning. In 2005 Ilyichevsk port signed a JV agreement with Moscow-based National Container Company (NCC) to run jointly Ilyichevsk Container Terminal. NCC, owning 75% in the JV, intended to invest USD 500 mln into new cranes, TOS, land reclamation and construction of new berths to increase the facility’s capacity up to 3.5 mln TEU by 2020. After Phase 1 was completed in 2007 with NCC’s investing USD 61 mln, it was Ukraine’s container terminal #1 capable of handling 650,000 TEU. Its actual throughput in 2008 reached 540,000 TEU, about the same volume was handled by Odessa. All major shipping lines were calling Ilyichevsk: Maersk, MSC, ZIM, CSAV, K Line and others.
But the friendship of Russian private investor and Ukraine’s state-owned port ended suddenly in mid-2009, when the port initiated a legal action to declare the JV agreement with NCC void on the ground of it being unfair and unprofitable. The court’s decision was in favour of the port and NCC was pushed out of the terminal, without any compensation of the invested funds. The following 6 years were a never-ending story of mutual legal actions and appeals, until in April 2015 the JV agreement was completely denounced.
The years of conflict have led to an obvious decline in the terminal’s commercial activity. Combined with the economic crisis and worsened relations with Russia, it turned out a hard blow to the facility. Thus, its throughput in 10 months this year was only 31,400 TEU, whereas Odessa, the largest Ukrainian container port of today, handled 398,610 TEU. The terminal’s capacities are heavily underutilized, the port handles there grain and metal products (see photo).
Today the port is actively searching for new investors. In October, 2016 the Ukrainian Ministry of Infrastructure also offered Chornomorsk Port for investment to another global terminal operator – DP World, while signing a Memorandum of Understanding to collaborate in terms of development of Ukraine’s port industry and logistics.
Hopefully, the new management of the port is indeed interested in its development and will play fair with the coming global investors.