Tonnage and container throughput at two of Ukraine's largest ports, Odessa and Illichivsk, are set to grow, albeit with the former performing far better than the latter during 2011.
The 20% discount offered by the port of Odessa on new container goods traffic through the port, in place until the end of 2011, marks a bold attempt to woo clients. BMI has been reassured in our bullish outlook by the port's incentives to increase throughput, and we predict this to continue over the mid term as the port aims to take market share from the current Black Sea port leader, Romania's port of Constantza. For the wider economy, although we concur with Prime Minister Azarov's view that Ukraine's current fiscal and foreign reserve position is relatively sanguine, the country's long-run prospects and ability to anchor confidence in the economy depends on the eventual capitulation to IMF conditions. We have long maintained that the country's fiscal position is on an unsustainable trajectory over the longer term, with state-owned natural gas provider Naftogaz Ukrainy and an underfunded pay-as-you-go pension system (which needed fiscal transfers of up to 7% of GDP in 2010) in need of reform.
Headline Industry Data
?? 2011 port of Odessa tonnage throughput forecast to rise 16.2% following a fall of 11.8% in 2010.
?? 2011 Odessa container throughput forecast to rise 17.9% following growth of 37.6% in 2010.
?? 2011 total trade growth forecast at 5.09%.
Key Industry Trends
Odessa Reduces Rates To Entice Clients - The port of Odessa has reduced its rates in a bid to woo clients. The port is still recovering from the downturn, which saw its box volumes drop by a massive 55.35%. From May 1 2011, the port has been offering a 20% discount on new container goods traffic through the port, and will be in place until the end of 2011.
Azerbaijan Eyes Up Vikingas - Azerbaijan has expressed an intention to join the Vikingas route which connects Ukrainian ports of Odessa and Illichivisk with Belarus and Lithuania, according to the country's foreign minister.
Risks To Outlook
In terms of downside risks, we believe that the prospect of Ukraine securing a new deal to lower the import price of Russian natural gas remains slim. In our view, a deal is unlikely to materialise without significant concessions on the part of Ukraine, something that Kiev has thus far been unwilling to cede. In the meantime, the pressure on Ukraine's fiscal and external accounts will continue to build as gas prices head higher, as reflected in our economic forecasts.
Also, We remain sanguine in our core view that Ukraine will eventually accede to IMF demands. Nevertheless, we cannot ignore the fact that the odds of the International Monetary Fund suspending Ukraine's US$15.9bn Stand-By Arrangement continue to climb. We had previously highlighted the prospects and consequences of the IMF withholding disbursements of further tranches of loans as Ukraine continued to falter in the implementation of key reforms (see our online service, March 28, 'IMF Delay Increasingly Likely'). Kiev failed to receive a planned tranche in March and with a decision regarding the approval of July's tranche looming, we are revisiting the subject and the attending political and economic risks.
On the upside, Ukraine is set to continue seeking private investors for its port sector in order to provide the funding needed to expand. Planned investment and increased oil transhipment offer upside risk to our forecast for the port of Odessa. The shipments of Azerbaijan oil to the port have started in March 2011, while further investment is planned for the port over the year, with the facility due to receive UAH591.8mn (US$75.35mn) from the state for the procurement of new handling equipment and the development.
[Studien Infos ausblenden]
