Ukraine Freight Transport Report 2009

Ukraine Freight Transport Report 2009

In mid-November 2008, Ukrainian President Viktor Yuschenko was reported saying he was confident
that by the first half of 2009, the country would have a Prime Minister able to reverse the flow of the
Odessa-Brody crude oil pipeline to run in its originally intended direction. The pipeline was built to carry
oil from Odessa to Brody, a route that would enable transporting non-Russian oil, principally from
Caspian producers, to Europe. Instead, for a number of years Russian oil has flowed from Brody through
to Odessa for onward shipping through the Black Sea. Yuschenko, seen as an advocate of a pro-European
policy for Ukraine, claimed his former ally and now political rival, Prime Minister Yulia Timoschenko
would not agree to reverse the flow, ‘because of the promises that she gave regarding the diversification
of oil supplies… the reverse mode is a purely political issue, it’s not about economics’ the President said.
He added that Azerbaijan could supply enough crude oil for European customers to justify the use of the
pipeline in the originally planned direction. Yuschenko also argued that Russia’s needs could still be
satisfied if the pipeline were to be used as originally intended. The six million tonnes of oil that were
being pumped in a reverse direction ‘can be pumped more cheaply and quickly from Okhtyrka to Odessa,
rather than from Brody to Odessa’ he said. During discussions at an energy summit in Baku, European
Union officials had raised the issue of the pipeline’s use, in the context of the proposed Eurasia transport
corridor, Yuschenko said, adding he was ‘confident we will find agreement in such a formulation of the
question’. In our latest Ukraine Freight Transport Report, however, BMI concludes that, despite the
uncertainties, oil and gas pipeline throughput will grow at an annual average rate of 3.2% over the next
five years.
Various factors support this prediction. The opposing political forces know the pipeline transit business
remains crucial to the national economy. While Ukraine will be sharply impacted by the global economic
slowdown, it will still manage moderate economic growth in the next few years. BMI now predicts
average annual GDP expansion of 2.6% in 2009-2013. Ukraine’s transport sector has been lagging rather
than leading economic growth. Between 2004 and 2008, freight transport, measured in total tonnage
transported, grew by an annual average of 5.2%, compared to a GDP growth rate of 6.8%. Despite
political changes, we do not now expect a radical transformation of the situation. Under our current
forecasts for 2009-2013, GDP growth will average 2.6% and freight transport growth will push out only a
fraction out in front with average growth of 3.1%.
Ukraine retains great potential as an important transport link between East and West. Against the
backdrop of the moderate economic growth expected in the next few years, we believe air cargo will lead
the way, boosted by the establishment of closer links with Europe and the expansion of low-cost airlines
(LCCs). We are now forecasting average annual growth in airfreight tonnage of 3.4% in 2009-2013. Road
haulage will grow at an annual rate of 3.2% during the forecast period. We believe there is strong
potential for road haulage growth, but it will take some time to gather pace, as it is dependent on greater
investment in the country’s highway network and modernisation of the vehicle fleet. Cargo carried by
water (both maritime and inland waterways freight) will grow by 2.6% per annum, affected by the nearterm
downturn in global shipping. Rail freight growth will be 3.0% per annum, with the poor financial
state of the railway system acting as a constraining factor. Ukraine has a composite freight transport
business environment ranking of 52.9 (out of a theoretical maximum of 100.0) Its relative strength lies in
its transport intensity index (a measure of the dynamism of foreign trade); it also has potential in the
regulatory environment. Areas of current weakness include freight growth rates, infrastructure and the
competitive environment.
The total value of transport and communications GDP will rise to US$47.9bn in nominal terms by 2013,
representing 14.5% of Ukraine’s GDP. The transport and communications sector employed 1.16mn
people (6.8% of the labour force) in 2008. We see that figure falling marginally to 1.14mn by 2013,
although it will remain unchanged in relative terms, at 6.8% of the total labour force.

Executive Summary 5
SWOT Analysis7
Ukraine Freight Industry SWOT... 7
Ukraine Political SWOT ... 7
Ukraine Economic SWOT. 8
Ukraine Business Environment SWOT.. 8
Business Environment Overview ...9
Table: Europe Freight Transport Business Environment Ratings 10
Freight Transport Industry Ranking ... 11
Economics – Long-Term Risk .. 11
Politics – Long-Term Risk 12
Freight Transport Growth ... 12
Transport Intensity Index. 12
Political Risk Summary 12
Economic Risk Summary.. 13
Business Environment Risk Summary .. 13
Legal Code/Corruption 14
Red Tape.. 14
Labour Force... 14
Industry Trends and Developments.16
Road ... 16
Rail . 17
Air... 17
Sea .. 17
Pipelines . 18
Industry Forecast Scenario ...19
Quarterly Oil Products Price Outlook 19
Table: Oil Product Price, 2006-2013 (US$/bbl) . 22
Macroeconomic Environment .. 23
Table: Growth And Output . 25
Transport Outlook .. 26
Table: Freight Transport Indicators ... 27
Table: Freight Carried ... 28
Trade Environment29
Table: Value of imports by category ... 29
Table: Value of exports by category ... 30
Table: Top Export Destinations (US$mn)... 31
Table: Export Trade (% y-o-y) 32
Table: Top Import Sources . 33
Table: Import Trade (% y-o-y) 34
Market Overview35
Multi-modal . 35
Infrastructure.. 36
Competitive Landscape: Multimodal .. 37
Road. 38
Infrastructure.. 38
Competitive Landscape: Road 38
Rail .. 39
Infrastructure... 39
Competitive Landscape: Rail .. 39
Company Profiles ... 41
Air 42
Infrastructure.. 42
Competitive Landscape: Aviation ... 43
Company Profiles 44
Water ... 45
Infrastructure.. 45
Competitive Landscape: Maritime.. 45
Company Profiles ... 47
Pipelines .. 48
Competitive Landscape: Pipelines.. 48
Country Snapshot: Ukraine Demographic Data..51
Section 1: Population... 51
Table: Demographic Indicators, 2005-2030... 51
Table: Rural/Urban Breakdown, 2005-2030 .. 52
Section 2: Education And Healthcare .. 52
Table: Education, 2002-2005 . 52
Table: Vital Statistics, 2005-2030... 52
Section 3: Labour Market And Spending Power .. 53
Table: Employment Indicators, 2001-2006. 53
Table: Consumer Expenditure, 2000-2012 (US$) ... 53
Table: Average Annual Wages, 2000-2012. 54
BMI Forecast Modelling55
How We Generate Our Industry Forecasts .. 55
Transport Industry ... 56
Sources 56