Ukraine-Romania-Moldova. Turning the Danube Region into a logistic agri-hub: ways to increase throughput

UkrAgroConsult

Article author:

Maksym Kharchenko

Freight Market Analyst

If the grain deal is over, the grain flows most likely will have to shift to the Danube region. Grain flows through the region will increase dramatically; at least until the modified/revised/adapted grain deal becomes a reality again. After that, share of the Big Odesa 3 ports and Mykolaiv region ports will go up to 60-70% (95-97% in 2020-2021).

Last week, in the  UkrAgroConsult Headlines we analyzed investments in river/sea export terminal capacities of this region. Anyway, the final transformation of the Danube region into a logistics agro hub requires clear indications how the investments in the logistics and infrastructure   might reduce logistics costs.

Costs of grain delivery by barge from the ports of Izmail or Reni to the Constanta is USD 25-30 per mt, while summer the price was USD 100-120. After export flows re-routing from the grain corridor to the Danube ports, the increase in logistics costs is inevitable. However, the growth rates depend on the extent to which the region’s transshipment capacities are responsive to and correlated with the sharp increase in grain flows.

Possibilities to reduce logistics costs

• A discount on railway transit tariff through the Moldova for Ukrainian grain delivery to the port of Reni.

Despite Ukrzaliznytsia’s attempts to negotiate a discount on transit, from 1 July, the railway tariff for grain transit through Moldova will increase by 8%. Moreover, after weakening of Ukrainian currency (UAH) exchange rate to the Swiss franc (40.74 early June and 41.08 on June 23), the tariff converted in to UAH for Ukrainian companies will increase by 11.8%.

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Tags: Ukraine, export, grain, Romania, Moldova, Danube ports, grain deal