Philipp Grushko: Logistics problems resolved for the M.V. Cargo terminal due to its direct proximity to TIS.

M.V. Cargo is building a new grain terminal at the port of Yuzhny. Cargill, one of the US global corporations, producer and distributor of agricultural products, invests its resources in the project. The grain terminal is to be commissioned in summer 2018. spoke to Philipp Grushko Director for Business Development, MV.Cargo, so as to cover issues, such as the project venue and why it was chosen, technical solutions to be applied at the terminal and the construction problems. What about the decision to build the terminal just in this water area? Any reasons for it?

Philipp Grushko: There are a few reasons why the port of Yuzhny is suitable for such a large-scale project. Let’s take its isolated location in relation to major population centers which helps resolve ecological problems and dusting in particular. And this is a challenging issue for all grain terminals. Besides, its location meets the transportation requirements: that’s where roadways to Odessa and Nikolayev join together; moreover, the Adjalykskiy Liman water area does not freeze, the tidal motion is quite negligible here, no big waves at all. All this factors allow to expect the terminal all-seasons stable operations.

And finally what can be called a key privilege: direct proximity to TIS enabling to take advantage of the Group infrastructure facilities. TIS may offer 80 km in railroads. No other port in Ukraine can boast of such a developed railroad system.

El.: Any benefits gained from such a location of the new terminal?

F.G.: Nearly half of this country’s grain, i.e. about 25 mln tons a year, is produced within a 350 km radius of the Yuzhny Port . Thus , it is only natural, that suppliers find the location highly beneficial.

El.: Wouldn’t you need further investments in access roads?

F.G.: Whereas the railroad infrastructure is the bottleneck of all Ukrainian ports, the TIS located close to our terminal has been duly investing in the railroad infrastructure for a few years now. The locomotive fleet and railhead controlled by TIS enable us to handle 1,800 freight wagons per day . However we assume that trucks would account for 30% of the entire cargos. So the a.m. railroad facilities exceed the expected demand for them. Getting back to relevant trucks, I would like to emphasize that we build a separate parking place for them which would help prevent a backup of cars on the freeway.

El.: The silos are at an angle to the berthage and rather remote from it which might call for a powerful and sophisticated automated conveyor transportation system. What about it?

F.G.: Just the other way around. Our silos and a flat warehouse are above the berth. That’s why there is no need for us to install complex conveyor systems and norias: the grain will be rolling down to ship loaders at the berth.

El.: Would you dwell upon any specific challenges to be met in the terminal construction and installation?

F.G.: There no particular technical problems related to the project implementation. At least as of now the project does not involve any issues that we have not addressed yet.

El.: What about the grain terminal design?

F.G.: The terminal superstructure has been designed by Zernovaya Stolitza, a leader in engineering solutions for grain related projects in this country. The company has a wealth of experience while working with Glencore International, “Brooklyn-Kiev” and Louis Dreyfus. The berth as such has been designed by Inros Lackner , a German company of name and repute for 75 years now. Besides, GT Proekt has been in charge of adjustments to meet Ukrainian standards.

El.: Any particular company in charge of the construction works as such?

F.G.: We have a few contractors responsible for the construction works and, in particular, there is a reliable team dealing with the berth. It used to do construction and drenching works in ports, such as Yuzhny, Odessa and Ilyichevsk. The terminal superstructure is built by a highly experienced and reliable company which has been participating in the TIS terminal construction since 1994.

The construction works are performed by 160 employees operating 24/7. By the way these are top rank professionals engaged in similar works both, in and outside Ukraine.

El.: Have you already made your choice about the equipment?

F.G.: We deal with suppliers from the US, Canada, Hungary, Italy and Germany. Ukrainian manufacturers are no exception in the case. It is only logical that we acquire solely new equipment items meeting the Cargill standards.

El.: Is there any particular transshipment cargo you place a premium on?

F.G.: The terminal is supposed to accept any grain cargos from suppliers, i.e. wheat, barley, corn, legumes. However, Ukraine is a traditional exporter of wheat and corn. It is no wonder these crops would account for the majority of the terminal cargo turnover.

El.: We would like to clarify the planning margins for grain transshipments and for oil transshipments as well?

F.G.: The new terminal transshipment capacity – 5 mln ton grain annually. The initial terminal stage does not suggest any oil transshipment. But over time we will be able to arrange engineering provisions required for oil transshipments, too.

El.: Are you planning to exclusively handle the Cargill grain or you expect other cargos to be serviced?

F.G.: Cargill has assumed an obligation to transship 70% of its Ukrainian exports via the new terminal which is provided for by our agreement. We estimate the amount at the rate of 2.5-4 mln tons grain annually. Thus Cargill will be served as the main client but other companies’ cargos will be also handled at the terminal.

El.: The current state of affairs in this business is characterized by an increased competition among grain terminals and therefore the terminal average traffic might slow down. Are you prepared to admit that the project payback period might be extended?

F.G.: It’s quite obvious that Ukraine’s grain production is subject to growth. That’s why the competition is ever increasing. The production volume amounted to 64 mln ton in 2016 which accounts for a 4 mln ton increase as compared to 2015.

Experts in this business, evaluate Ukraine’s potential at the rate of 100 mln ton grain annually. Wheat output per hectare amounts to 9 ton in New Zealand, 6 ton in EU and only 4 – in Ukraine. 17% of Ukraine’s lands suitable for crops are not utilized yet. Given the extent of the natural potential it can’t stay idle for long, the investments will come quickly. After all, the UN FAO expects quite a significant population growth by 2050 – nearly 9 bln as compared with today’s 7 bln which accounts for a 30% increase. And Ukraine might become instrumental in satisfying the demand for food products worldwide.

Besides, Cargill, our partner, views the terminal as a possibility to expand its exports from Ukraine. The point is, Ukraine can’t boast of many terminals servicing foreign companies which is a meaningful factor of export restraint.

El.: Could you cast a thought that obstructive official routine might hinder the project performance?

F.G.: Our terminal is a major project implemented in Ukraine as of late. Its total value is worth US$ 150 mln. More than 500 jobs would be established here which would entail 2,000 new jobs in related sectors. That means well being for 2,500 families and at least UAH 600 mln annually in taxes for Ukraine’s state budget. It would be hard to overestimate the importance of such a high class project for the nation’s economy. It is not just a new terminal. I have not the slightest doubt in my mind that other investors keen on the issue are closely monitoring the relevant developments so as to make a final decision. And hopefully we are able to show the encouraging results.

I have to admit, we have been faced with a few challenges. But we have fought them off. It was in April 2017 that we got all necessary approvals and permits, including those issued by the Cabinet of Ministers. A tender on drenching works was quite a problem which could have resulted in breaking the project deadlines. It has been nevertheless resolved and USPA is now liable for that part of the project.

The next step to make is to enter into a relevant agreement with the tender winner and to commence the drenching operations. The project schedule is very tight. According to our agreement with Cargill the terminal is bound to be commissioned in April 2018. Therefore the drenching shall be completed in less than 12 months. Given the bank yard of 4.4 mln cubic meters it is no easy task at all.

Vitaliy Salnik,