Logistics in the Black Sea region was badly affected after the start of the Russo-Ukrainian War and the subsequent blockade of Ukrainian seaports.
Shortly after Ukrainian seaports were blocked by Russian Navy forces, a significant part of container traffic en route to Ukraine was diverted to the neighboring Black Sea port of Constanta, Romania. Port of Constanta [150 km north from Varna, Bulgaria] was overloaded after a rapid increase in Ukrainian import containers. As a result, part of the cargo began to shift towards the port of Varna in Bulgaria, the terminals of which are not overloaded.
Some transport stakeholders shared the opinion with Informall BG that Varna port is currently a more reasonable option for Ukrainian exporters who ship their cargoes in sea containers. Given the current bottlenecks in Constanta, some Ukrainian shippers prefer to deliver the cargo to/from Varna, where the container terminal operates under standard conditions.
Daniil Melnychenko, Data Analyst at Informall BG: “Varna is an attractive option for shippers willing to transport cargo seamlessly while offsetting the additional costs of traveling to Varna with cheaper cargo handling fees and affordable stevedore services.”
Similar to Romania, the Bulgarian government has also joined the initiative to simplify cross-border regulations for trucks carrying Ukrainian import and export cargo. The initiative made it possible to speed up the transshipment of Ukrainian containers with essential products and humanitarian aid arriving at the port of Varna.
With trusted and friendly partners in Bulgaria, Informall BG Kostadin Dimitrov, Manager of Varna West Terminal, asked for some comments to learn more about the operation of container terminals during the Russo-Ukrainian War:
“The results of the first quarter of 2022 did not show a significant increase in the volume of Ukrainian containers moving in transit. However, when the terminal in Constanta was overloaded, we received more inquiries from Ukrainian carriers interested in transporting cargo through the terminal in Varna,” shares Mr. Dimitrov.
Kostadin points out that the restrictions on shipping companies imposed on container equipment imported into Ukraine are the main bottleneck for import container traffic from Varna (and Constanta) to Ukraine. While non-Ukrainian containerized cargo continues to be transported to the POD [place of delivery] in a container, the Ukrainian cargo has to be transferred to a customs truck for further delivery to Ukraine. This additional cargo handling is a time-consuming process that slows down overall container handling and increases transportation costs.
Mr. Dimitrov confirms that Varna container terminal has sufficient capacity to handle part of Ukrainian traffic. However, storage space could become an issue if shipping companies maintain restrictions.
If restrictions are lifted, Ukrainian container traffic flowing via Bulgaria will be handled significantly faster than today and at more reasonable costs. Currently, few shipping companies are willing to take risks and let Ukrainian importers ship their containerized cargo directly to Ukraine. Mr. Dimitrov continues: “We regularly receive inquiries [from Ukraine] for bonded warehousing services in Varna, but today such port warehouses are at full capacity and storage capacity is limited. As soon as shipping companies allow containers to be shipped directly to Ukraine, storage space should no longer be a problem. As the operator of Terminal West in
Varna continues our talks with representatives of shipping companies and promotes the idea of direct container shipping to Ukraine, but it’s up to them [shipping lines] to decide”.
Vassiliy Vesselovsky, CEO of Informall BG, says: “While regional transport players recover from the aftershocks of the war, we expect that the companies offering liner services to the Black Sea will review and relax their restrictions on Ukrainian import containers in the near future. Such a move will benefit all parties involved in the transportation of containerized cargo to/from Ukraine.”
Review of container turnover in Bulgaria:
Note: The informal assessment is based on data for total container sales, [without transshipment] for container terminals of Varna and Burgas.
According to the results of the Informall rating for the first quarter of 2022, the total container turnover of Bulgaria decreased by (-) 6.99% compared to the first quarter of 2021 the rating table below.
Despite the decline in domestic throughput of loaded containers in the first quarter of 2022 compared to the first quarter of 2021, Informall forecasts that Bulgaria will increase its throughput volume in the second quarter as the Russo-Ukrainian war unfolds.
TOP-3 line operators [MSC, MAERSK, HAPAG LLOYD] secured their positions from the previous year and further increased the total container volume transported via terminals in Bulgaria.
Overall, the TOP 3 airlines transported almost 69% of the total container turnover in Bulgaria.
2M Alliance holds the largest share of container volume in Varna and Burgas with a total market share of 55%. The shipping company MAERSK recorded the highest volume growth in the first quarter of 2022 (+) 2.08 percentage points compared to the first quarter of 2021.
At the same time, YANG MING Carrier showed remarkable growth of (+) 1.95pp, doubling its share in Q1 2022 compared to the same period of Q1 2021, resulting in a total market share of 3.86% in Bulgaria.
In contrast, the EVERGREEN line transported twice as much cargo in the first quarter of 2022 as in the same period of the first quarter of 2021, thereby shrinking its market share to 3.76%.
While Ukrainian container loads found their way to Varna port [mainly by trucks], Ukrainian exporters of bulk goods still have problems. The complexity of the route between Ukraine and Bulgaria, as well as cost factors, do not allow Ukrainian grain to be transported effectively [wheat, corn, sunflower seeds etc.] to the terminals of Bulgaria. However, officials of Ukraine and Bulgaria are jointly looking for ways to improve logistics, especially on the bulk cargo route.
“Bulgaria will gladly provide the port of Varna as a logistical hub for transshipment of flour and sunflower seeds and distribution of grain that Ukraine could not distribute through its ports,” said Bulgarian Prime Minister K. Petkov after the meeting with V. Zelenskyy, President of Ukraine. However, the prime minister gave no timetable or details on the quantities of grain to be shipped via Varna on the Black Sea.
On the contrary, Informall BG argues with the potential of the corridor for export of grain between Ukraine and Bulgaria. While the port of Constanta provides access to the waters of the Danube, the port of Varna is only accessible by country roads, which poses a major problem for grain shippers. The combined use of freight trains and spacious barges [on Danube River] enables the transport of significant quantities of grain through Constanta at a reasonable cost. Also, the proximity of Constanta’s grain terminals to the Ukrainian borders is a factor that allows trucks to be used efficiently on the route.
Despite the traffic jam on the Ukrainian [Danube] River ports, Constanta shipped over 100,000 tons of Ukrainian grain from mid-March to May 2022. Constanta continues to receive barges and trucks loaded with Ukrainian corn and wheat, which transfer the grain to ships via one of the fastest-loading grain terminals in Romania, reports Informall BG.
If the grain terminal in Varna were trying to handle similar amounts of Ukrainian grain at the same time, they would have to receive over 4,400 loaded trucks or at least 1,660 rail cars within the same period. Despite Varna’s proximity to Ukraine, the land corridor connecting both countries is underdeveloped, posing serious logistical challenges for exporters willing to transport significant amounts of grain through the port.
Informall BG continues: “Considering the currently spiked bunker [and gas] Prices, significantly increased insurance premiums for ships entering Black Sea waters and the overall complexity of the Ukraine-Bulgaria land corridor, the cost of transhipment of Ukrainian grain through terminals in Varna will likely make logistics on the route unreasonably costly for exporters make.” .
Alexander Khromov, project manager of Informall BG, emphasizes: “While Ukrainian seaports are blocked, the ports of Poland and Lithuania on the Baltic Sea remain important gateways for Ukrainian agricultural products to international markets. Countries continue to expand the transit corridor from Ukraine, bypassing Belarus, to transport grain under minimum controls and expedited customs procedures, minimizing existing infrastructure and bureaucratic obstacles.”
Informall BG continues: “A significant share of Ukraine’s grain is expected to continue to flow to ports of Poland and Lithuania on the Baltic Sea and port of Romania on the Black Sea, but their terminal capacity is also limited, especially during harvest seasons. Bulgaria’s ports have yet to be considered as a potential gateway for Ukrainian agricultural exporters in case existing export routes become congested and/or severely congested.”
Source: Informal Business Group