Ukrainian river logistics awaits a reboot after the war

River transport in Ukraine virtually ceased to exist due to the war, and logistics flows shifted to sea ports. NIBULON Logistics Director Serhiy Kalkutin told USM about the main challenges faced by Ukrainian river logistics during the war, the future of inland waterways, the blocked fleet in Mykolaiv, and the prospects for the restoration of navigation on the Dnipro. Is it worth investing in river transport, and what opportunities will open up after the war?

Ukrainian logistics has experienced unprecedented changes in the past two years. If at the beginning of the full-scale invasion the Danube became a lifeline for agricultural exports, then after the opening of the “grain corridor” cargo flows again shifted to the ports of Great Odesa. All this seriously affected the plans of logistics operators, including the agricultural producer and exporter, NIBULON, which, due to the specifics of its business model, is one of the largest Ukrainian carriers on inland waterways.

River logistics during war: stagnation or search for new opportunities?

Mr. Serhiy, does NIBULON have any plans for the development of river transport in 2025?

Given that NIBULON was the largest operator of inland waterways of Ukraine before the war, we did not consider plans to increase the capacity of river and sea transport. In the conditions of war, our focus was on utilizing existing capacities, primarily through work on the Danube.

Yes, given the blocking of our transshipment terminal in Mykolaiv, we invested $22.5 million and built a new facility in the Danube ports, which allowed us not only to load the fleet with work, but also to stabilize exports. These investments have fully paid off. Since its establishment, the branch has transshipped 3.8 million tons of grain and oilseeds. But now, due to the resumption of work in large ports, when military risks for shipowners have gradually begun to decrease, the region is losing its competitiveness.

This significantly affected the cost of freight when ships entered Ukraine compared to Constanta. Therefore, the economic attractiveness of the export shipment chain — primarily grain — via the Danube with subsequent shipment in Constanta began to decrease significantly. With such dynamics, we do not see significant opportunities to increase grain exports next year specifically through Danube ports.

Unfortunately, the logistics market is currently experiencing some stagnation. This applies not only to river transport. Therefore, we probably should not talk about any global changes or development now. All those who remained to work in the Ukrainian river industry on the Danube should talk not about expansion, but about survival in these conditions. This is how it turned out today.

You say that the industry as a whole is stagnating. How are you preparing for these challenges and what key changes in logistics regulation do you see now?

Look, if we talk about river transport, then today there are opportunities for shipment to the ports of Great Odesa. This is natural, because from an economic and trade point of view, export through these ports is more profitable. Therefore, logistics flows are being redirected there.

Instead, we have a fleet on the Danube. We are considering options for its use outside Ukraine – this is Romania, as well as incidental cargo that can be transported from the Middle Danube towards Constanta. In addition, now Nibulon is looking for opportunities to transport non-grain cargo from Izmail to Constanta and vice versa. But the market in this direction is quite limited. As for our logistics model as a whole, having our own road and rail transport, we are now using it more actively in the direction of the ports of Great Odesa.

Do you have a feeling that rail and road transport are becoming more profitable under these conditions?

We must understand that in today’s conditions in Ukraine, as such, there is no river transport. The Dnipro is blocked due to military operations and the explosion of the Kakhovska HPP. It was the main transport artery through which about 15 million tons of cargo were transported before the war.

There was also the Pivdennyi Bug, where shipping was carried out almost exclusively by our company. We transported up to 600 thousand tons there at semi-annual peaks. But now the Dniзкщ is blocked due to the war, the Kakhovska HPP is destroyed, and the Pivdennyi Bug is not working, because the Mykolaiv port is blocked, and this logistics chain has simply lost any feasibility.

The opening of the Mykolaiv port could be a prerequisite for at least a partial revival of river transport. And in the long term, after the end of hostilities and the restoration of the Kakhovska HPP, we can think about returning shipping to the Dnieper. At the initial stage, this could be the restoration of shipping to Kherson – at least in its lower part.

Therefore, there is no need to talk about any competition in river transport now, because it simply does not exist. And the transportation that is possible on the Ukrainian section of the Danube is only about 100 kilometers, and there are simply no sufficient cargo flows there. There is no economic feasibility, there are no chains. For example, transporting something from Ust-Dunaysk or Kiliya to Reni – there is simply no point.

In Ukraine, river transport is currently absent. It could grow exclusively on the Danube, develop there, but with the opening of the ports of Great Odesa, this story has stopped. We are currently experiencing a certain crisis in this segment.

Mykolaiv Port and the Blocked Fleet: What’s in the Future?

What developments do you see in the possible opening of the Mykolaiv port?

From the point of view of legal issues, I may be wrong, but there are no obstacles. If political and geopolitical agreements are reached and there is a physical possibility of ships entering the port, this process can be implemented in a fairly short time. I do not see any particular legal difficulties.

Odessa was also opened quite quickly, as soon as the relevant political decisions were made and security was ensured by the Armed Forces of Ukraine. Therefore, at our level, we can only hope and be ready for the opening of the port from a technical point of view.

We understand that, most likely, this will become possible only after the end of active hostilities. After all, the enemy is now on the Kinburn Spit, and it is through this section that the entire fleet must pass to the Mykolaiv port.

“Nibulon” is fully ready to resume the port’s work. We are ready to start loading the ship an hour and a half after it docks.

Nibulon has often emphasized that the company has a certain share of the blocked fleet. Is there any possibility of taking it away before the cessation of hostilities? And in general, is it economically feasible to export it?

In war conditions, when Mykolaiv is actually in the frontline zone, part of our fleet remains blocked there. Its use on the Voznesensk-Mykolaiv section could be possible. This would significantly relieve the load on the roads, because Voznesensk has always been a logistics hub for our company. It is very well located on transport highways, and there was an opportunity to accumulate goods there, delivering them to the port by water transport.

But due to the blockade of the Mykolaiv port, this scheme is currently economically inoperative and is not considered viable. We are currently waiting for the opening of the Mykolaiv port, or for a change in UZ policy regarding tariff formation, which would allow us to compete with road transport in this region through combined water-rail transportation.

Danube route and new logistics directions

Mr. Serhiy, you have said several times that you have plans to enter the Danube beyond Ukraine. Do you plan to expand the geography of exports not only in this direction, but also through border crossings?

No, today there is simply no alternative to deep-water ports. Everyone understands that the cheapest mode of transport in the world is sea transport. The ability to ship batches of 30-60 thousand tons completely eliminates any other competition from rail or road transport.

We work in large ship batches, and the business model involves using the ports of Greater Odessa to enter foreign markets. This is confirmed by statistics: the volumes of shipments through border crossings by car and rail are falling. Yes, these deliveries still exist, but they are niche and insignificant compared to the main flows that now go through the ports of Great Odesa.

First of all, this approach is more economically feasible. Currently, there is no shortage of port capacity, and therefore logistics through alternative routes simply cannot withstand competition.

However, there are nuances. This situation reduces overall competition in Ukraine, especially for manufacturers located closer to the Dnipro, in particular on the Right Bank. The opening of the Mykolaiv port would make serious economic sense, as it would reduce the cost of logistics by 2-4 dollars per ton.

From the point of view of competitiveness, development of the agricultural sector and increased cargo flows, the opening of the Mykolaiv port would be a significant advantage, first of all, for manufacturers.

That is, at the moment, NIBULON does not plan to invest in the river fleet. Are you considering investing in the company’s railway or road transport?

From the point of view of investing in the river fleet, we will focus exclusively on the workload of what we have now – for objective reasons. As for road and rail transport, the situation is slightly different here.

If you look at how logistics has changed since the beginning of the war, we have lost some territories, the Mykolaiv port was closed, production volumes have decreased in the last year. Added to this is the transport deficit in 2022-2023, when logistics chains were significantly lengthened. There were congestion at border crossings, as well as on the Danube, which simply did not have time to handle such a flow of cargo.

All this led to a significant deficit of road and rail transport within the country due to large downtime. But over the past few years, the situation has changed, and now a certain surplus has formed. Ports today operate with high productivity, quickly processing transport delivering products, which significantly improves the reversibility of logistics processes and reduces the need for additional resources.

As a result, both road and rail transport were not very profitable in 2024. The supply on the market is sufficient, and there is currently no economic feasibility in expanding these assets.

If we talk about the near future, we focus on the effective use of existing assets. The main emphasis is on improving performance through optimization and increasing efficiency.

How did the war change the interaction between the state and business?

Do you feel support from the Ukrainian government in the conditions of a full-scale war? What, in your opinion, should be changed or improved?

In the first year of the war, there was indeed a very serious feeling of state involvement and understanding of the situation in which the country found itself. The authorities were clearly aware of the need to support business, and this gave its results. It was thanks to such support that we managed to build an enterprise in Izmail in a short time.

The construction was implemented primarily with the support of the Ministry of Infrastructure, Ukrzaliznytsia and local authorities. Everyone worked as a single team, understanding that it was necessary to create a new infrastructure to ensure exports in the conditions of the blocked ports of Great Odesa and Mykolaiv.

We can also note the support of state banks, which is actually a continuation of the government’s policy. They were the first to meet us and restructure the loan portfolio that we found ourselves with at the beginning of the war.

Now, in the context of the further development of the Danube route, which remains strategically important for the economy of Ukraine, we would like more support from the reformed Ministry of Infrastructure. In particular, in tariff formation, since it is railway tariffs that significantly affect the cost of domestic transportation. And road transport is already guided by them.

Due to the fact that most of the cargo flows have been redirected to the ports of Great Odesa, the Danube region, which once saved the grain industry, is now beginning to stagnate. Many enterprises are closing, volumes are decreasing. We, in turn, continue to support this route thanks to the mechanisms that are in Nibulon. But the economic part still affects, and cargoes simply leave from there.

We have also repeatedly publicly expressed our position, addressed official letters to Ukrzaliznytsia and the Ministry of Infrastructure. We raised the issue of the need to maintain the competitiveness of the Danube route.

Now Ukrzaliznytsia plans to index transportation tariffs, and they justify it. But even before indexation, the Danube region lost to the Odesa region by an average of $4-5 per ton of delivery. And considering that the freight of ships between Constanta and Great Odesa differs by only $2.5, this direction completely loses competitiveness.

It is precisely in order to support an alternative route that could work under any geopolitical conditions that it would be worth finding a mechanism that would keep the Danube competitive. We have submitted our proposals to both Ukrzaliznytsia and the Ministry of Infrastructure. We are currently waiting for specific actions that will help not to lose this direction.

People and technology: how to maintain efficiency

In times of war, staff shortages are one of the biggest problems in the industry. We hear this from other companies. Is Nibulon currently facing a shortage of workers?

In today’s conditions, people are one of the most valuable factors in overall success. We have always paid a lot of attention to this issue, but now even more so.

Thanks to the ability to provide certain social guarantees and competitive wages, we try to remain competitive in the market and thereby avoid personnel problems. Therefore, now we have no difficulties either in the field of road transportation, having our own fleet of over 100 vehicles, or in shipping. We manage to form teams of drivers and crews without a shortage of personnel.

This is the result of systematic work, which has been part of the company’s philosophy for 20 years. We have always adhered to the principle that a person should have social guarantees, stability, normal working conditions and decent pay. First of all, Nibulon is stability for our people. And this is what gives us the opportunity to keep the situation under control today.

Many companies are digitizing their processes, including HR and data processing. Is digitalization happening at Nibulon? Are there any innovations already implemented or are they in development?

The main factor in this direction is what is already obvious today: it is impossible to move forward without artificial intelligence and digitalization. This is really a “musthave”.

Our company is really implementing large projects aimed at consolidating all databases under a single ERP system. We work with IT Enterprise, since the company is quite large, has diverse businesses and complex logistics chains, which have built up huge amounts of information in various resources over many years.

Nibulon’s strategic decision is to unite all these processes under a single “dome” of the ERP system. Intensive work is being carried out in all areas, including logistics. For example, we already have a vehicle management system built on GPS technologies, which monitors fuel accounting, vehicle movement, their actual location, etc. We have a similar system in our fleet.

In addition, there is a system for accounting for cargo movements, in particular grain. Now our main goal for the next few years is to integrate all these processes into a single ERP system, create end-to-end traceability and full planning and management of all logistics processes. Therefore, the vector now is precisely this – comprehensive digitalization and integration of all key areas into a single system.

Battlefield or harvest field – what awaits Ukrainian farmers

Finally, I would like to ask what challenges you see in the agricultural sector in general, as well as in its long-term development? And how are you preparing for them?

If we talk about the long-term perspective, then first of all it is climate change. In our opinion, this is one of the key challenges.

I communicate with producers from different regions and see how the situation is changing. Previously, the land in the Odessa region was considered good, the gross harvest in the region was one of the best in the country, if we talk about the early group.. And now they are massively trying to restore irrigation systems there, which were eliminated back in the 90s, when there was enough rainfall. Now it’s a different story – producers are actively switching to niche crops, in order to get higher margins, understanding the difficulty of obtaining high yields on classic crops due to the influence of weather conditions.

Therefore, the first key factor is climate change, to which farmers must adapt. Speaking globally, in order to maintain the pace of development and the increase in yield that Ukraine has experienced over the past 15-20 years, serious adaptation to changing conditions is required by producers. After all, if we compare what happened in the 2000s and what we have now, export volumes, for example, have increased 4-5 times. This automatically affected the development of logistics. Today, in terms of infrastructure, Ukraine has everything to ensure exports of 60-70 million tons per year, and with Mykolaiv even more.

The second factor is, of course, the war. It has not gone anywhere and will not go anywhere, at least in the near future.. It is important not only how it ends, but also under what conditions. Many scenarios can be simulated here, but one thing is obvious: Ukrainian business has proven to be extremely flexible and adaptive. The events of 2022 have shown that Ukraine is capable of finding alternative solutions even in critical situations.

Therefore, the main questions for the future are what the climate will be like, how quickly the desert will move from south to north, and under what conditions the war will end. And the Ukrainians will be able to decide everything else. We are ready to move on.

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