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  • Prime Interest Unchanged
  • Bond Sales Recover on FX Confidence
  • EU Used Cars Flood Ukraine
  • South Korean Cars Coming
  • Naftogaz to Cut Gas Price by One Quarter
  • Norwegians and Chinese Build Big Solar Plant in Mykolaiv
  • MHP Builds Largest Poultry Plant in Europe
  • UZ Mulls Private Trains on the Boryspil Express
  • Russia Cuts Diesel, LPG Exports to Ukraine
  • Spring Planting Indicates Another Bumper Crop
  • Grain Traders Invest in Rail Cars, Port Expansions
  • Turkey-Ukraine FTA: 99% Done
  • Ukraine Starts Flying to the Balkans
  • Energy Prices To Go Up After Russia’s Export Ban
  • 5 Western Oil Cos. Bid for Ukraine Production Blocks
  • Chinese Interested in Ukrposhta

 

 

The dominance of Ukrainian state companies in tender bids for nine oil and gas production sharing agreements is “a major concern,” says the US-Ukraine Business Council. Noting that state-owned UkrGazVydobuvannya participated in nine of the 22 bids, the USUBC writes: “A major concern has been expressed by many energy experts about state-owned companies like UGV, being allowed to bid in a program designed to attract private international and domestic investors…State-owned companies do not need any additional privileges and incentives.”

 

The surge of foreign buying of government hryvnia bonds does not threaten to Ukraine’s finances, Yakiv Smoliy, governor of the National Bank of Ukraine, told reporters Thursday. “Since the beginning of the year, the inflow of foreign funds from foreign investors in comparison with the previous year has increased by almost seven times, and has reached about 40 billion UAH,” the central bank head said, citing the equivalent of $1.5 billion. “This portfolio is diversified in terms of time, and we do not see the simultaneous outflow of foreign investors from this portfolio…we do not see risks.”

 

Ukraine’s central bank kept its main interest rate unchanged at 17.5% on Thursday, citing the need to contain inflation risks that increased since the bank cut the rate in April. Pushing the National Bank of Ukraine to the side of caution were diesel fuel price hikes caused by Russia’s June export cuts and the understanding that an IMF second tranche would only come in the fall, after talks with a new government.

 

‘Green bonds’ could allow Ukraine to raise $73 billion in the 2020s, Andriy Frolov, deputy head of the Energy Efficiency Reform Office, told reporters Thursday, citing an International Finance Company estimate. Accompanied by Jean-Erik de Zagon, European Investment Bank representation for Ukraine, Frolov said draft regulations under review by the Cabinet of Ministers envisage launching Ukraine ‘green bonds’ as early as next year.

 

In the latest EU-Ukraine rail link, Ukrzaliznytsia and Slovak Railways Company start Sunday a daily train between Košice, Slovakia, and Mukachevo, Zakarpattia region. Slovak trains will run on the cross border European gauge track, originally laid during the Austro-Hungarian empire. The four-hour train will cost €7.5 and will stop in Chop (Ukraine) and Čierna nad Tisou (Slovakia).

 

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The Finance Ministry doubled its bond sales at last Tuesday’s weekly auction, raising in equivalent UAH 8.4 billion, compared to UAH 3.8 billion last week. Purchases of hryvnia bonds recovered by 43%, compared to last week, hitting UAH 2 billion. Reflecting growing confidence in exchange rate stability, two bidders bought 3 year bonds for UAH 573.4 million at 17%. One third of auction receipts — UAH 609 million – came from the sale of 1 year bonds to seven bidders at 18.5%.  On Wednesday, Finance Minister Oksana Markarova told the Cabinet: “We are increasing our debt share in the national currency.”

 

Dragon Capital writes: “Modest demand likely reflects a combination of technical issues related to Clearstream’s launch, UAH weakness -3.6% in the past two weeks, to UAH 27.13:USD…we expect demand for UAH bonds to pick up in the coming weeks, including on the side of non-residents.”

 

Over the next four years, the hryvnia will gradually devalue against the dollar, moving from UAH27/$1 today, to almost UAH31/$1 in 2022.The projection is part of the government’s debt management strategy adopted Wednesday by the Cabinet of Ministers. In Feb. 2016, the exchange hit UAH27/$1. Since then, it has varied within a narrow band. According to the government forecast, the US dollar will cost: 28 hryvnia at the end of this year; 29.4 hryvnia in 2020; 30.5 in 2021; and 30.7 in 2022.

 

GDP growth is forecast at: 2019 – 2.8%; 2020 – 3.3%; 2021 – 3.8%; and 2022 – 4.1%.

 

Ukraine plans to cut government debt ratio to 52% of GDP this year and to 43% of GDP by 2022, Finance Minister Oksana Markarova told a televised Cabinet meeting on Wednesday. Building on a stable foreign exchange outlook, the government also plans to increase its share of hryvnia debt.

 

The EU is renewing its offer of €500 million in aid this year, contingent on Ukraine fulfilling the requirements set out last year in the EU’s fourth macro-financial assistance program to Ukraine. Valdis Dombrovskis, a European Commission vice president for financial affairs, reviewed the conditions Tuesday in a meeting in Brussels with Ukraine’s new president. Earlier, in March, Finance Minister Oksana Markarova with Dombrovskis and said later that Ukraine had fulfilled more than half of the commitments required to receive the €500 million tranche.

 

Through May, first time registrations of used imported cars were seven times higher than registrations of new imports, reports Ukravtoprom, the industry association. Boosted by a January-February tax amnesty for illegally imported cars, the used car registrations hit 231,000, seven times the number for the January-May period of 2018. Ukraine’s lowered import duties and Germany’s phase out of diesel cars keep the used car market hot. In May, used cars accounted for three quarters of the 31,000 cars registered for the first time.

 

Used Hyundai and KIA cars will be imported from South Korea by the AIS Group of Companies, a major auto dealer in Ukraine. Starting this month, AIS will import ‘global models’ fabricated between 2011 and 2014, with mileage below 200,000 km. “Unlike US auctions, which mainly offer cars after an accident, official Korean suppliers offer cars that do not require rebuilding,” Sergei Borovik, AIS marketing director, said in a company press release.

 

Naftogaz is lowering its gas prices by 23% from May to July. This government-mandated drop comes after the EU natural gas import price has fallen to one half of last fall’s levels. Today, the EU price is $4.34 per MMBtu, the lowest level since Sept. 2016. But Ukraine price has been stuck at last fall’s peak, $8.3 per MMBtu. At that time, the government sought to eliminate subsidies by moving Ukraine’s prices toward EU levels.

 

Teaching business executives how to avoid corruption and how to run a business transparently are the goals of ZmiNEW, Business Ombudsman Council’s new education project. After dealing with 5,600 complaints from business managers in three years, Algirdas Šemeta, the Ombudsman, believes training can head off corruption conflicts before they arise. At the project launching on Wednesday, he said: “Our new project aims to resolve issues between the business and government by providing a platform to communicate properly and thus breaking a systemic logjam.”

 

Norway’s Scatec Solar and PowerChina Guizhou Engineering Co. Ltd. have started to build a €124, 148 MW solar power plant in Prohressivka, 100 km west of Mykolaiv city. PowerChina is covering 65% of the construction costs of the station, which is to be ready by next June. For commissioning this year, before the ‘green’ tariffs expire, Scatec is building two other solar plants: a 47 MW station in Mykolaiv and a 30 MW station in Kamyanka, Cherkasy.

 

Ukraine could start exporting eggs to the United States this year, part of a major drive that sends Ukrainian egg products to 60 countries worldwide. Last year, exports were up 20% y-o-y, to 1.8 billion eggs, according to an industry overview in World-Grain.com. UkrLandFarming, parent of Avangard, a major egg producer, plans to invest over $200 million in a terminal to handle its egg exports to 40 nations worldwide.

 

Through April, poultry meat exports were up 40% to $199 million, compared to January-April of last year, reports Ukraine’s Association of Food Industry Producers. During 2018, poultry exports rose 21% in volume, to 329,000 tons and by 30% in monetary terms, to $507 million, according to the State Fiscal Service. So far this year, the top buyers are: Saudi Arabia – $55 million; Netherlands — $33 million; and Slovaki $20 million.

 

MHP is building in Vinnytsia the largest poultry farm in Europe, World-Grain reports, citing Yuriy Kosiuk, the company founder/CEO. Located in central Ukraine, this project represents a major expansion of an existing poultry farm to 560,000 tons of broiler meat a year.

 

Thanks to MHP exports, Ukraine became last year the third largest supplier of poultry meat to the EU and the sixth largest poultry exporter worldwide. According to Sergey Karpenko, general director of the Ukraine Poultry Union, the nation’s biggest sales markets are: The Netherlands, Iraq, Saudi Arabia and Slovakia.

 

The EBRD is reviewing a €100 million loan request from MHP to buy a 91% stake in Perutnina Ptuj, Slovenia’s main poultry producer. “Some media reports that the EBRD allegedly rejected this project are not true,” Anton Usov, the EBRD’s regional spokesman, tells Interfax-Ukraine.

 

Prior to Austria’s May 26 European Parliament elections, Kurier, a major Vienna newspaper, ran an article charging MHP was ducking EU quotas on chicken fillet imports by sending half-processed chicken cuts to its EU factories for final processing. The newspaper announced: “The KURIER managed to uncover the export tricks of MHP…when cutting the birds in Ukraine, a bone remains on the chicken breasts.”

 

In response, Sergii Karpenko, executive director of the Poultry Union, said Ukraine’s goal is to “deliver quality poultry products at affordable prices for our consumers.” He told GlobalMeat news site: “Unfortunately, we have seen a rise in anti-Ukrainian rhetoric ahead of the European elections later this month. We regret that fake news, misinformation and willful inaccuracies are freely used now in the debate about European poultry.”

 

Investing in increased ridership, Ukrzaliznytsia is building a multimodal station at Vydubychi, the southernmost stop on the Metro’s Green line, before it crosses the Dnipro. Due for completion this fall, this covered station will allow bus riders from the south and metro riders from the north to transfer at Vydubychi to the train Boryspil.

 

Russia has slashed monthly diesel exports to Ukraine to 25% of normal levels and liquefied petroleum gas exports to 40% of normal levels, reports Sergey Kuyun, director of Ukraine’s A-95 energy consulting group. To maximize market tension, Russia’s Economic Development Ministry will set levels of permitted exports each month.

 

In the face of Russia’s cuts, Ukraine’s diesel prices could go up another 5% this summer, to 31 UAH the liter, Kuyun writes on Facebook. With most consumer goods moving around the country by a truck this could imperil Ukraine’s goal to end this year with inflation at 6.3%. After the Kremlin announced the restrictions on April 18, diesel prices rose by 4%. With the June 1 export restrictions, Ukraine loses 25% of its diesel and 15% of its LPG. “Is it a lot or a little?” asks Kuyun.For diesel fuel – a lot. For gas – less, but also not easy.”

 

Easing economic pressure on Ukraine, European oil prices have receded to February lows. August futures for Brent on the London Stock Exchange ICE Futures traded Monday evening at $61.62 per barrel.

 

Pumping gas into storage at record rates, Ukrtransgaz has filled Ukraine’s 12 storage reservoirs to 37% of their 31 billion cubic meter capacity. After the national heating season ended April 5, the state pipeline company started filling the reservoirs, preparing for a possible end of Russian gas transit across Ukraine on Jan. 1. Separately, from January to April, natural gas production in Ukraine grew by 3.6% y-o-y to 7 billion cubic meters, the Energy and Coal Industry Ministry tells Interfax-Ukraine.

 

DTEK Group cut its coal imports by 24% during the first quarter, compared to the same period last year. The 225,000 ton drop in imports was partly covered by switching to gas and partly by expanding DTEK’s coal production by 1.35%, to 6.5 million tons.

 

Last year’s record 70 million-ton harvest may be the new normal for Ukraine’s top export – grain. With spring sowing completed, farmers seeded 14.8 million hectares, the same amount as last year, reports the Agrarian Policy and Food Ministry. Noting that favorable weather allowed farmers to start planting one month earlier than last year, Deputy Minister Volodymyr Topchiy says: “The period of hibernation was favorable, and the spring weather conditions were better than in 2018one can expect that the harvest of early grains in 2019 will not be lower than last year’s.”

 

The ministry predicts this year grain harvest will hit 70.8 million tons. The USDA predicts 72.1 million tons.

 

While this year’s grain harvest may match last year’s in size, the crop mix will shuffle as farmers look for highest prices. King corn will shrink by 7%, to 33.1 million tons, predicts APK-Inform consultancy. Wheat will increase to 26.2 million tons and barley will increase to 7.9 million tons. Sunflower seed harvest will stay virtually the same, at 14.9 million tons. As a result, sunflower oil exports will be unchanged – 5.9 million tons. Soybean production is to drop by 20%, to 3.7 million tons. In compensation, canola production is to go up by 29%, to 3.6 million tons.

 

Ukraine could export a record 50 million tons of grain in the 2018/ 2019 marketing year that ends this month, predicts Dragon CapitalWith 46.1 million tons of grain exported as of June 1, Dragon sees: “exports for the full marketing year to 49-50 Mt, up 23-25% y‑o-y and a new record high.”

 

Grain exports through Ukraine’s ports have grown by 45% since 2012, Andrew Shklyar, head of CTS-Consulting said last week at the Ukrainian Ports Forum. “Over the past five years, grain is the only type of cargo that has been growing annually,” he said in Odesa. “The volume of grain shipments since 2012 has increased from 27.5 million tons to 40 million tons in 2018. Grains make up almost a third turnover of Ukrainian ports.”

 

To catch up, companies are investing to move the grain to ports and to export the grain to the world.

 

Examples:

  • Risoil SA increased grain exports from its terminals by 150% to 1 million tonsduring the first five months of this year, compared to the same period last year.
  • South Korea’s Posco International plans to inaugurate next monthin Mykolaiv a grain handling terminal with 140,000-ton storage capacity.
  • Posco, France’s Soufflet Group and Ukraine’s Astartaare in various stages of creating their own fleets of grain hopper wagons for rail transport.
  • Holland’s Louis Dreyfus Company expects to win from the EBRD a $35 million loanto buy 1,000 rail grain wagons for use in Ukraine. Louis Dreyfus has warehouses in Vinnytsia, Cherkasy and Zaporizhia and a port complex in Odesa with a storage capacity of 240,000 tons.
  • Ukrzaliznytsia held two ProZorro auctions in March, auctioning 24 grain routes, with a total 1,296 cars.Although the new electronic system bids up shipping costs, it gives shippers peace of mind, knowing that freight trains are to arrive on time, in working order.
  • UZ says its working fleet of grain cars has expandedto 13,180 grain wagons, enough to handle 40 million tons of grain a year.

 

The Turkey-Ukraine free trade pact is ‘99%’ negotiated, Vasiliy Bonday, deputy foreign minister tell Ukrainian Radio. Sticking points are several agricultural products and some services, he said. Last fall, Turkish President Recep Tayyip Erdogan said talks should be completed by the end of 2018.

 

Air Serbia flew from Belgrade to Kyiv last Monday, renewing a route dropped three years ago. The return of flights to the largest city in the Balkans is part of a mini-boom in flights to the long-overlooked region. This summer, Windrose has flights from Kyiv to Pula, Croatia and to Tivat, Montenegro. SkyUp has seasonal charters to Tivat; Tirana, Albania; and, starting Thursday, to Split, Croatia. This spring Ryanair and Wizz Air launched flights from Kyiv to Athens, competing with UIA. Ten days ago, Wizz Air launched flights from Kyiv Sikorsky to Thessaloniki, northern Greece.

 

Diesel and butane prices are to rise this week in the wake of Russia’s June 1 bans on energy exports to Ukraine. Last week, Ukrainian producers of liquefied petroleum gas increased their prices by 30%, Sergei Fedorenko, commercial director of UkrGazVydobuvannya, writes on Facebook. Kazakhstan’s Tengizchevroil had to suspend shipments of LPG to Ukraine last week after Russia refused to allow transit. The company accounts for about 15% of Ukraine’s LPG.

 

Burisma Group plans to build a $25 million plant capable of producing 50,000 tons of liquefied petroleum gas a year, reports Nefterynok. The natural gas would come from Burisma’s field in the Kharkiv region.

 

After no foreign energy companies bid for oil and gas licenses at two auctions this spring, five Western companies are among the 13 bidders for the 50-year oil and gas production sharing agreements. With bidding closed, the foreign bidders are Vermilion of Alberta, Canada; Aspect Energy of Denver, Colorado; SigmaBleyzer of Houston, Texas; Nafta of Slovakia; and EPH or Energetický a průmyslový holding, a.s., of the Czech Republic. WorldOil.com reports that Ukraine’s Intergovernmental Commission is to evaluate bids in June and make its recommendations for winners to the Cabinet of Ministers.

 

Alibaba and other large Chinese companies are interested in taking part in possible privatization of Ukrposhta, Igor Smelyansky, CEO of the national postal operator, writes on Facebook. “Alibaba warehouses and its logistics are being built in Russia, Belgium, Latvia, Estonia (and soon in Africa), but not here,” Smelyansky writes of the world’s largest retailer and e-commerce company. “Alibaba likes to work through partners and share risks with them. But they want certainty, understandable strategies and clear rules at customs.”

 

During the first four months of this year, Ukraine’s agricultural exports increased by 19% to $7.1 billion. Sales were up $1.1 billion from January-April of last year. With farm products the nation’s top export item, the main destinations were: Asia – 42%; EU 33.5%; Africa – 16%; and former Soviet Union – 7%.

 

Dragon Capital’s Ukraine real estate fund earned a net profit of $3.17 million last year, turning around a 2017 net loss of $4.85 million. According to a filing on the London Stock Exchange, net asset value fell by 15%, to $36.2 million, due to a distribution of $9.8 million to shareholders of the Ukrainian Real Estate Investment Fund Dragon Ukrainian Properties and Development Plc. Dragon Capital Investments owns 61% of the fund.

 

Kristina Kvien, the U.S. new acting ambassador, or Charge d’Affaires, started work in Kyiv last week. Moving from Paris, where she had the number two job at the US embassy, Kvien has served as an economic counselor at the US embassies in Paris, London, and Bangkok. She has served at the US embassy in Moscow and has an MS in Strategic Studies from the U.S. Army War College.

 

Bolstered by a surge in ‘e-Residents’ of Estonia, the Ukrainian-Estonian Chamber of Commerce has opened in Tallinn. Aimed at IT entrepreneurs, the e-Residency program gives non-Estonians access to Estonian services such as banking, company formation, and payment processing. To date, 3,431 Ukrainians are e-Residents of Estonia, the third largest group of foreigners. Ukrainian e-Residents have founded 729 companies, the largest for any nationality. Wizz Air flies to Tallinn from Kyiv Sikorsky and Estonia’s Nordica flies from Kyiv Boryspil.

 

Lviv Airport handled 51% more passengers during the first five months of this year than during the same January-May last year. With 90% of passengers flying on international routes, the airport served 722,300 passengers. For comparison, the airport handled 708,000 for all of 2013. Lviv now has direct flights to 32 foreign cities, largely in the EU. On June 14, Earnest launches a Lviv-Venice flight. On July 21, Jonica launches a Lviv-Athens flight.

 

Flixbus, Europe’s largest bus operator, plans to announce next week the major expansion of its bus service between Ukraine and the EU. Based in Germany, Flixbus operates in 28 countries, serving 2,000 cities. In 2017, it started several routes to Ukraine. Last year, it opened in the United States, largely serving American border states from Los Angeles.

 

Die englische Originalversion stammt von unserem Partner UBN – Ukraine Business News. Weitere Informationen und ein Nachrichtenarchiv finden Sie unter: www.ubn.news.

 

The original English version is from our partner UBN – Ukraine Business News. For more information and news archive, go to: www.ubn.news.