• Arcelor to Invest $350 million in Steel Production
  • Zelenskiy Vision: ‘State in a Smartphone’
  • Targeting Migrant Workers, Ryanair Unveils More Ukraine Flights to Germany, Poland
  • Food Export up $1 billion in Q1
  • Limits on Dividend Remittances Nearly Double
  • Reuters’ Analysts: More Interest Rate Cuts This Year
  • With Bond Rates Double Inflation, Foreign Buyers Abound
  • Outgoing Korean Ambassador Says Hyundai To Bid on Kharkiv Metro
  • Used Imports Flood Car Market
  • Kolomoisky Airline Wins Odesa-Tel Aviv Route
  • VR Capital Invests in Ukraine Solar
  • GDP Growth dips to 2.4%
  • 5G Auctions Next Year
  • Azeri, Kazakh Airlines Profit from Russia’s Ban on Ukrainian Overflights
  • 25-Year Growth Plan for Boryspil

Ukraine’s largest integrated steel maker, ArcelorMittal Kryviy Rih, will reinvest its entire 2018 profits – $350 million – into upgrading production, the company reports. The decision was taken at the company’s annual general meeting of shareholders on April 25.

Poland displaced Russia as the top buyer of Ukrainian goods, as Ukraine’s trade with Russia dropped 11% q-o-q, to $2.4 billion. In the January-March period, Ukraine sold $818 million worth of goods to Poland, compared to $759 million to Russia. Ukraine’s trade with Russia is expected to further drop this summer after the June 1 start of Moscow’s second trade embargo list with Ukraine in six months. While trade with Russia fell, Ukraine’s trade with the EU grew by 10% to $9.5 billion. The EU accounts for 38% of Ukraine’s foreign trade.

In Sarajevo, Finance Minister Oksana Markarova says Ukraine is “either on track or well positioned” to meet all requirements of the IMF standby program. Talking to Bloomberg Thursday after a panel at the EBRD Annual Meeting, she declined to discuss timing of the next IMF tranche, saying most important thing is to “stay on track.” On the panel, she said Ukraine’s macroeconomic situation is “very good.”

To cut corruption, „our goal is the state in a smartphone, Zelenskiy told visiting Canadian Foreign Minister Chrystia Freeland on Wednesday. “We don’t want to be talking about fighting corruption, we want to defeat it,” he said. To do this, his team wants to minimize Ukrainians’ contacts with bureaucrats.

Nibbling away at Ukraine’s massive inventory of idle state-owned properties, ProZorro has auctioned off 552 state properties since July, earning $37 million for the treasury. Real estate accounted for the overwhelming majority of sales of these ‘small privatisations’. Last December, Kyiv court rulings froze privatisations of large state companies.

Ukraine’s new oil and gas production sharing agreement mechanism is drawing blasts from from the American Chamber of Commerce – days before tenders are due and awards are to be made.PSAs are not used in any EU country, and their use in Ukraine only underlines the urgent need for reforms in the existing oil and gas fiscal and regulatory regime,” the ACC says. “The criteria discriminating PSA and other [license] blocks are unclear. The current PSA process is seriously flawed. A single, fair, stable and non-discriminatory environment for oil and gas is one of the key factors in attracting major international investment.”

In an aggressive bid for Ukraine’s migrant worker market, Ryanair unveils a fall Ukraine schedule with flights to five new German cities and eight new Polish cities. From Odesa, Ryanair launches flights to five Polish cities: Krakow in July, then Gdansk, Katowice, Poznan and Wroclaw on Oct. 29-30. From Kharkiv, Ryanair starts flights to Krakow and Poznan, and Vilinius Lithuania. From Kyiv Boryspil, Ryanair starts a flight in the fall to Katowice and doubles its frequencies to Warsaw to twice daily. Ryanair already flies from Borsypil to five other Polish cities.

Targeting Germany, Ryanair starts flights in October from Boryspil to Hahn, Karlruhe/Baden-Baden, Nuremberg and Weeze; and from Odesa to Berlin-Tegel. Its Austrian unit, Lauda, starts flights in November to Stuttgart.

With three year head start, rival Wizz Air’s Ukraine flight network already includes 12 Ukraine-Poland routes and 13 Ukraine-Germany routes. This summer Wizz Air launches three new flights: from Kyiv Sikorsky to Lublin in June and to Leipzig/Halle in July; and, in August from Kharkiv to Krakow, a new Wizz Air base.

Motor Sich suspends its weekly Kyiv-Lviv-Uzhgorod flight, inaugurated only two months ago. The Infrastructure Ministry is working with the airline and regional officials to promote the route, aiming to establish daily direct Kyiv-Uzhgorod flights for Zakarpattia’s summer tourism season.

In time for the summer travel crush, Kyiv Boryspil opens on May 23, the airport’s first multilevel parking garage. Connected by a covered walkway to Terminal D, the garage will offer long term and short term parking, video surveillance, and digital signs indicating where spaces are free in the 1,000-space facility. Short term parking will be about $1 an hour. Frustrated by years of construction delays, airport officials will celebrate May 23 with a ‘musical festival’ on the roof, billed as “KBPAEROPARTY.”

Ukraine’s food exports increased by 22.5% during the first quarter, adding almost $1 billion in sales, compared to the same period last year, reports Olga Trofimtseva, acting Minister of Agrarian Policy and Food. The top three export groups were: grain – 45%; oil – 22%; and oilseeds – 7%. Top products were: corn – 33%; sunflower oil – 21%; and wheat – 11%. Top destinations were: Asia – 41%; EU – 35%; Africa – 15%; and CIS – 6%.

After last year’s record 70-million ton crop, Ukraine’s grain harvest this year is to recede by 2.3% this year, to 68.4 million tons, predicts the Institute of Agrarian Economics. While livestock production is to be flat, egg production is to grow by 3.4%, and poultry meat by 7.4%. Last year, company farms were the locomotives of Ukrainian agriculture, with their output growing by 12.1%, compared to family farm output growing by 2.2%.

The Grain Ukraine conference will gather producers, international traders and government officials in Odesa on May 24-25. In addition to an address by Trofimtseva and panels on Ukraine’s prospects in world grain markets and strategies for easing domestic transportation bottlenecks, there will be a field trip to M.V. Cargo’s new grain terminal in Yuzhne, a one-hour bus ride south of Odesa.

Effective last Wednesday, the central bank raised the monthly limit on dividend repatriation to €12 million, from €7 million per company. “€12 million, satisfies the needs of all companies with foreign investments operating in Ukraine,” says Oleh Churiy, deputy head of the National Bank of Ukraine. “However, we realize that this limit is a certain barrier for new investors, and our goal is to lift the limit.”

Concorde Capital’s Evgeniya Akhtyrko writes: “This is the latest step by the central bank in its ForEx liberalization campaign. It reflects the NBU’s increasing confidence in the situation on Ukraine’s ForEx and the market’s ability to regulate itself.”

Ukraine will receive the next IMF loan tranche, for $1.3 billion, by mid-July, Alexander Paraschiy, Concorde Capital’s head of research, predicts in an interview with UNIAN. He says that Ukraine has fulfilled three of four basic provisions for the tranche. This month, the Rada may pass a fourth: a new, constitutionally sound illegal enrichment law. “Based on our history, this is a very good result,” he says. Lowering gas prices should not be an issue because parity with imports is maintained. The biggest cloud, he sees, is Igor Kolomoisky’s attempts to reverse the 2016 nationalization of PrivatBank.

Ukraine’s central bank will make at least one more cut in its prime interest rate this year, indicates a Reuters poll of 12 analysts. Five analysts expect the rate to end this year at 16%, down from 17.5% today. Three see the year-end rate at 17%. Two weeks ago, the National Bank of Ukraine cut prime from 18%, its first cut in two years. ICU writes: “In case of successful negotiation on the new [IMF] tranche and continuing decline of the CPI, the NBU is likely to cut the rate again during June meeting (-50 bps), eventually lowering it to 16% by the end of the year.”

Inflation in April was 8.8% compared to one year ago, the State Statistics Service reports. The central bank predicts inflation will taper to 6.3% at the end of this year. The median forecast of Reuters’ analysts is 7.8%.

The interest rate cut led to a 19% drop in bond sales Wednesday at the central bank’s weekly auction, compared to the pre-cut auction on April 23. At the May 7 auction, the bank sold $411 million worth of bonds — $166 million in dollars and the rest in hryvnia. In addition to selling puttable dollar bonds at 3.85%, the bank sold 18-month bonds to 18 bidders for $8.3 mln at 7.25%. The largest demand was for four-month bonds — UAH 4.5 billion sold in 43 bids, with interest rates of 18.25 to 19%.

Concorde Capital’s Evgeniya Akhtyrko writes:We expect the demand for UAH-denominated bonds will remain high as yields will still significantly exceed the current inflation rate. In addition, investing in UAH-denominated bonds looks like a very lucrative opportunity for non-residents, given the hryvnia’s ongoing stability.”

With inflation expected to hold below 9% and the hryvnia/dollar exchange rate at 26.5, little changed in three years, foreign investor interest remains strong. Foreign investors now hold UAH 36.3 billion ($1.37 billion) in bonds. ICU writes: “In our view, a large portion of bills was purchased by foreign investors, most likely with longer maturities from offered yesterday.”

As the presidential transition nears, the US-Ukraine Business Council stresses the importance of Ukraine’s new oil and and gas production sharing agreements. “Tender bids are due in May and the awards are expected in June,” the Council said Wednesday. This process “is being watched around the world as a strong and serious signal that Ukraine is expanding the energy investment climate and providing real opportunities for the private sector to invest in Ukraine.”

South Korea’s outgoing ambassador heard a pitch from Infrastructure Minister Volodymyr Omelyan that Hyundai build an electric car factory in Ukraine. In response, Amb. Lee Yang-goo said Hyundai plans to build on the success of its Rotem trains on Ukraine’s InterCity service and participate in a tender for 85 new subway cars in the Kharkiv Metro expansion plan. The EBRD and the European Investment Bank are financing half of the €320 million project.

With EU’s electric car market booming, Omelyan says that if lawmakers pass bills to stimulate the electric car and battery industry, “the next day we send a delegation to Tesla on construction of their first European plant in Ukraine.” Ukraine has Europe’s largest known supplies of lithium, a key imponent for car batteries. A Tesla battery weighs 540kg, giving Ukraine a supply advantage for Europe, argues Omelyan.

First time registrations of used imported cars totaled 207,000 for the first four months of this year, eight times the number of the same January-April period last year. By contrast, 25,300 new passenger cars – all imports – were registered during the same period, 3% fewer than during the first four months of last year. The flood of imports is due to lower taxes in Ukraine and growing restrictions in Germany against diesel cars. Of new registrations of used imports, 53% were for diesels, according to Ukravtoprom, the industry association.

Analysts from JP Morgan and UBS predict that political maneuvering in advance of parliamentary elections will delay Ukraine’s receipt of a second tranche this year. “PM Groysman clearly signaled that he is moving away from IMF requirements as he announced he will be running in parliamentary elections,” JP Morgan economists Nicolaie Alexandru and Trang Nguyen write in a note. “Both Zelenskiy and most politicians are likely to call for populist measures rather than IMF-required reforms.” Separately, analysts at Swiss investment bank UBS predict that if the Rada does not approve new anti-corruption legislation, this summer’s $1.4 billion IMF tranche will be delayed.

Ukrainian companies again won all auctions for oil and gas blocks conducted under the rules of ProZorro. On Thursday, in the second round of auctions, UkrGazVydobuvannya, the state gas producer, won six of the seven licenses, which are valid for 20 years of exploration and production. A small, private company, Unified Oil and Gas Company, won the seventh license. In March, in the first round of electronic auctions, UGV and two private gas producers, Burisma Group, DTEK Oil & Gas, won three licenses. The third licensing round, for nine blocks, will be June 18, reports WorldOil website.

Richard Deitz’s VR Capital Group is expanding its investments in Ukraine, establishing a joint venture with Investment Capital Ukraine and buying a 50% stake in 11 solar plants with a total capacity of 127 MW in Mykolaiv region. This is the third joint venture in renewable energy between Kyiv-based ICU and VR, according to Avellum, which provided legal advice to ICU. An investor in Russia since 1994, Deitz was based in Moscow for many years. According to Barron’s, his flagship hedge fund, VR Global Partners, L.P., had assets under management of $4.4 billion at the end of 2017.

Ukrainians driving home en masse Sunday from their ‘no visa’ May holidays caused lines as long as 500 cars at Polish-Ukraine border crossings, reports Ukraine’s Border Service. With automobile crossings on the Polish border increasing by 500,000 a year, Ukraine needs to double its land crossings with the EU from the current number of 18, Petro Tsyhykal, head of the border service, recently told Channel 5. He said that last year 100 million people crossed Ukraine’s borders.

With the record harvest pushed through the economy, Ukraine’s real GDP growth slowed to 2.4% in Q1 2019, compared to 3.5% in Q4 2018. Metals, the largest export after agriculture and labor, was ‘close to zero’ due to planned repairs at major mines and steelmakers, reported the National Bank of Ukraine. Retail, travel and construction were up, fueled partly by labor remittances. The central bank predicts the economy will grow by 2.5% this year, down from 3.3% last year.

Ukraine will auction 5G mobile frequencies next year, Infrastructure Minister Volodomyr Omelyan told reporters after meeting Friday with the National Communications and Information Regulatory Commission. “They see a great prospect of this technology,” said Omelyan. “It is their position, that Ukraine will be able to sell the first licenses for 5G next year.” Last month, Omelyan launched a 5G pilot project “Internet of Things on Highways.” Last year, 4G service was launched in Ukraine. Last month, Verizon, the leading American mobile company, and South Korea’s three mobile carriers launched 5G service.

If Western partners – including the IMF – maintain cooperation, Ukraine can get through this year, a peak year for foreign debt repayments, Yakiv Smolii, governor of the National Bank of Ukraine, told G7 ambassadors and IMF representatives in Kyiv on Friday. When the Rada returns to work in two weeks, parliamentarians are to consider a key IMF demand: reorganizing the State Fiscal Service into a tax service and a customs service. If Ukraine passes its IMF review in late May, it should win an IMF tranche of $1.3 billion.

Taking advantage of Russia’s ban on overflights of its territory by Ukrainian airlines, Azerbaijan’s low-cost carrier Buta Airways, is expanding flights from Baku to three Ukrainian cities: Kharkiv, Kyiv and Odesa. After flying to Kyiv Sikorskiy for two years, Buta added Kharkiv on Friday and will add Odesa on May 16. on Friday, May 3, made its first flight to / from Kharkiv airport. UIA has a lone flight to Baku, from Kyiv Boryspil, which must fly south over the Black Sea, around Crimea and across Georgia to reach Azerbaijan.

Kazakhstan’s new discount carrier, FlyArystan, plans to fly to Ukraine in the near future, Peter Foster, president of the parent company, Air Astana, tells the Center for Transportation Strategies. According to the British CEO, FlyArystan plans to carry 700,000 passengers this year and to expand its fleet in two years to 15 passenger jets. UIA, faced with longer and costlier flight routes to Kazakhstan, has cut its frequencies to Almaty and dropped its flights to Astana, now called Nur-Sultan.

Over the next 25 years, Kyiv’s Borsypil airport is to undergo a major €3.4 billion expansion to handle 54 million passengers – four times today’s level. Under a long range development plan approved last week by the government, the airport’s land area would increase by two thirds, to 1,538 hectares, Viktor Dovhan, deputy Infrastructure Minister, posts on Facebook. Terminal D, the main international terminal, would be greatly expanded and the second runway would be rebuilt. After registering a 19% increase last year, to 12.6 million passengers, Boryspil expects to see a 14% increase this year, to 14.4 million passengers.

Starting Friday, Ukrzaliznytsya will double the size of its Boryspil Express train, allowing the airport railroad shuttle to carry 200 passengers at peak hours. Ridiculed by the Kyiv press at its launch last November, the 80 hryvnia shuttle from downtown Kyiv has proved so popular, passengers often stand for the 35-minute ride.

Online purchases now account for 56% of long distance rail tickets sold, up from 50% last year, reports Evhen Kravtsov, CEO of Ukrzaliznytsia. More than 100 million rail tickets have been bought online since the service started in 2015.



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