Ukraine’s UDP is Auctioning Unprofitable Sea Fleet to Focus on River Ops
The Ukrainian Danube Shipping Company (UDP), a state-run shipping company, is starting an auction to sell its six antiquated ocean-going vessels that used to operate on the Black Sea, Sea of Azov, and the Mediterranean. The company called it a “painful but the only right decision,” as its focus is on shipping from the river ports on the Danube and Dnieper.
The company posted online last week an auction for six Izmail-type cargo vessels with the auction set to begin on December 13. The six vessels are being offered as a single lot even though only two are currently in operating condition. A minimum bid of approximately $10.6 million was set for the vessels with an approximately $500,000 guarantee also due.
“We must get rid of unprofitable non-core assets and direct resources to modernizing the river fleet,” UDP said announcing its plans for the auction. “It is in the segment of river freight transportation that shipping companies have development prospects.”
The change in condition is also symptomatic of the economics in the bulk market since the ports in the Odesa region have reopened the company said. They said after the blockade of Odesa was lifted, freight rates collapsed with many private companies able to operate at lower rates than the state company.
The six ships, Vylkovo, Izmail, Tatarbunary, Viana do Castelo, Kiliya, and Reny, were built in Portugal between 1992 and 1993. Each is 3,700 DWT with two large holds able to operate from the river ports and the seaports. Before the war, the vessels were operating on bareboat charters but they were returned to Ukraine. In 2023, with a government mandate to move grain and other cargo and rates high with the seaports blocked, UDP reports it was economical to start the refurbishment of the vessels. Work was completed on Vylkovo and Izmail and planned for Reny, but when freight rates collapsed the restoration of the vessels became uneconomical.
Four of the vessels need restoration with Ukraine's hope that all will be put back into service by a private operator (UDP)
“We analyzed and worked out all possible options. We considered proposals for transferring vessels to time charter. However, the income from the charter will not cover the future costs of maintaining and repairing the vessels. This is a clearly unprofitable project for the state,” reports UDP.
It says it is spending money to keep the ships laid up. They will also now face additional certification requirements and costs due to their age.
They report the shareholders of the company supported the decision to start the privatization and sale of the six vessels. They said there has been interest in the two that were restored, but they want to sell them as a single group. The hope is that a private company will restore all the ships to expand shipping capacity from Ukraine.
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