Business Update: April 24 – State railway pays big tax bill, farmers oppose export limits

March saw Ukraine rise to the 12th place in a global ranking of worldwide steel producers. According to the results of metallurgical enterprises in March 2020, Ukraine reduced its steel production by 10.3% compared to the same period in 2019, to 1.765 million tonnes, but rose from the 13th to the 12th place, and according to the results of the first quarter rose from the 12th position to the 11th in the ranking of 64 countries compiled by the World Steel Association. According to the record in March, there was a decline in steel production by March 2019 in most countries of the top ten, except for Turkey and Iran.

The economy ministry plans to restrict exports of Ukrainian corn to 29.3 million tons. The Ukrainian Grain Association opposes the decision and the announcement of the plan comes days after news of a 20% y-o-y increase for the country’s grain exports, and a 6% increase for the first sales quarter of 2020. Grain and metals exports are Ukraine’s largest foreign exchange earners. The limitation on exports is to prevent possible food shortages in Ukraine, officials have said.

The Ukrainian Grain Association (UGA) said in response that it’s convinced there is little chance for a shortage of corn in the domestic market, therefore, setting the ceiling for export volume of this crop is impractical. Last year, Ukraine received a record corn crop of 35.2 million tonnes, and this year, the corn crop can reach a new record, the association predicts. This week, multiple international organizations have warned of a possible famine in many countries as a result of COVID-19. Ukraine has become a major food exporter.

The UGA warned of limiting exports, and said: “Corn exports amounted to about 26 million tonnes and export rates are declining, which indicates the absence of special interest of exporters in corn. In addition, the market situation is such that the price of Ukrainian corn is almost $25-30 more per tonne than the price of its competitors from Argentina and the United States. Therefore, the UGA expects a further decline in the rate of export of corn in the near future… the UGA does not see the preconditions for talking about a shortage of corn in the domestic market.”

Ukraine’s economy ministry has worsened its grain forecast for 2020 to 60 million tons, blaming a lack of moisture and the COVID-19 pandemic. The Ministry for Development of Economy, Trade and Agriculture of Ukraine has predicted that Ukrainian farmers in 2020 will harvest 60 million tonnes of grain and leguminous crops compared with the previous forecast of 65-70 million tonnes.

The ministry stated: “According to the adjusted forecasts… due to lack of moisture and economic factors caused by the coronavirus disease and COVID-19 pandemic, farmers will harvest 60 million tonnes of grain and leguminous crops.” Spring farming has gotten underway, but has been hampered by the coronavirus. By April 23, field work had been carried out on an area of 7.8 million hectares 15.3 million targeted hectares.

Ovostar Union, a leading egg producer in Ukraine, reduced egg sales by 28% in January-March 2020 compared to the same period in 2019, to 241 million eggs. According to the company’s statement on the website of the Warsaw Stock Exchange on Friday, egg sales for export decreased to 56.5%, to 81 million eggs, resulting in a share of export sales of 34% during the specified period (compared to 56% in the first quarter of 2019).

To boost major grain exporters like Nibulon and Kernel, the Rada passed a first reading of a law on inland water transport. A total of 243 MPs cast their votes in favor of the bill in its first reading, reported Interfax. Ukraine’s extensive but underutilised system of rivers and canals can be a major arterial system for getting fuel, commodities and food to market. According to an explanatory note attached to the new law, the bill regulates activities in the fields of inland water transport, the use of river waterways, canals and coastal strips for navigation; regulates the use of river vessels and pleasure craft.

State railway Ukrzaliznytsia paid over $803 million in taxes in 2019, from revenues of about $3.3 billion. JSC Ukrzaliznytsia paid more than UAH 21.8 billion (excluding VAT) of taxes and fees to the national and local budgets in 2019 – some 24% of the company’s net income chairman of the board Ivan Yuryk said on Friday. Payments at all levels increased by 37% compared to 2018.

Ukrzaliznytsia said in a statement: “Ukraine is practically the only country in the world that does not use budgetary funds to invest in railways. Moreover, the tax burden on the company is growing every year. Last year we were forced to pay about UAH 4 billion of land tax, from which almost all railways of the world are exempted, and another UAH 1.5 billion of excise tax on fuel. With these funds, the company could buy 196 new passenger wagons or 12 suburban electric trains in ten-wagon configuration.”

Mariupol port on the Azov Sea increased cargo handling by 30.4% in the first quarter of this year. The Donbas port city which, alongside neighboring Berdyansk,  has been the victim of a lengthy Russian navy blockade, is starting to turn things around. It increased cargo handling by 30.4% in January-March 2020 compared to the same period in 2019, to 1.654 million tons. According to the Ukrainian Sea Ports Authority, during the period the port increased the transshipment of export cargo by 26.8%, to 1.386 million tonnes, import by 29%, to 224,660 tons, coastal freight by 43 times, to 43,000 tonnes. At the same time, the port did not handle transit cargo.

Mariupol wasn’t alone. The seaports of Ukraine increased cargo handling by 11.2% this quarter. January-March 2020, the seaports of Ukraine handled more than 41 million tonnes of cargo, which is 11.2% more compared to the same period in 2019. According to the statement of the Ukrainian Sea Ports Authority on the state-owned enterprise’s website, traditionally, the leaders in transshipment are grain, ore and containers.

After a small run on Ukrainian bank deposits in late February, customers returned almost $1 billion to their bank accounts through to April 1. Deposits of individuals in Ukrainian banks for the month increased by 5% to about $20 billion. This was reported by the press service of the Deposit Guarantee Fund of Ukraine.

During quarantine, rental prices for housing in Kyiv fell by 7-10% while sale prices increased slightly. That’s according to analytics from OLX Real Estate, as told to Interfax. While rental prices have fallen and sale prices have dropped, both markets have been essentially frozen by the lockdown linked to the COVID-19 pandemic.

OLX said: “Since the middle of March, prices for long-term rental housing have been falling in the capital. If we compare the first half of March with April, then the one-bedroom apartments have fallen in price by 10%, or by UAH 1,000, now these apartments cost of UAH 9,000 per month, on average. Two-bedroom apartments are rented by 7%, or UAH 1,000 cheaper, for UAH 12,500. Three-bedroom apartments fell in price by 9%, or UAH 1,500, the average rent in April was UAH 15,000 per month.”