Exclusive How a ship time charter became a successful logistics case for Interpipe

The company is once again close to leasing another vessel to operate on the Odesa – Persian Gulf route

Last summer, the Ukrainian industrial company Interpipe started operating a ship that it had taken on a time charter for the first time in its history. This case proved to be positive not only in terms of transportation economics, but also in terms of logistics management.

The first experience

At the beginning of the full-scale invasion of Russian troops, Ukrainian seaports, in particular, the ports of Greater Odesa, were closed and, of course, unavailable for transshipment of our products to foreign markets. I would like to remind you that Interpipe is a major exporter of steel pipes and railway products, with exports accounting for at least 75% of total sales. That is why we built logistics through land corridors and Izmail with delivery to the Romanian port of Constanta, where shipments were accumulated for delivery to destination ports.

This was followed by the Grain Agreement, which later grew into a temporary maritime corridor. This led to the opening of the ports of Greater Odesa, but shipowners were reluctant to enter them, mainly because of military risks. Since freight rates were sky-high, Interpipe continued to operate the port of Constanta and later moved to Varna, Bulgaria, where loading and unloading was cheaper. To reach Varna, we chartered small bulk carriers to transport our products from Odesa, consolidating shipments in Bulgaria before forwarding them to the final customers.

However, it eventually became clear that freight costs were exceptionally high at the time. Then we considered a time charter to be a more cost-effective and practical option. We agreed on the project internally, selected a vessel, signed a contract, and began shipping and transportation.

Initially, we used it as a feeder, delivering pipes along the Odesa-Varna route. However, later the bulk carrier made several trips to Batumi, so we diversified our routes. Thus, potentially, the time chartered vessel could operate in the entire Black Sea basin.

The main motive

The main argument for making this decision was the cost of transportation per ton of cargo. During the leased vessel’s operation, Interpipe saved almost 30% on the Odesa-Varna route. The time charter helped to stabilize the rhythm of deliveries and reduced operational costs (in man-hours).

For the company as a cargo owner, the time charter proved to be expedient, as it was responsible only for loading the vessel, paying a fixed price – a daily rental. The shipowner remained responsible for the crew, fuel stocks, port dues and military risks. In particular, the lease of the vessel allowed Interpipe to avoid additional costs after it was damaged in a Russian attack.

The vessel leased by the company was damaged in October 2024 during the shelling of port infrastructure in Odesa. Since then, Interpipe has returned to the practice of chartering on specific routes. Coincidentally, rates for chartering bulk carriers from Odesa have been gradually declining. In addition, in December 2024, the first vessel named Lady Sacha, sailed directly from Odesa to Houston. After that, the company refused to transship cargo in Varna.

Heading to the Middle East

The positive results and experience we have gained show that time charter is the right direction to optimize maritime supplies. Currently, the company has certain volumes of shipments to the Middle East, so we are preparing to lease another vessel to operate on the Odesa – Persian Gulf ports route. We are currently working on forming and stabilizing a constant cargo flow and selecting potential candidate vessels for long-term lease.

By the way, another reason why the time charter option is being considered again, this time for the Middle East, is the manageability of logistics. At the end of last year, Interpipe engaged a Turkish shipowner to supply pipes under a contract with QatarEnergy. The bulk named Iskenderun-M was chartered. However, instead of the agreed period of one month, it took three months to reach the east coast of the Arabian Peninsula. Accordingly, the cargo reached the client with a significant delay.

Creating your own fleet

At the same time, the option of creating our own cargo fleet remains on the table. It has been calculated, and under certain conditions, this solution is more efficient than a time charter. However, the company will not consider it in the short term.

The problem with this case is the increased liabilities and higher risks (repairing damage to the vessel, maintaining the crew). In addition, such a serious investment must be absolutely justified. The company does not yet see such a steady flow of maritime exports that would pay off the costs of buying its own fleet.

Freight rates

The reopening of Odesa Port and the return of container lines following the opening of the Ukrainian sea corridor positively affected both transit times and freight rates. In recent months, with an increase in supply from shipowners, we have seen a decline in rates – by about 20-30%, although prices still remain somewhat higher than in peaceful ports in the Black Sea region. Currently, the market seems to be at a certain point of equilibrium, and this trend is likely to continue until the end of the second quarter.

However, periodic shelling of port infrastructure continues to pose a risk of damage to cargo brought in for loading onto ships. This also disrupts ship lining schedules and leads to disruptions in cargo shipments.

The cost of insurance against war risks is still too high – it is much higher than usual. In this case, it would be advisable for the state to consider compensation for damage to cargo, as the burden on the budget would not be significant.