Posted on January, 16, 2025 at 11:03 pm
It has been a harrowing three years for agricultural trader Nibulon, one of the largest grain exporters in Ukraine.
Russia’s full-scale invasion has upended the company’s supply chains, rendered many assets such as grain siloes inoperable, and brought devasting personal losses to its staff and leadership.
In July 2022, founder and owner Oleksiy Vadaturskyy was killed by a Russian missile strike on his home in the city of Mykolaiv. His son, Andriy, took charge of the company in his stead, and relocated its headquarters to Kyiv.
In the face of these challenges, the trader has persevered and remains a major provider of grains such as wheat, corn and barley to buyers across Europe, Asia, the Middle East and Africa.
According to a company statement issued in December, Nibulon today holds a 5% share of Ukraine’s grain export market.
Ukraine is often labelled the “breadbasket” of Europe due to its fertile growing conditions and was the world’s seventh-largest exporter of wheat and fourth-largest exporter of barley before the war. Local firms such as Nibulon and Kernel, as well as international traders, compete to sell its goods.
GTR speaks with Volodymyr Slavinskyi, Nibulon’s director of trade, about how the company has adapted its supply chain approach in response to the Ukraine crisis. He also outlines the difficulties the firm continues to experience in accessing “inland” trade finance and the vital role of export credit agencies.
GTR: Can you provide an overview of Nibulon for our readers?
Slavinskyi: Nibulon was founded in 1991 and today is one of Ukraine’s larger exporters of grains and oilseeds, with the firm having invested a lot of money in transport and storage infrastructure over the years.
It has built up a network of over 30 inland silo and river grain siloes across Ukraine, though five of these facilities are unfortunately now in occupied territory. Our total storage capacity is about 2 million metric tons, and the company also has its own ship building yard and a river fleet of over 100 vessels and working cranes.
Before the full-scale invasion by the Russia Federation, our annual export volumes were between 5 to 6 million metric tons. The firm continues to trade Ukrainian commodities and has its own agri-division that cultivates around 50,000 thousand hectares of land in Ukraine.
Current export capacity is around 2.5 to 3 million metric tons, so our volumes have decreased because our fleet is blocked at the Mykolaiv port and the Dnieper River is also not available for navigation.
The river used to be the firm’s main transportation route and carried about 4 million metric tons annually, but now we have changed our logistics model and mostly use rail wagons and trucks. We have managed to reestablish a sustainable export logistics chain to continue our main activity of originating goods from over 3,000 Ukrainian farmers and supplying them to global markets.
GTR: Where did Nibulon largely export to prior to February 2022, and has this mix changed at all?
Slavinskyi: It changed a bit, but in general, the three main regions that Ukraine supplies agri commodities to are the European Union, Asia, the Middle East and North Africa. After the full-scale invasion, the European Union share increased because in the initial months of the crisis, the only way of exporting was land transport through the western border.
When ports started to operate, shipping to the European Union was more suitable for Ukrainian exporters because buyers from Asia were afraid of risks posed by the longer voyages. European companies were more ready to absorb those risks and work with Ukrainian companies. About 50% of our exports head to European Union, around 30% Asia, and 20% is Middle East and North Africa.
GTR: It sounds like there has been a significant impact on Nibulon’s operations and trading activities as a result of the war?
Slavinskyi: We have been forced to significantly change our operations and logistics. In the initial phase of the Ukraine crisis, we sought for any sustainable way to export grain because we had stocks at our warehouses. We used the railways and built our own terminal on the Danube to regain access to river transport and so move goods as fast as possible to Romania’s Constanța port, which is the closest deep-water port to Ukraine. There, the cargo can be transferred onto seagoing vessels.
In the second phase, we restarted our trading activity and by Autumn 2022 started to buy once again from suppliers. There has been a return to normality in 2024, both for Nibulon and the wider Ukrainian agri-industry. Our operational model and logistics are now stable.
Even still, the invasion has been a huge challenge. We now only use 32% of the assets that we used to own before the war, because the rest is either underutilised or is taken by Russia – either ruined or it cannot be used.
GTR: What are the firm’s main sources of working capital and trade finance? Have these changed since early 2022?
Slavinskyi: Nibulon has always relied on Ukrainian banks and international financial institutions for liquidity and today we have about 25 banking partners. Due to the challenges posed by the war we have been forced to restructure our portfolio. As compared to the pre-war times, the portion of Ukrainian banks has increased and they now account for about 50% of our debt, versus 31% from international financial institutions. We have reached agreements with most of our bank partners about restructuring debts – loans and lines of credit – and we are finalising another deal as we speak.
In terms of trade finance, we use international syndicates and also local banks. Approximately 18% of our overall portfolio is trade financing from both western and local banks. We mainly use letters of credit and sometimes also performance and bid guarantees.
GTR: Has your approach to trade finance changed at all in the past couple of years?
Slavinskyi: In general, our approach did not change and we have been able to restart trade finance lines. But having said this, the country risk is elevated and the share of inland trade financing from foreign banks has decreased significantly.
Following the full-scale invasion, we started step by step to re-establish trade finance for cargo already loaded at vessels, then after some time, started to gain finance for cargo delivered to the [river] ports. We have now started talking with our banks about instruments we used previously.
It is a bit tricky currently as international banks will only cover a part of these transactions. Nibulon must pay the farmer and store the grains at an elevator inland, maybe for one or two months, then deliver to the port. Only after that can you obtain financing from foreign banks. It covers your cycle for six weeks of goods being stored in the port and shipped to the buyer, but it doesn’t cover the first part just after you bought it from the farmer. That’s why we were forced to look for other instruments. We rediscussed payment terms with our suppliers and looked for financing inside Ukraine. It is a difficult time for companies and for the industry in Ukraine.
International trade finance banks still have appetite, but they are reluctant to take the inland risk. As such, the transportation of the goods from the silos to the ports is normally not covered by trade finance. This is why we have increased the share of local banks. If it’s a letter of credit, the international bank will only confirm that transaction for the last portion of the trade.
GTR: Which export credit agencies are particularly active in Ukraine and is Nibulon increasingly looking to use this form of support?
Slavinskyi: Denmark’s Export and Investment Fund of Denmark (EIFO) has offered us vital support since it restarted its Ukrainian business in 2023. We obtained a loan of €12.8mn last year and this helped finance the purchase of agricultural machinery. Alongside the trading part of the business, we are also involved in production and had a very successful year despite the fact that the conditions in Ukraine were not the best – we had drought. We have also tried to utilise Euler Hermes and are currently in negotiations over potential support. Export credit agencies can provide long-term funding at a reasonable rate and grace period, which can be critical for long term projects.
GTR: When it comes to exporting goods from ports on the Black Sea, there have been quite a few issues for Ukrainian exporters and the government has tried to help by launching an insurance facility. Has the Unity insurance solution been useful to Nibulon?
Slavinskyi: We have not used the Unity grain insurance scheme as this product is pretty expensive as compared to commercial insurance when we need cover for goods being exported from Ukraine. Our typical rates from the private market are much lower compared to the rates that are being provided under Unity.
I can confirm that this instrument did not work [for Nibulon]. International organisations are not that quick and competitive as compared to private players and the marine insurance market is quite developed. Companies involved in that business were more prepared for the Ukraine crisis. Unfortunately, it’s not the first and most probably not the last conflict that affects seaborne transportation, and the market did its job. Insurance was in general available when shipping restarted from Ukrainian ports and the price of insurance quite quickly went down to more or less normal values.
Initially, there were abnormal risk premiums and the cost of insurance was roughly US$57 per metric ton, which was completely unacceptable for exporters. But it normalised within months and insurance does not cost that much today. The governments took too long to discuss and produce a guarantee scheme.
Source: GTR