Ukraine Rail Tariff Hike Puts 300,000 Jobs and Steel Industry at Risk, Union Warns
Impact of Proposed Freight Tariff Increase on Ukraine's Steel Industry
By Pavel Polityuk
Union's Warning on Economic Consequences
KYIV, June 9 (Reuters) - A freight tariff increase proposed by Ukraine's state railway could reduce GDP, lead to the permanent closure of some facilities and deprive 300,000 people of jobs, the Ukrainian steelmakers' union UkrMetalurgProm said on Tuesday.
Details of the Proposed Tariff Hike
Ukrzaliznytsia CEO Oleksandr Pertsovskyi told Reuters earlier this month that the company wanted to raise freight tariffs by at least 45%. The increase would help to reduce its losses and restructure its significant debt.
Steel Sector's Financial Struggles
In a letter to Reuters commenting on Ukrzaliznytsia's statements, the union's president, Oleksandr Kalenkov, said Ukraine's steel sector had suffered losses of 28 billion hryvnias ($632 million) and that any additional burden on the industry would be crippling.
Effects of War and Economic Downturn
Loss of Steel Facilities
During the war with Russia, Ukraine has already lost major steel facilities. Several plants have been suspended and others are operating at significantly reduced capacity.
Risk of Permanent Shutdowns
"Under these circumstances, any further increase in transportation costs could become the decisive factor that pushes additional enterprises from partial operation into permanent shutdown," Kalenkov wrote.
Decline in Freight Transportation
He said that Ukraine's freight transportation base had contracted and volumes transported by rail declined to a projected 160 million metric tons in 2026 from approximately 314 million tons in 2021.
Causes of Decline
Half of this decline was caused by the occupation of Ukrainian territories and the loss of industrial assets located there, Kalenkov said.
He blamed the rest on deteriorating economic activity, reduced industrial output and a fall in export volumes.
Railway's Financial Challenges and Industry Response
Maintaining Infrastructure Amid Declining Shipments
Despite the decline in freight shipments, UkrMetalurgProm said the railway continued to maintain infrastructure and operating costs largely designed for a significantly larger transportation market.
Freight Customers Bearing the Burden
While Ukrzaliznytsia's CEO told Reuters earlier this month the railway could no longer afford to subsidise other sectors of the economy, the union said freight customers were effectively being asked to compensate for passenger transportation losses and unresolved structural inefficiencies within the railway system.
Competitive Disadvantage for Exporters
Kalenkov said the proposed increase in rates would create a significant competitive disadvantage for Ukrainian exporters when the country urgently needs to preserve industrial output, exports, jobs and foreign currency revenues.
($1 = 44.3339 hryvnias)
(Reporting by Pavel Polityuk; editing by Barbara Lewis)
