Ukraine steel union warns proposed rail tariff hike threatens 300,000 jobs

The Ukrainian steelmakers’ union released a crucial statement on Tuesday that a freight tariff increase proposed by Ukraine’s state railway could shrink GDP, ultimately leading to the permanent shutdown of some facilities and displacing 300,000 workers.

Earlier, Ukrzaliznytis CEO Olessandr Pertsovskyi told Reuters that the company seeks to raise freight tariffs by at least 45%. This substantial increase would help to limit its losses and provide leverage for debt restructuring with creditors.

Ukraine has already lost its major steel facilities during the war with Russia. Meanwhile, various plants have idled operations, while others continue to run at drastically reduced capacities.

In this regard, Kalenkov wrote: “Under these circumstances, any further increase in transportation costs could become the decisive factor that pushes additional enterprises from partial operation into permanent shutdown.”

While Ukraine’s freight transportation had contracted-with volumes projected to decline to a projected 160 million metric tons in 2026 from 314 million tons in 2021. 

Kalenkov further clarified that the majority of this decline was caused by the occupation of Ukrainian territories and the capital destruction of industrial assets. On the other hand, the remaining were driven by an economic downturn and reduced exports.

The CEO stated that the state railway can no longer afford to financially subsidize other sectors of the economy. The union claims that freight customers are being compelled to pay higher rates to cover passenger transit losses.

Furthermore, they argue that freight rate hikes are being used to mask unresolved structural inefficiencies within the railway system.

It has been observed that proposed rate hikes will critically weaken the competitiveness of Ukrainian exporters in the global market. 

Nonetheless, the implementation of these rates could threaten key areas when Ukraine needs them such as industrial production, export volumes, domestic jobs and foreign currency revenues.