Ukraine rail tariff hike threatens 300,000 jobs and steel sector, union says

By Pavel Polityuk

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.

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.

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.

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.

"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.

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.

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.

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.

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.

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)