More than 60% of Ukrainian Railways infrastructure is unprofitable – Oleksandr Kalenkov

Steel industry demands changes in tariffs: ore transportation cannot cover UZ's losses for all

More than 60% of Ukraine’s rail infrastructure is unprofitable, Ukrmetprom President Oleksandr Kalenkov said in an interview with CFTS. According to him, the costs of maintaining it are artificially spread across all cargoes, regardless of the volume and complexity of transportation. As a result, those who transport efficiently – primarily the iron and steel sector – are forced to subsidize inefficient logistics.

“The cost of route transportation of ore is one of the lowest: the train is formed on a private track, travels non-stop along the main line, without any sorting or shunting operations. But in Ukrainian Railways’ (UZ) tariff, these costs are equated to the transportation of one car from remote, inactive stations,” explained Kalenkov.

He reminded that ore is transported through 18 stations, while, for example, grain is transported through more than 400. Of these 400, a significant number are unprofitable, which entails the maintenance of additional tracks, junction and marshalling yards, and shunting locomotives that are not used in ore transportation.

Mr. Kalenkov also drew attention to seasonality: ore is transported evenly all year round, while grain is transported mostly at peak times. This creates an additional burden on the infrastructure and increases costs.

“63.4% of UZ’s tracks are unprofitable, generating over UAH 16 billion in losses. If you add other infrastructure elements, the amount is even higher. Why, then, are these costs included in the cost of ore?” added the president of Ukrmetallurgprom.

He called for a fair reform of tariff setting. First of all, we need to introduce a surcharge for the use of inactive infrastructure. Next, we need to move to tariffs that depend on the format of transportation: route, group or carload. And most importantly, to start accounting for real costs for each individual transportation.

“We are ready to pay an economically justified tariff, but we are not ready to pay for manipulations and deception by UZ management, which avoids solving systemic problems and once again wants to shift the burden of already unaffordable costs onto the shoulders of those who are still working,” summarized Oleksandr Kalenkov.

As GMK Center reported earlier, in 2024, Ukrainian Railways increased iron ore exports by 1.7 times compared to 2023, to 33 million tons. Export transportation of ferrous metals increased by 13.7% y/y – to 5.17 million tons.

In 2024, the total volume of cargo transported by Ukrainian Railways increased by 17.9% compared to 2023, to 174.9 million tons. In particular, export traffic amounted to 84.67 million tons (+51.2% y/y), and import traffic – 9.63 million tons (+40.9%). Domestic transportation decreased by 5.5% y/y – to 80.2 million tons.