Additional growth in logistics costs may make ArcelorMittal's production activities impossible

The increase in Ukrainian Railways tariffs is negatively affecting the plant, which has been suffering losses since the beginning of the war

Over the past four years, the ArcelorMittal parent group has provided more than $1 billion to ensure the survival of ArcelorMittal Kryvyi Rih in wartime conditions. The group has now made it clear that the funds provided are intended exclusively for AMKR and not to cover the losses of other companies. If the planned indexation of Ukrainian Railways’ tariffs, aimed at covering the carrier’s losses, takes place, the company will probably have to stop production.

This was stated by Mauro Longobardo, CEO of ArcelorMittal Kryvyi Rih, during an online discussion entitled “Railway tariffs in 2025-2026: where is the balance between customer capabilities and carrier needs,” held by the Center for Transportation Strategies.

«We understand the situation of Ukrainian Railways and the challenges it faces. However, we are trying to convey that we should not bear the costs associated with this increase. If we are forced to cover these costs, we will probably have to stop production. This is a sad but real possibility. We are already losing money, and any additional losses will make it impossible to cover our costs,» said Mauro Longobardo.

The possibility of shutting down the enterprise stems from the fact that since the beginning of the war, ArcelorMittal Kryvyi Rih has been incurring huge losses, which are further exacerbated by rising logistics costs and electricity prices.

«In a situation where we have already demonstrated significant financial losses in recent years, the prospect of further growth is not just a red flag, but a black flag. We cannot describe the seriousness of the situation any other way. An increase in logistics tariffs could lead to hundreds of millions in additional costs each year, and we simply do not have that kind of money,» the top manager emphasized.

For Ukrainian businesses and companies in the mining and metallurgical complex in particular, it is important that rail freight tariffs are economically justified.

«We believe that the current freight tariffs are a quasi-tax. Freight transportation is highly profitable, but its revenues go to finance passenger transportation in the amount of UAH 23-24 billion per year. This a priori contradicts the principle of economic justification of tariffs,» added Alexander Kalenkov, president of Ukrmetprom, during his speech in an online discussion.

It should be recalled that Ukrainian Railways’ tariffs had already increased significantly on January 1, 2022, and were then further increased in June-July 2022. For Class I cargo, the increase was 2.4 times, for Class II – 2.2 times, and for empty cars – 2.6 times.

As GMK Center reported earlier, Ukrainian Railways’ plans to raise freight tariffs by indexing them by 37% could have a significant impact on the entire Ukrainian economy. In particular, this could lead to an increase in overall logistics costs, higher production costs and loss of competitiveness, a reduction in production and export volumes, increased industrial inflation, etc.