New conditions for Ukrainian Railways auctions and railcar cutting: what will change in the scrap market

For more than 1.5 years, Ukrainian steel companies were unable to purchase scrap metal from Ukrainian Railways (UZ) due to legislative barriers. During this time, more than 200,000 tons of raw materials accumulated in the company’s warehouses. During a meeting in January with the participation of the head of the board, Alexander Pertsovsky, the parties managed to agree on new trading conditions and market prices, as well as a program for cutting up obsolete railcars.

The situation with Ukrainian Railways’ scrap metal

Throughout 2022–2025, the Ukrainian market experienced a shortage of scrap metal due to increased exports, which led to the depletion of this strategic resource. This problem affects not only Metinvest-Resource, but all steel companies in Ukraine.

Ukrainian Railways, as one of the main sources of scrap metal among state-owned companies, had a significant amount of scrap metal in its warehouses, but steel enterprises were unable to purchase it.

From September 2023 to May 2025, there were legislative problems with the sale of Ukrainian Railways scrap metal. Steel companies held numerous meetings with Ukrainian Railways, Prozorro, and members of parliament at various levels, but the issue remained unresolved. During this period, about 200,000 tons of raw materials accumulated.

In May 2025, Ukrainian Railways held its first auction. The starting prices exceeded market prices by UAH 2,500 per ton. The excess was due to incorrect pricing based on benchmarks and inflated prices for loading railcars – UAH 1,400 instead of the previous UAH 400 (the level before sales were suspended in 2023).

From June 2025 to January of this year, UZ sold only 80,000 tons, of which only 30,000 tons were shipped. Steel enterprises did not participate in the auctions due to non-market prices.

Given the high cost of electricity in Ukraine, rising resource prices, complex logistics, and the military premium for the delivery of raw materials, steel companies cannot afford to overpay for scrap metal.

Before the January 2026 meeting with market participants, Ukrainian Railways offered lots at prices close to market rates. Steel companies purchased 77% of the lots offered, confirming their willingness to buy scrap metal on market terms.

Ukrainian Railways is in a difficult financial situation. The sale of scrap metal is seen as an important source of financing for the company. There are about 92,000 tons of raw materials ready for shipment in warehouses. By the end of the year, another 130,000 tons are expected to be added.

This year, Ukrainian Railways plans to sell 220,000 tons of raw materials. Historically, Ukrainian Railways has shipped no more than 170,000 tons per year, which accounted for less than 10% of the total market volume.

Agreements reached

Meetings with Ukrainian Railways management were held repeatedly at various levels. Alexander Pertsovsky, Chairman of the Board, took part in the January meeting, which is a positive development.

The following agreements were reached as a result of the meeting:

1. Starting in mid-February 2026, Ukrainian Railways will hold auctions at which 80% of lots will be sold on FCA (free carrier) terms. Small lots that do not constitute a wagon load may be sold on EXW (ex works) terms, which reduces overhead costs for small companies and Ukrainian Railways.
2. The size of the lots is set at 2,000, 1,000, and 500 tons. Small lots are shipped within 30 calendar days, large lots within 90 calendar days, with a 30-day delivery schedule for planning the production program of steel enterprises.
3. The loading price has been reduced from UAH 1,400 to UAH 700, which is also above market level. The management of Ukrainian Railways will consider reducing the loading cost and including it in the contract on FCA terms.
4. Terms of sale: scrap metal is sold loaded into railcars on equal terms for all bidders. Previously, companies located close to UZ’s scrap metal storage facilities had a competitive advantage because they could provide their own reloaders and motor vehicles.
5. Railcar loading: currently, the minimum load is 30–32 tons. Steel companies insist on increasing the load to 50–60 tons (market level) to avoid additional tariffs for transporting incomplete railcars. Ukrainian Railways management has agreed to work on this issue.
6. Payment terms: a 40% advance payment remains in place, unlike market practice with deferred payment. Steel companies understand the need to finance the state-owned company and have agreed to a compromise.

The actual implementation of the agreements will be assessed after trading begins in February 2026 and Ukrainian Railways fulfills its obligations.

Railcar cutting program

Ukrainian Railways is offering steel companies a program for independent railcar cutting. In the first stage, Ukrainian Railways plans to sell 5,000 obsolete railcars, with another 40,000 units planned for the future.

This issue has been under discussion for several years. Our company is interested in participating in the program, despite the shortage of labor resources and the need to bring in special equipment. We have the relevant experience: in January last year, our company cut up 120 railcars per month on its own, despite the shortage of scrap metal.

The company has the necessary equipment, in particular, special Genesis shears for automating the cutting process. We plan to repair the existing equipment and hire personnel to achieve a cutting volume of 150-200 railcars per month. This will provide a stable source of scrap metal and accelerate the financing of Ukrainian Railways.

It is important for steel enterprises that the exact weight of scrap metal is indicated for each railcar, excluding debris (residues of crushed stone, coal, and other raw materials). The railcars must be prepared for sale and delivered to the station adjacent to the steel plant.

Our plans

In 2026, our company plans to purchase 750,000–800,000 tons of scrap metal, depending on market conditions and the production program. The company aims to source as much scrap metal as possible from the domestic market. For comparison, in 2025, the volume of purchased scrap metal amounted to 700,000 tons.

Today, the level of scrap metal shipments by suppliers is 73%, even with exports closed. Not all companies are fulfilling their obligations, which is partly due to weather conditions. Based on the results of January 2026, the plan is expected to be fulfilled by 70%, with an underload of about 30%. The deficit is covered by internal reserves and warehouse stocks.

Steel companies have always been the main buyers of all UZ scrap metal.

The steelmakers’ requirements for Ukrainian Railways’ scrap metal are simple: market price, loading of wagons at the level of 50-60 tons to avoid additional tariffs, quality of scrap metal (compliance with DSTU), as well as adherence to the delivery schedule.