---
title: "\"We Are Finishing Off Our Own Exporters\": Metallurgy Federation Warns of Ukrzaliznytsia's Destructive Tariff Cycle"
description: "The Metallurgy Federation of Ukraine warned that a cumulative increase in Ukrzaliznytsia's freight tariffs by ~50% over five months amid port blockades forms a \"death spiral\" capable of reducing the cargo base to 120 million tons by 2027 and causing annual economic losses of up to 96 billion UAH in GDP."
date: 2026-10-27T13:58:17.803Z
lang: en
url: https://xab.info/en/posts/metallurgy-federation-warns-uz-tariff-cycle
tags: [ukrainian-railways, freight-tariffs, metallurgy, logistics, ukraine-economy, port-blockade]
author: "Andrey Kosynko"
publisher: "XAB.info"
---

# "We Are Finishing Off Our Own Exporters": Metallurgy Federation Warns of Ukrzaliznytsia's Destructive Tariff Cycle

![Freight railway cars and trains on the tracks of a sorting station](https://xab.info/media/2026/10/27/metalurgi-predupredili-o-razrushitelnom-cikle-tarifov-uz/metalurgi-predupredili-o-razrushitelnom-cikle-tarifov-uz-1.webp)

## Key Points

- Starting August 1, 2026, Ukrzaliznytsia freight tariffs rose by 30%, with another +15% scheduled for January 2027 — totaling around 50% over five months
- Ukrzaliznytsia's 2026 cargo base forecast was lowered from 160 to 130 million tons; breakeven requires about 200 million tons
- The cost of rail transport for pig iron grew from $30 to $68 per ton; alternative logistics through neighboring country ports add another ~$46
- The MFU proposes preferential tariffs for enterprises 150–200 km from the frontline and state budget funding for passenger losses via the PSO model

The Metallurgy Federation of Ukraine (MFU) has issued a public warning: further increases in Ukrzaliznytsia's freight tariffs could accelerate the decline in shipping volumes, halt industrial operations, and ultimately worsen the financial condition of the railway company itself. This is reported by RBC-Ukraine, citing a statement from the MFU. According to the Federation's assessment, the current tariff model creates a closed negative cycle in which every new step to raise rates only deepens the crisis of the carrier's cargo base.

### "Death Spiral": How Fixed Costs Are Shifted onto Remaining Clients

The MFU describes the current situation as a "death spiral." The majority of Ukrzaliznytsia's expenses remain fixed and do not scale proportionally with shipping volumes. When cargo volumes decrease due to hostilities, the blockade of sea ports, and the general decline in industrial production, these invariable costs are redistributed among those clients who continue to ship products. As a result, the tariff rises, enterprises are forced to cut shipments, Ukrzaliznytsia's cargo base falls even further, and the need for the next rate increase arises. According to the Federation, starting August 1, 2026, freight tariffs have already risen by 30%, with an additional 15% increase scheduled for January 2027. Combined, this means an almost 50% increase over five months for enterprises that have simultaneously lost normal maritime logistics and operate under shelling conditions.

### Crisis Figures: From 314 Million Tons to a Forecast of 130

For Ukrzaliznytsia to operate profitably, it needs to transport about 200 million tons of cargo per year. Meanwhile, the forecast for 2026 has already been adjusted from approximately 160 million to 130 million tons. For comparison: in 2021, before the full-scale war began, the railway transported 314 million tons. Citing calculations by the state enterprise Ukrpromvneshexpertiza, the MFU points out that a 37% tariff increase could reduce Ukrzaliznytsia's cargo base by 27 million tons annually. Potential losses for the economy are estimated at 96 billion hryvnias of GDP, 2.4 billion dollars in foreign exchange earnings, and 36 billion hryvnias in budget revenues per year. The Federation warns that if the dynamic does not change, Ukrzaliznytsia's cargo base could shrink to 120 million tons in 2027.

### Metallurgy Is Already Paying for the Port Blockade

For the metallurgical sector, the consequences have become practical rather than hypothetical. Due to the port blockade and the August tariff increase, the cost of rail transportation of pig iron and raw materials for its production has grown from $30 to $68 per ton of finished products. Alternative logistics through ports in neighboring countries add another $46 per ton of pig iron. GMK Center analysts previously pointed out that further freight tariff increases amid the maritime export blockade could worsen the crisis in the mining and metallurgical complex while simultaneously degrading Ukrzaliznytsia's financial position. The MFU emphasizes: "We are not against Ukrzaliznytsia. We are for it to survive without destroying its clients."

### Cross-Subsidization: The Passenger Segment Hits Freight Shippers

Metallurgists cite cross-subsidization of passenger transport at the expense of the freight segment as another systemic problem. According to the MFU, passenger transport losses amounted to about 20 billion hryvnias in 2025 and could exceed 25 billion hryvnias in 2026. The Federation believes these costs should be financed from the state budget under the European PSO (public service obligation) model rather than shifted onto freight shippers. "The state must realize that a tariff increase costs the budget more than direct support for Ukrzaliznytsia," the Federation notes. Earlier, ICC Ukraine also called for freezing Ukrzaliznytsia's freight tariffs until the end of martial law.

### What Metallurgists Propose

The Metallurgy Federation of Ukraine puts forward a number of specific proposals: introducing preferential tariffs for enterprises located within 150–200 kilometers of the frontline, and ensuring the priority transit of critical metallurgical exports through the western border. The MFU summarizes: "We are finishing off our own exporters instead of saving them." Against the background of these statements, the issue of balancing Ukrzaliznytsia's tariff policy and maintaining the competitiveness of Ukrainian industrial exports remains one of the key issues for the country's economy in 2026–2027.

## Fact-Check & Sources

- [Металлурги предупредили о разрушительных последствиях повышения тарифов УЗ для экономики](https://www.rbc.ua/ukr/news/metalurgi-poperedili-ruynivni-naslidki-pidvishchennya-1793107903.html) - Primary source. All key figures and MFU quotes, Ukrpromvneshexpertiza calculations, GMK Center data, and the mention of ICC Ukraine are taken from this material. Tariff increase dates (August 2026 — +30%, January 2027 — +15%) and transport volumes (314/200/160/130/120 million tons) match the source text.

## FAQ

### By how much did Ukrzaliznytsia's freight tariffs increase in 2026?

Starting August 1, 2026, tariffs rose by 30%. An additional 15% increase is scheduled for January 2027. Combined, this represents nearly a 50% increase over five months.

### What shipping volume does Ukrzaliznytsia need to operate profitably?

According to estimates by the Metallurgy Federation of Ukraine, Ukrzaliznytsia needs to transport about 200 million tons of cargo per year to break even. The forecast for 2026 is 130 million tons.

### How does the port blockade affect the cost of pig iron transportation?

The cost of rail transportation for pig iron and raw materials increased from $30 to $68 per ton of finished products. Alternative logistics through neighboring country ports add about $46 per ton.

### What does the Metallurgy Federation propose to solve the problem?

The MFU proposes introducing preferential tariffs for enterprises within 150–200 km of the frontline, ensuring priority passage of metallurgical exports through the western border, and funding passenger transport losses from the state budget under the European PSO model.