Ukraine’s steel industry is facing a threat that does not look like a front-line attack, but could leave a long economic scar. A proposed freight tariff increase of at least 45 percent by Ukrzaliznytsia could become not a cost adjustment for the sector, but a line between survival and shutdown.
The state railway is trying to reduce losses and manage a heavy debt burden. Its logic is clear: freight remains one of its main sources of revenue, and a wartime economy offers no easy solutions. The problem is that higher tariffs would shift part of the railway’s crisis onto industry.
Steelmakers warn that additional logistics costs could reduce GDP, force the permanent closure of some facilities and put up to 300,000 jobs at risk. For a country at war, while also fighting to preserve export earnings, this is not a narrow industry complaint. It is a question of economic resilience.
According to Daycom’s earlier analysis, the dispute over freight tariffs reveals a deeper weakness in Ukraine’s wartime economy. The state is trying to keep critical infrastructure alive at a time when its key customers have themselves been weakened by war, lost assets and falling exports.
The steel sector has already suffered losses of about 28 billion hryvnias. Some major plants remain on occupied territory or have been destroyed. Others have been suspended, while several continue to operate at sharply reduced capacity. This is an industry that has not recovered from the shock, but merely adapted to it.
In such conditions, a tariff rise could become the final push for plants still operating only partially. Steelmaking depends on the railway almost physically: ore, coal, coke, finished metal products and export routes cannot be quickly replaced by cheaper logistics.
The problem is sharpened by the collapse in the freight base itself. In 2021, Ukraine’s railway carried about 314 million tonnes of cargo. In 2026, the projected figure may be close to 160 million tonnes. That is almost half the former market, while much of the old cost structure remains.
Part of this decline is linked to the occupation of Ukrainian territories and the loss of industrial assets located there. The rest reflects weaker economic activity, reduced industrial output and lower export volumes. In other words, the railway is carrying less not because business is seeking privileges, but because the country has lost part of its industrial foundation.
Ukrzaliznytsia is still maintaining infrastructure built for a much larger transport market. Tracks, stations, depots, personnel, energy systems and security costs do not shrink automatically when freight volumes fall. That is why the company is looking for additional revenue through tariffs.
But this is where the central contradiction appears. If higher tariffs reduce freight volumes even further, the railway may end up not with financial recovery, but with a narrower customer base. A short-term increase in rates could turn into a long-term decline in cargo.
Steelmakers argue that freight customers are effectively being asked to compensate for passenger transport losses and unresolved structural inefficiencies within the railway system. This is an old problem in Ukraine’s transport policy: the railway’s social function has long been partly covered by industrial cargo.
In peacetime, that model could still function, even though it weakened exporters’ competitiveness. In wartime, its cost has become much higher. Ukrainian steel competes abroad not only through quality, but through the cost of delivery to ports, borders and buyers.
For Ukrainian exporters, every additional hryvnia in logistics costs becomes a loss of margin. If a competitor in another country has cheaper transport, stable ports and lower financial risks, a Ukrainian producer begins to lose even before its goods reach the market.
That is why tariffs cannot be treated separately from industrial policy. The railway needs financial stabilisation, but industry needs conditions in which it can continue working. If one critical system is rescued by exhausting another, the state is merely moving the problem from one balance sheet to another.
The most dangerous scenario is permanent plant closure. A temporary shutdown still leaves a chance of restarting after the market stabilises. Permanent closure means the loss of jobs, production chains, tax revenue, foreign currency earnings, engineering teams and entire industrial towns.
Steelmaking for Ukraine is not only steel. It is mining, energy, repair services, machine building, railway logistics, ports, suppliers and communities that depend on large enterprises. A tariff shock would quickly travel through the entire economic chain.
At the same time, Ukrzaliznytsia’s problems cannot be ignored. The company remains one of the pillars of the state in wartime: it moves people, military cargo, humanitarian aid, export goods and critical resources. Its debts and operating losses are also a risk for the country.
That is why the answer cannot be either a simple tariff freeze or a sharp increase for everyone. Ukraine needs a more precise model: cost audits, a clearer separation of passenger and freight economics, targeted support for critical shipments, differentiated tariffs for export sectors and a transparent debt restructuring plan.
There is no convenient villain in this dispute. There is a wartime state that must keep the railway, industry, exports and jobs alive at the same time. For that reason, the decision on freight tariffs must be strategic, not merely accounting-driven.
If the tariff increase is introduced without taking the condition of steelmaking into account, Ukraine may lose more than it gains. The railway could temporarily close part of its financial gap, while the economy risks losing enterprises that will not return once shut down. In a wartime economy, the price of a mistake is measured not only in hryvnias, but in the country’s ability to remain an industrial state.
