Changes in tariffs for electricity transmission and an increase in the cost of freight transportation by Ukrzaliznytsia may lead to a mass shutdown of enterprises of the mining and metallurgical complex. The consequences will be job losses, a reduction in tax and foreign exchange earnings, as well as additional pressure on the hryvnia exchange rate.

This was stated by the Chairman of the Federation of Metallurgists of Ukraine Sergei Belenky, commenting on recent government decisions.

According to him, the Ukrainian metallurgy industry finds itself in a “perfect storm”: the industry is simultaneously under pressure from the CBAM carbon import adjustment mechanism, restrictions on product supplies to the European Union, and problems with maritime logistics. Now high electricity prices and increased railway tariffs have been added to this list..

" After restricting exports to the EU, blocking sea ports and increasing electricity tariffs, the increase in the cost of rail transportation may become critical,” Belenky noted..

He emphasized that metallurgical enterprises export a significant part of their products by sea. It is technically and economically impossible to redirect such cargo to road or rail transport in the required volumes.

According to Belensky, the industry is already reporting the shutdown of certain production facilities.. Without changing the state tariff policy, other enterprises may be forced to resort to this.

He named a possible reduction in the cargo base of Ukrzaliznytsia as a separate risk: increasing tariffs, in his assessment, does not guarantee an increase in the company’s income, since industrial enterprises may reduce production or completely stop transportation.

“The railroad may lose such volumes of cargo that its financial position will deteriorate even further due to high fixed costs.. There are almost no reserves left in industry that would allow us to withstand another tariff increase without consequences,” explained Belensky.

At the same time, he noted that the shutdown of metallurgical and mining enterprises will have consequences not only for the industry, but also for the cities where they are the main employers and taxpayers. Particularly high risks exist for Krivoy Rog and other industrial centers.

" Stopping them will mean a burden on employment centers, a reduction in community income and a deterioration in the social situation,” emphasized the Chairman of the Federation of Metallurgists.

In addition, a reduction in the export of metallurgical products will lead to a decrease in foreign exchange earnings and a deterioration in the trade balance, which will create additional pressure on the hryvnia and affect the incomes of all citizens.

He called on the government to reconsider the already adopted and planned tariff decisions, as well as to intensify negotiations with the EU on trade restrictions and diplomatic efforts to stabilize the work of the sea corridor.

“If we consider the needs of each state monopoly separately and do not evaluate their total impact on the economy, the consequences can be catastrophic - both for metallurgy and for the state as a whole,” concluded Belenky.

As you know, recently the new government made two decisions at once - increasing tariffs for freight transportation by 30% and revising the tariff for electricity transmission, despite calls from industrial and agricultural associations of Ukraine to refrain from increasing it, because the economic situation remains extremely difficult.