News / Rail freight review: Ukrainian Railways hikes tariffs as war drives up costs

Photo: DB Cargo

With Ukraine raising tariffs, Estonia eyeing more private volumes and, in the UK, it seems incentives by DP World to lure customers onto rail all appear to be paying off, as intermodal loads inch back up in our latest rail freight round-up.

Following three years of war, and the increased cost of maintenance it has provoked, it appears Ukrainian Railways (UR) customers may be facing a spike in costs.

Announcing it is seeking a 37% price increase, the national carrier said the government-mandated norm of annually indexing rail tariffs had not been followed in recent years, leaving UR under-resourced as it contends with the impact of war.

Noting that this hike was the first since 2022, UR chair Gephard Hafer said: “Indexing freight tariffs is vital for the Ukrainian railway to ensure stable operation and comply with safety standards.

“The level of tariff indexation was calculated to be minimally sufficient to finance operating expenses and carry out critically needed infrastructure repairs.”

The carrier pointed out not only the shortfall in payments for workers, who “reliably deliver cargo despite daily shelling”, but surging energy and fuel costs and a 217% spike in the cost of sourcing spare parts for locomotives – costs rising as war has left the country overly dependent upon its rail freight services.

Sources have told The Loadstar over the year that the blockade by Russia of Ukraine’s so-called grain corridor had forced a rapid migration to moving increased volumes in containers by rail.

One source told The Loadstar that Ukraine’s rail dependence was unsurprising, noting that the country has “one of the most well-developed rail systems in Europe”.

Nonetheless, the source warned its reorientation away from Russia had exposed a major weakness – and cultural hangover – in Ukraine’s desire to increase trade with its western neighbours: namely, its mismatched gauges.

Considering pending price spikes, the suggestion has been made that what’s needed most is for the country to rip out the old Soviet-gauge tracks and seek external investment to replace them.

Estonia, which has spent recent years contending with the threat of a Russian invasion, has also seen developments on the tracks, with former state-owned Operail’s new owner, Tiigi Keskus, targeting bolstered container volumes.

The acquisition of Operail for €19m was confirmed early last week, the sale itself enforced by the Russian war on Ukraine, said the government.

Minister of infrastructure Vladimir Svet said: “Since the start of Russia’s war of aggression against Ukraine, the volume of goods transported on Estonian railways has dropped dramatically.”

He added that profits increased in line with volumes and distance, and, being a small country, it appeared the government was eager to sheer itself of the responsibility for track and locomotive maintenance while funds were need to meet growing defence concerns.

Supervisory board member at Tiigi Keskus Richard Tomingas said the aim was to not only “continue in the Estonian railway sector, [but] in the future, expand its activities, if possible”, noting that “at first glance, it seems that we must kickstart container transport”.

 “Looking to the future, rail’s importance will increase, more goods must be transported on rail than on highways to meet national climate objectives,” he explained.

Meanwhile, in the UK, it seems a series of efforts  to boost rail freight services may have started to pay off, the latest quarterly figures showing some signs of progress.

Intermodal maritime saw a 4% year-on-year bump, to 1.6bn net tonne km over the three months to September, with non-maritime up 11%, to 197m net tonne km.

The Office of Rail and Road highlighted efforts made by DP World to get more shippers using rail services, adding: “This has increased rail freight’s share of the market at Southampton. Furthermore, there have been new services, such as between Tilbury and Manchester.”

Over the three-month period, the office stated that, “as the commodity with the largest share of cargo moved, rail accounted for 38% of all freight moved between July and September 2024”.