Metallurgists turned to the government over UZ’s new tariffs for Odesa ports

UZ’s initiative to average the tariff distance to the ports of Great Odesa has drawn criticism from the mining and metallurgical complex.

The industry is reporting risks to competition and rising costs due to a change in the approach to calculating transportation costs,  RBC-Ukraine writes.

Representatives of Ukrmetallurgprom sent a letter to the Vice Prime Minister for the Restoration of Ukraine – Minister for Development of Communities and Territories Oleksiy Kuleba, Deputy Minister and Chairman of the Board of Ukrzaliznytsia.

The letter notes that the initiative to average the tariff distance to the ports of Greater Odessa is in fact the introduction of a single “manual” approach to tariff formation regardless of the actual length of transportation.

“Such an approach contradicts the basic principles of economically justified tariff formation in railway transport, where the cost should directly correlate with distance and costs, and has significant corruption risks,” the letter says.

Ukrmetallurgprom also recalled that a significant part of the MMC’s products is export-oriented, and seaports, in particular Great Odesa, remain the key logistics direction. At the same time, the cost of rail transportation to ports is a significant component of the cost of products and directly affects its competitiveness in foreign markets.

In particular, according to them, the initiative does not comply with current legislation, in particular the Charter of Ukrainian Railways, which provides for the calculation of fees taking into account the distance. At the same time, shippers who are directly related to the innovations were not involved in the discussion of the new initiative.

The association of enterprises noted that the implementation of this initiative creates systemic risks of market distortion: it, de facto, leads to cross-subsidization, when shippers located closer to the ports are forced to compensate for the costs of those located at a much greater distance.

“It should be emphasized separately that there are significant corruption risks that arise in the case of implementing such an approach, especially given the way it is promoted,” Ukrmetallurgprom emphasized.

The industry warns that the implementation of such a model will lead to an increase in logistics costs for a significant part of manufacturers. In wartime, this may lead to a reduction in production, a further drop in the workload of enterprises, and a loss of positions in foreign markets.