The recent decision to raise tariffs by the state-owned company Ukrzaliznytsia is expected to complicate the execution of projects that attract private investments. According to the head of the association, launching a new mineral extraction venture requires an investment of at least $150 million.
Approximately 20 projects are at risk, which equates to 20 licenses for greenfield companies working to establish their business processes amid ongoing conflict, as explained by Orynychak.
She emphasized that logistics costs account for 50-60% of the total production costs in the mining industry, making any adjustment in Ukrzaliznytsia’s freight tariffs directly impact the economic viability of these future projects.
“We risk losing these 20 projects, which are very capital-intensive. Each plant requires investments starting from $150 million,” Orynychak stated.
Industry representatives are urging Ukrzaliznytsia to collaborate with industrial stakeholders to formulate a strategic action plan. “We are ready to contribute to this plan, but over the years, we have yet to see a clear strategy from Ukrzaliznytsia outlining our joint actions with the business sector,” Orynychak added.
She called for consideration of the impact that the tariff policies of the state monopoly have on new investments, noting that rising domestic costs could contradict Ukraine’s plans for developing critical mineral extraction and attracting international capital.
Context
- In July, a working group from the Ukrainian Parliament proposed to the Economic Development Committee to reconsider the decision to raise Ukrzaliznytsia’s freight tariffs by 30%. Group members asserted that the proposed tariffs are unjustified and raised concerns about their legality.
