Tariff increase in Ukraine triggers reverse modal shift
Ukrainian Railways has decided to increase the tariffs for rail freight operations, and the country’s sector reacts. Compared to passenger rail, the disproportionate price increase is estimated to impact the country’s modal shift and prices in the whole supply chain.
Shippers from Ukraine’s cement industry explained to the Interfax-Ukraine news agency how this decision could impact the supply chain. Increased tariffs will lead the prices of coal transportation to rise. Respectively, this will affect the transport prices of raw materials and additives used to produce cement. In a domino effect, consumers will have to deal with higher prices when buying the final products.
Shift to road?
Nevertheless, apart from disturbing Ukraine’s supply chain for products transported by rail, the tariff increase will have another more devastating result. Liudmyla Kripka, Executive Director of the Association of Cement Producers of Ukraine, and Volodymyr Husak, Director General of the Federation of Transport Employers of Ukraine, agreed on one thing: the price increase for rail freight will possibly lead logistics companies to use more road transport.
Both emphasised that logistics providers will not tolerate the higher tariffs and move their enterprises to road. Such a move could have a double effect. First of all, it will reverse the country’s modal shift by turning products from trains to road trucks. Ukrainian Railways will lose way more income compared to if they maintained their tariffs lower. Simultaneously, the road system of Ukraine could collapse because it could not handle the extra volumes moving from the railways.
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