The authorities of Ukraine are working to reduce the freight cost of ships in the Black Sea corridor, but do not respond to the increase of grain transportation tariffs by Ukrzaliznytsia

The cooperation of the Ukrainian authorities with international insurance companies made it possible to reduce insurance premiums and the cost of freight of ships entering the Black Sea ports of Ukraine, which leads to an increase in purchase prices and an increase in exports.

At the same time, Ukrzaliznytsia, like last year, decided to increase tariffs for the transportation of grain, without changing them for the transportation of ore and metals, the export of which through the ports has also resumed.

The Ukrainian Grain Association (UZA) stated that the current artificial increase in the cost of renting freight cars and UZ's intention to increase freight tariffs by 20% in 2024 will make growing grain unprofitable, as logistics costs already account for a larger share of the export price. As a result, the area sown for the 2024 harvest will be significantly reduced.

"Export of agricultural products is one of the main sources of foreign currency inflows to the country, therefore, the reduction of the area sown under agricultural crops will automatically lead to a reduction in exports and foreign exchange earnings. And the reduction in production and, accordingly, the export of grain will ultimately reduce the transportation and profits of Ukrzaliznytsia itself. Against the background of the war and the reduction of financial aid from partners, all this will have catastrophic consequences for the economy of Ukraine," UZA emphasizes.

In addition, an increase in transportation tariffs will accelerate inflation, and a decrease in foreign exchange earnings will increase the devaluation of the hryvnia. As a result, all Ukrainians and UZ itself will suffer from Ukrzaliznytsia's decision to raise the cost of transportation.

Therefore, UZA calls on the authorities and Ukrzaliznytsia to communicate constructively and find mutually acceptable solutions with business, in particular with farmers, who already pay significantly higher rates for rail transportation than other industries.

The Deputy Minister of Development of Communities, Territories and Infrastructure, Yuriy Vaskov, said that the insurance mechanism for vessels using the Black Sea Corridor, developed by the authorities of Ukraine and Great Britain together with 14 insurance companies, will be operational within two weeks, after which the market of insurers and shippers will see a decrease in freight costs.

"There is a practice of combining companies during the insurance of important non-standard risks, which helps to strengthen financial capacity. Such an insurance pool will include Ukraine with financial guarantees, as well as leading British companies, which will allow policyholders to provide shipowners with an insurance rate of no higher than 1.25%," Yu. Vaskov explained.