Rising Railway Tariffs: A Blow to Freight Flows or the Cost of Modernization?
The Central Asian railway market is entering a new period in which transportation costs are becoming one of the key factors determining the distribution of freight flows. This issue is particularly important for Kazakhstan, a major transit country connecting China, Russia, Central Asia and Europe.
In 2026, Kazakhstan’s tariff policy has once again moved to the center of attention for shippers, freight forwarders and railcar operators. Kazakhstan Temir Zholy (KTZ) has initiated several reviews of tariffs for services provided by the mainline railway network. In July, KTZ submitted a new application proposing to increase freight transportation tariffs by 25% in 2026–2027 and by 26% in 2028–2030. The application is still under consideration.
This is important because the issue is not simply another change in transportation prices. The tariff is one of the factors determining whether cargo remains on rail, shifts to road transport, changes route, or loses its economic attractiveness altogether.
Higher Tariffs Mean Changes Across the Entire Logistics Chain
For a shipper, the railway tariff is only one component of the total logistics cost. It is accompanied by the cost of railcars, forwarding services, transshipment, port services, idle time, terminal handling and other expenses.
Therefore, a 20–25% increase in the railway tariff does not automatically mean that the cost of the entire logistics chain will rise by the same percentage.
But there is another problem.
If railway transportation represents a significant share of the cargo’s cost structure, even a relatively small tariff increase can make a particular route uncompetitive.
The most price-sensitive cargoes include:
- coal;
- grain and processed agricultural products;
- ore and metallurgical raw materials;
- construction materials;
- mineral fertilizers;
- petrochemical products;
- containerized cargo;
- long-distance transit freight.
This is why tariff increases should be assessed not only from the perspective of railway revenues, but also in terms of the elasticity of demand for transportation services.
The Main Risk: Losing Low-Margin Cargo
High-value cargo can generally absorb higher transportation costs.
For example, if transportation represents only a small portion of the final value of an expensive product, the shipper is likely to continue using rail.
The situation is completely different for bulk, low-margin cargo.
For such cargo, logistics can account for a significant share of total costs. If tariffs rise sharply, shippers have several options.
First — change the route.
A shipper may choose another export route that is formally longer but cheaper.
Second — switch to road transport.
This is particularly possible over relatively short distances and where road infrastructure is well developed.
Third — change the transshipment scheme.
Cargo may be redirected to another terminal or port if the alternative logistics chain proves less expensive.
Fourth — reduce transportation volumes.
If transportation costs begin to consume the margin, part of production or exports may become economically less attractive.
This is where the main paradox of tariff increases emerges: a railway may receive a higher tariff per tonne while simultaneously losing part of its freight volume.
Kazakhstan: The Tariff Debate Goes Beyond KTZ
The situation in Kazakhstan deserves particular attention.
In November 2025, a five-year tariff for services provided by the mainline railway network for 2026–2030 was approved. Initially, tariffs for 2026–2027 were set at the 2025 level, while from 2028 an increase of approximately 4–5% within the inflation range was envisaged.
However, in 2026, KTZ began seeking a revision of the approved parameters.
In July, a public hearing was held regarding KTZ’s application to change the tariff for mainline railway network services, as well as an application by KTZ Freight Transportation to increase the maximum price for locomotive traction services.
Thus, the market is facing not simply a planned annual increase, but an attempt to revise the tariff model earlier than originally scheduled.
For business, this means greater uncertainty.
A shipper entering into a long-term contract needs to know how much transportation will cost six months or a year from now. The less predictable tariff policy becomes, the greater the commercial risk.
International Transit Is Particularly Vulnerable
For Kazakhstan, this issue is especially important.
The country’s strategy for developing its transport and logistics potential envisages increasing transit freight through Kazakhstan to 32 million tonnes in 2026 and 35 million tonnes by 2030. The target for container transit in 2026 is 1.556 million TEUs.
However, transit is one of the most price-sensitive segments.
Transit cargo can easily compare several international routes. If the Kazakhstan corridor becomes more expensive, the shipper begins considering alternatives:
China → Kazakhstan → Russia/Belarus/Europe
versus
China → another land corridor
or
China → maritime route → final market.
Therefore, an increase in transit tariffs can have an impact far greater than that on the domestic market.
Competition Is No Longer Only Between Railways
Another important trend is growing competition between different modes of transport.
If railway tariffs rise faster than the cost of road transportation, part of the cargo may shift to trucks.
However, road transport cannot completely replace rail.
For bulk cargo transported over thousands of kilometers, rail retains advantages in terms of capacity, energy efficiency and the ability to move large volumes in a single shipment.
Therefore, the most likely scenario is not a mass departure from rail, but rather a redistribution of freight flows.
Some routes will remain on rail.
Others will be optimized.
Some may shift to multimodal logistics schemes.
The most price-sensitive cargoes will begin searching for alternative routes.
The Railcar Market Will Also Come Under Pressure
Changes in tariffs inevitably affect the rolling stock market.
If transportation volumes decline, demand for railcars will also fall.
This is particularly important for operators of gondola cars and covered railcars.
On the one hand, higher railway tariffs increase the overall cost of transportation.
On the other hand, if freight flows decline, railcar operators face the following risk:
fewer loadings → more empty runs → lower railcar utilization → higher operating costs per tonne.
As a result, the railcar market may move from a shortage situation toward a more balanced market.
This will fundamentally change the negotiating position of rolling stock owners.
If shippers were previously willing to pay a premium for guaranteed railcar availability, declining transportation volumes may lead them to demand more flexible commercial terms.
Higher Tariffs Can Change the Geography of Freight
The most interesting effect does not appear immediately.
Companies begin changing their logistics strategies long before freight volumes actually decline.
A manufacturer may change its supplier.
An exporter may change its destination port.
A trader may change its delivery basis.
A logistics company may change its route.
An operator may change the structure of its railcar fleet.
Therefore, the impact of tariffs should not be assessed solely on the basis of current monthly loading statistics.
The real effect may become visible only after 6–18 months.
This is the period during which businesses can restructure their contracts and find alternative routes.
Tariffs Must Be Linked to Service Quality
For a shipper, a higher price is not necessarily the main problem.
The problem arises when prices increase faster than service quality.
If higher tariffs are accompanied by:
- faster delivery;
- predictable transit times;
- fewer delays;
- stable railcar availability;
- transparent pricing;
- digital tracking and support;
- increased infrastructure capacity,
then higher tariffs may be perceived as an investment in service quality.
But if transportation costs rise while delivery times and infrastructure availability do not improve, the market will react differently — companies will begin looking for alternatives.
What Will Happen to Freight Flows?
In my view, four major processes are likely to develop simultaneously.
1. Part of the cargo will remain on rail
These will be cargoes for which rail transportation remains more efficient than road or maritime alternatives.
2. Routes will be optimized
Freight forwarders will compare tariffs across different routes more actively, look for alternative origin and destination stations, and make greater use of multimodal logistics schemes.
3. Competition for transit freight will intensify
As transportation costs increase, it will become more difficult for Kazakhstan to retain some of the international freight flows that are most sensitive to price.
4. The railcar market will become more selective
Instead of a situation where “a railcar is needed at any price,” the market may gradually move toward a model in which operating costs, railcar utilization, operator reliability and the ability to offer a competitive rate on a specific route become decisive factors.
The Main Conclusion
Higher railway tariffs are not simply a financial issue for KTZ.
They are a mechanism for redistributing freight flows.
If tariffs rise moderately while infrastructure efficiency improves at the same time, railways can preserve and even strengthen their market position.
But if tariffs increase significantly faster than transportation productivity and service quality, the market will begin looking for alternatives.
Therefore, the success of tariff reform should not be measured only by additional railway revenues.
There is a much more important question:
How many tonnes of cargo will remain on rail after the tariff increase?
This is particularly relevant for Kazakhstan. The country is simultaneously seeking to increase transit volumes, attract additional freight flows and turn its geographic position into a competitive advantage. But the competitiveness of a transport corridor is determined by more than simply having a railway.
It is determined by the final cost of delivery for the customer.
In the coming years, this will become the key criterion in the competition between transport routes across Central Asia.
In other words, the market is entering a new phase: infrastructure and railcar shortages are gradually giving way to competition for freight.
And in this competition, the winner will not necessarily be the route that simply has a railway. The winner will be the route capable of offering an acceptable price, predictable delivery times and consistent service quality.