Abstract The ‘dynarat’ computer model is used to simulate accumulation of plastic shear strain (ratcheting) in rails and to predict wear and crack initiation. Recent developments have focussed on models of microstructure and strain hardening characteristics, based on twin-disc tests with British normal grade (Grade 220) rail steel. In Europe, and increasingly in Britain, the harder Grade 260 rail steel is more common. A set of twin-disc tests using Grade 260 rail steel has been performed, providing wear rates, micro-hardness data and shear strain estimates in order to select a new strain-hardening model. Calibration has led to developments in the core ratcheting model, including the ratcheting equation, the criterion for material failure and the influence of surface micro-roughness. Having calibrated the model against twin-disc data, wear rates are predicted for a set of generic wheel-rail contacts. The ratcheting model is developed here to simulate transverse traction, and a new quasi-static partial slip model for wheel-rail contact is presented. For the range of contact conditions studied, wear rate is found to vary linearly with peak contact pressure, and an equation for estimating wear rate as a function of peak pressure and traction coefficient is fitted to the simulation data.