Shippers fear Europe rail unable to handle volume jumps

Shippers fear Europe rail unable to handle volume jumps

The UK Port of Felixstowe is expanding its rail services that have seen volume double in 10 years.

Credit: Hutchison Ports

Europe’s rail network is already overloaded and congested, especially along key corridors such as the Rhine Valley, and there is no way it could handle any large scale transfer of road transport volume to the tracks.

This was the assessment of European Shippers’ Council policy manager for rail and transport Pauline Bastidon, who said rail was also facing a reliability problem with the quality of services declining over time.

Bastidon highlighted the recent two-month closure of Europe’s most important north-south corridor. On August 12, work on the new Rastatt Tunnel freight bypass caused the track through the Rhine Valley to subside by half a meter (1.6 feet) between Karlsruhe in Germany and Basel in Switzerland, making the route unsuitable for rail traffic. This immediately blocked the way for more than 100 trains a day, forcing cargo shippers to scramble for alternatives, which were themselves limited because of widespread maintenance work by rail operator Deutsche Bahn and its subsidiary DB Netz.

“When things are so messy, when a shipper faces weeks and weeks of containers not moving, wagons not moving, with no information on whether a shipment will reach its destination, and with road not even able to handle the sudden extra volume, it makes a point about reliability,” she told JOC.com.

“After something like that, how do you expect shippers that have never used rail to even consider it?”

The European Commission’s (EC's) Single European Railway Area has been trying to achieve a modal shift from road towards more sustainable modes of transport such as rail, which the EC believes will dramatically cut the costs of running passenger and freight trains by providing a common framework of rules and regulations for rail operators in all EU countries.

Yet even with the green campaigns, rail continues to shed market share to trucks as most of the international containerised cargo in Europe travels by road to and from the ports. This is because the rail system in many places is under pressure, something that was highlighted by Hans Reinhard, president of the Group of European TransEurasia Operators and Forwarders (GETO) and vice chairman of the International Coordinating Council on Transsiberian Transportation (CCTT).

At a meeting in Beijing recently, Reinhard said Europe needed to urgently improve what he called the “massive structural inadequacies” that existed in its rail freight sector and have been exposed by the rapidly expanding China-Europe rail services. He also called for a reduction in tariffs by rail operators.

“There are diverse, and partly massive, structural inadequacies in Europe that have to be remedied urgently. We need additional railway lines, more locomotives, and wagons and additional locomotive drivers,” he told a plenary session in Beijing hosted by the China Railway Container Transport Co., a subsidiary of the China Railway Corporation.

The structural issues facing rail across the continent have not curbed attempts by environmentally conscious governments to divert freight traffic from Europe’s increasingly congested highways to greener rail tracks and inland waterways. Where rail does make sense, though, is when a shipper is transporting a large volume of cargo over a long distance.

Hans-Willem Vroon, manager and corporate advisor at Netherlands rail lobby group RailGood, said on the longer distances, rail transport had a larger share of the market. For example, on the Netherlands-Italy corridor almost 90 percent of the freight traveled by rail.  
 
“Rail transport is by far the safest and environmentally friendliest transport mode,” he said. “The efficiency potential and economies of scale potential are far bigger than truck and barge. It’s a no brainer that the competitiveness of the rail freight transport market must strongly be enforced in the next decade by industry, logistics sector, and governments.”

However, Vroon said a lot of work was still needed to improve the rail freight system. In Europe, he said the railway was costly because it was not harmonised at either a technical or regulatory level, having for instance too many railway safety systems and too many electrical power systems. This increased the costs of shipping around Europe via rail compared with truck, barge, and short sea.

In countries such as the Netherlands, Vroon said the rail freight market was over-regulated with national laws and regulations on top of the European Union laws and regulations. “This makes the railway market a complex and costly alternative for shippers,” he told JOC.com.

Reducing carbon footprints is high on corporate social responsibility agendas in Europe and rail operators such as Deutsche Bahn are unsurprisingly devoting a lot of time and energy towards promoting the green benefits of rail transport.

Richard Lutz, CEO of German rail operator Deutsche Bahn and its board chairman, said his group was committed to reducing its CO2 emissions by at least 50 percent with the ultimate aim of becoming “climate-neutral.”

"Rail is already the most climate-friendly mode of transport and we are continuing to expand this environmental advantage,” he said. “Nothing less than the future of successive generations is at stake. That is why we are amplifying our efforts and responding actively to climate change and its impact.”

On May 31, 2017, the European Commission put forward the first part of its new Mobility Package, Europe on the Move. Road transport alone is responsible for almost a fifth of EU emissions and the commission has proposed to make use of improved emission standards and smart road charging.

As transport consultancy Transport Intelligence, or Ti, points out in its European Road Freight Transport 2017 report, even though the road charging rules are voluntary, systems already in operation would have to adjust in time. In practice, this means countries that use time-based “vignettes” for trucks, such as Denmark, Luxembourg, the Netherlands, and Sweden or Germany, would have to adjust their schemes by 2023.

While keeping green initiatives voluntary at a corporate level is one thing, Bastidon was not a fan of the top-down regulatory approach. She said greater regulation or other state involvement aimed at pushing cargo from trucks to rail freight would only serve to make road transport more expensive without changing the modal choice of cargo shippers.

“We don’t believe in forcing modal choice through tax policy or any regulations,” she said. “Transport is not an end in itself. It is there to serve industry and in many cases you have no choice and have to use road freight because it is more appropriate.

“It is time to stop looking at transport as something where every mode is competing against each other in exactly the same market in exactly the same way. It doesn’t work like that. Shippers will choose one mode over the other based on their supply chain needs. That will never change.”

Much of the cargo imported to or exported from Europe is handled by forwarders, and the mode of transport they choose is also based on what makes the most sense.

“Modes of transport are chosen based on a number of factors: time, price, availability, and sometimes even customer preference,” said a spokesman for Danish forwarder DSV. “For each transport, the freight forwarder looks at the optimal route and the use of transport mode by analyzing specific needs with the customer.”

The needs of shippers and forwarders also varies from port to port. At HHLA in Hamburg, for instance, the proportion of overseas containers that are moved by truck is 52 percent, which is a slight increase on the previous year. The proportion that is transported by rail is 29.5 percent, slightly down on the previous year, according to Thomas Lütje, managing director sales at HHLA.

Lütje said the flexibility of cargo transport by truck was unparalleled, although the relative increase in road tolls and the decrease in route pricing for rail would result in rail demand rising in the next few years, while trucking would see a slight decrease in container volume.

At Felixstowe in the United Kingdom, rail volume was seeing solid growth. A spokesman for the Hutchison Ports-operated terminal told JOC.com that rail volumes had doubled in just more than 10 years and continued to grow.

“Price is always important, but rail also provides predictability, sustainability, and — from Felixstowe, at least — frequency, which shippers also like,” the spokesman said. “Rail is also more competitive over longer distances, which is why it accounts for 28 percent of all movements at Felixstowe but that rises to 50 percent for traffic to the West Midlands and the North.”

Rather than being in competition across Europe, the transport modes of rail and road are integral parts of the regional supply chain, and a shipper’s modal choice to move containerised cargo is heavily influenced by the prevailing situation at a port.

This can be seen at Hutchison’s ECT terminal in Rotterdam, where truck movements have increased because of the congestion on barges, even though the outbound trains ECT runs into Germany are also full.

Contact Greg Knowler at greg.knowler@ihsmarkit.com and follow him on Twitter: @greg_knowler.