INTRO: A fundamental switch from national networks to line-of-route management spanning frontiers is essential if rail is to absorb a much larger share of freight growth in Europe. Bryan Stone* and Richard Hope explain how major shipping companies are forcing open the door for others to follow
BYLINE: *Bryan Stone is an Intermodal Transportation Consultant based in Switzerland who formerly worked for Intercontainer-Interfrigo.
FREIGHTWAYS were described as ’a mechanism for putting together through paths and prices’ by Trevor Halvorsen, Secretary General of the Community of European Railways, when he addressed the SMi Pan-European Rail Freight Conference on March 12. ’Instead of relying largely on legislative instruments’, he said the European Commission was ’now looking for short term voluntary solutions.’
The Netherlands, Germany, Austria and Italy have agreed at government level to explore ways of creating one or more north - south Trans-European Rail Freightways (TERF), originally dubbed Freight Freeways.
Meanwhile, major multimodal companies engaged in deep sea container traffic through Rotterdam and Hamburg are quietly and successfully getting on with job of breaking down some of the inefficiencies and artificial barriers that prevent rail from competing with road, and thus reaching its full potential in Europe.
TERFs have yet to take concrete form, but the message is very clear: one way or another, the Commission is determined to break down the rigid bureaucratic nationalist structure of the railways as one way of coping with intolerable projections for road traffic expansion.
Brussels tries hard
There has been no shortage of initiatives from Brussels in the 1990s designed to bring about this transformation.
Directive 91/440 was a real landmark. It identified intermodal traffic as the most suitable for liberalisation, introducing for the first time the open access concept of companies outside the railways operating their own trains, complete with locomotive and crew, on public tracks. Open access operators were to compete with the state railway on equal terms. Access charges would be paid, if not to a track authority, at least to a distinct infrastructure division within the railway.
It has to be said that open access in the form envisaged has made very little progress to date, even in countries like Sweden and Britain where there has been genuine separation of the infrastructure from train operations. But 91/440 has nevertheless had a profound impact on attitudes within government and railway administrations. Change is in the wind, if not yet on the ground.
The Common Transport Policy published in 1992 stated unambiguously that roads could not cope with projected traffic growth. So rail (and water) must increase market share, whereas it has actually been declining. In practical terms, growth means intermodal.
Trans-European Networks were conceived as European economic development and integration measures, described under Title XII of the Treaty of Maastricht. TENs are defined essentially by transport mode - roads, waterways, rail, and especially high speed lines - but a network is also defined for intermodal freight. There is little evidence that the TENs initiative has had much practical effect as yet.
Policy for Revitalising Europe’s Railways, a white paper published in July 1996, was highly critical of rail’s performance and uncommercial attitudes. As well as endorsing TERFs, it proposes legislation reducing the present state railways to service and traction providers on infrastructure open to any other companies which want to operate their own trains. Neither access to the infrastructure nor technical standards should be set and adjudicated by the same organisation, as is mostly the case today.
Also published in 1996 was The Future of Rail Transport in Europe. This well informed and far sighted report, by an advisory group set up by EU Transport Commissioner Neil Kinnock under the chairmanship of Daniel Vincent, enlarged upon the TERF concept. The white paper is highly controversial, but the national railways (perhaps even SNCF) now realise their lobbying to retain the status quo has failed. Even though the legal instruments and institutional mechanisms are a long way from being fully defined in many EU member countries, the railways see compliance with the free market principles of the Treaty of Rome and competition law as inevitable.
This first became evident five years ago as a result of an EC ruling that captive companies like Intercontainer-Interfrigo (ICF), jointly owned by the railways, and the national UIRR companies like Kombiverkehr in which road haulage also has an stake, were enjoying a level of access to the rail transport market denied to others. This has - in theory at least - been corrected.
It is interesting to note that Halvorsen, who represents the railway operators (and latterly, track authorities like Banverket) in Western Europe, welcomed as ’a stimulus’ their exposure to market forces. As well as joint ventures ’founded to develop new markets in a non-discriminatory way’, he identified the advantages of new entrants as ’better integrated management across the modal divides, development of new niche markets, and logistics know-how.’ Five years ago this would have been heresy.
Shipping lines steam in
The earliest and fastest reactions to the new situation have concerned deep sea container traffic, and this is not surprising. Major players in the world transport market, like Sea-Land which shipped its first containers across the Atlantic to Europe in 1966, market a door-to-door service at an inclusive tariff which means that they have to purchase inland transport in competition with rival steamship lines.
Coaxing continental freight which rail has long since lost to road, or never carried at all, into boxes or swap bodies is a daunting task, although almost all UIRR traffic and around half of ICF’s is not maritime.
The shipping companies already use containers, and concentrate large volumes at ports like Rotterdam which favours rail economics. Up to now road has been an easy, uncomplicated option with unlimited choice of service providers to force quality up and prices down.
But the major deep sea shipping companies have observed the way double-stack containers and deregulation have enabled US rail operators to beat truckers hands down on price and quality, even on relatively uncongested highways. Though double-stack is improbable and distances shorter in Europe, favouring trucks, they are convinced that restrictions on road traffic can only get worse - especially in densely populated regions like the Ruhr where much tonnage originates, and especially across the Alps.
Shuttle trains
From the initiative of the shipping lines, there emerged from 1993 onwards radial networks based mainly on the ports of Hamburg and Rotterdam which became known as shuttle trains. This simply means a standard formation of flat wagons carrying containers (and sometimes a few swap bodies or even piggyback trailers in continental traffic) which shuttles between the port and a single inland destination, or maybe two on the longer routes.
Peter Jacobse, Director, Intermodal Services Europe, for Sea-Land, points out that ’until 1993 we were stuck with Intercontainer-Interfrigo as the only cross-border rail service provider for containers. We still use ICF for a number of routes, but we felt that a breakthrough was required so we started a couple of our own services.’
Jacobse cites the need for ’a tailor-made product’ to provide the service his customers wanted as the main reason. ’We also believed that nothing would change significantly until private operators - or at least more competitors - were able to offer customised rail service, and we required a drastic reduction in our cross-border rail costs.’
For the moment, there is no open access involved in the purest sense of private locomotives and crews ranging across frontiers, although Short Lines in the Netherlands has plans to operate short distance shuttles within that country’s constricting borders. NS Cargo’s Director of Intermodal Services, Bas van Nes believes these are uneconomic - Rotterdam to Almelo, for example.
The private sector is now deeply involved in chartering shuttles through joint ventures and partnerships between the ports, the shipping lines and the state railways, especially NS and DB.
Today, some nine ’operators’ (as these groups are known) based at Rotterdam are running about 14 shuttles a day out of one or both of the two container terminals within the port complex. The ECT Delta rail terminal handles deep sea containers exclusively, while NS Cargo’s Rail Service Centre also serves short sea routes as well as purely continental traffic (p401).
The operator leases the wagons, normally from the state railways, and negotiates a price for having the train moved by the state railways’ locomotives and crews to an agreed timetable. The commercial risk is primarily taken by the operator. The railways may accept some of the risk through reduced start-up charges, for example, although Jacobse says ’European Rail Shuttle took the entire risk from day one.’
ERS is perhaps the most interesting of these new operators. Formed by four major shipping lines - Sea-Land, Maersk, P&O and Nedlloyd - with NS Cargo as a partner, ERS sends four trains a day to Italy and Germany.
Hamburg port authority does not operate shuttle trains, but two terminal operators do so. Eurokai is involved in running the Eurokombi shuttle to Praha and Budapest. HHLA is a partner with Polish interests and forwarders in running PolZug, a very successful regular train to Poland which currently shifts 25000 containers a year.
Of course, ICF and the UIRR companies, formed originally between the state railways and road haulage interests as national monopolies for piggyback and swap bodies, are still very active. In addition to poaching in each others’ modal and geographical territories in the newly liberalised market, they are also in the joint ventures: HHLA is in a JV with ICF to run trains to Budapest, for instance.
Newest player on the scene is NDX, which began modestly with a daily shuttle between Rotterdam (Delta) and Antwerpen (Interferry) on January 2. A Rotterdam - München service followed on January 27, and another will commence shortly between Hamburg and Milano (p399).
NDX is a JV in which CSX Corp (owner of Sea-Land) holds 25% of the shares; DB has 50% and NS Cargo 25%. At the moment it appears to be just another operator competing for maritime boxes, but NDX has ambitions to become a continental player in a big way. If any single company is going to bulldoze Freightways through the institutional barriers to open access it could be CSX, one of the five big US railway operators (soon to become four when Conrail is broken up).
The prospect of train-ship-train transits from Chicago to Budapest under common management has already started to emerge. CSX is talking to American owned English Welsh & Scottish Railway about a tie-up with NDX that could see a Manchester - Budapest Freightway evolve.
Before long NS Cargo will be up for sale, with CSX among four groups expressing interest. As well as an outright sale, options on the table include a share swap or some form of joint venture. The buyer will inherit the rights which NS now enjoys as a national railway to sit as an equal with DB and others at timetable planning and other conferences. NS Cargo already negotiates paths and through rates for all the shuttle operators based in Rotterdam.
Of course, there will be competition, not least from ERS in which Sea-Land is a founding partner. P&O and Nedlloyd distrust DB profoundly, and P&O has already lodged complaints that DB is obstructing its attempts to negotiate paths or reasonable access charges.
Nevertheless, if NDX proves to be the route by which DB establishes itself in Rotterdam after 30 years of fighting and losing, and CSX gets a firm grip on European rail transport, this is a play for big returns.
We see developments at several levels:
