Rising costs: rail freight could lose competitiveness and shrink 26/01/22
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Freight transport by rail has so far been cheaper than transport by truck in most cases, but rising costs threaten to wipe out this advantage. This is according to a study by rail freight corridor ScanMed (Scandinavian Mediterranean Rail Freight Corridor), which runs from Sweden to the southernmost tip of Italy.
Within ScanMed RFC, seven rail operators are working together on what is also known as Europe’s longest rail freight corridor (7,527 kilometres). It runs from Stockholm, Sweden, through Oslo, Copenhagen, Hamburg and Innsbruck to the tip of the Italian boot in Palermo.
The partnership recently made public a 2020 study of intermodal costs on the route. The study was designed to analyse the position of the ScanMed RFC about competing modalities on the same route. In addition to recommendations for the rail operators involved, it also contains suggestions for freight operators and governments.
Cost increase
According to the researchers, the cost increase for road transport in the coming years is lower than the other modes. The market position of rail freight transport will suffer if no appropriate measures are taken, “especially since the current lower costs of rail or combined transport already do not translate into a larger market share of these modes compared to road transport.”
Transporters base their mode choice on a combination of costs and other factors such as flexibility, reliability, transport time, distance and convenience. According to the report, a smaller cost advantage will put more pressure on the other decision factors in the future.
The market share of combined transport and rail will then not increase, but rather shrink. Therefore, cost increases for combined transport and rail freight should be kept to a minimum unless they are directly related to a significant improvement in the other factors. In that case, customers might be able to accept the additional costs.
The ball is in the governments’ court
The final recommendations in the study consist of factors that indirectly influence the choice of transport mode, such as rail access costs, energy costs and rail carrier time buffers. At the same time, the effectiveness of resource deployment and the possibility of high-quality rail freight paths also play a role. Understandably, the report’s recommendations address not only the direct influence of rail operators but, to some extent, those of other stakeholders and government agencies.
Rail access and energy costs account for 40 per cent of total expenses in the case of combined rail-road transport. When part of the transport is also by water, it is 30 per cent. Therefore, price increases for rail access and energy significantly impact operations. ScanMed calls on policymakers and authorities to find ways to subsidise rail access and energy costs, especially as long as competing modes do not get external costs fully passed on.
Smaller buffers
According to the rail operators within ScanMed RFC, carriers can save significantly on costs by making more efficient use of operational resources, particularly locomotives, wagons and personnel. These represent between 20 and 30 per cent of a rail carrier’s total costs and, in some cases, as much as 40 per cent. According to the researchers, the potential for savings lies mainly in reducing time buffers and better coordination of interfaces, for example when changing locomotives and/or drivers.
The infrastructure managers themselves could contribute to a more efficient use of resources by better coordinating train paths with deployment schedules of rail carriers (synchronisation) and thus reversing the current process, which entails the need for dynamic planning. Furthermore, national and European authorities should enable infrastructure managers to make high-quality hourly train paths available for rail freight. These train paths are characterised by a minimum of stops and stops that are as well-matched as possible to the change of locomotives or personnel.
Track access charges
Policymakers are called upon in the report to temporarily reduce rail access charges
and/or provide a higher subsidy per trip. Furthermore, the relevant rail operators could consider volume-based discounts and adjusted fares in the event of a detour due to planned construction work or ad hoc temporary track closures.
These types of disruptions often result in higher costs for carriers. The researchers suggest that rail operators should only charge the ‘normal’ price when the trip was completely according to the requested route to accommodate these companies.