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Wagonload traffic: the market won't deliver

by DoDo Mon Feb 27th, 2012 at 07:55:16 AM EST

Freight traffic on modern railways can be broadly categorised in three types:

  1. Trainload traffic: a train carries the same cargo of a single customer, and all cars are loaded at the starting point and unloaded at the endpoint. (Examples: transports of raw materials from a mine to a factory; transport of cars from a car factory to a port.)
  2. Intermodal traffic: containers or trailers usually also travel on trains that only load/unload at the end points of the journey, but the cargo belongs to different customers and is transferred to other modes of transport to reach different final destinations (or vice versa).
  3. Wagonload traffic: trains consist of wagons carrying the cargo of different customers with different departure points and destinations.

A mixed train composed of at least four sections climbs towards Semmering in Austria

The first two types ensure large volumes of traffic, however, in the entire transport sector, they only constitute niches. Wagonload traffic however, due to its need for the time- and energy-intensive shunting movements (to assemble, re-assemble [marshalling] and separate trains), has difficulties competing with road transport. For a significant modal shift from road to rail, you'd need to change that.

I criticised the EU's rail liberalisation strategy for not delivering the kind of competition and drawing of new capital promised, while bringing new problems and not really boosting traffic. Now a new study of wagonload traffic showed that

  • the overall development of wagonload traffic since liberalisation has been negative,
  • virtually no competition developed, and
  • the direction is towards cooperation rather than competition of rail transport companies.

I recently reviewed the experience of railfreight liberalisation in The Dawn Of Open Access (1/2); to sum up the key criticisms:

  • where and when there was growth, it was largely due to technical improvements and global economic trends boosting international traffic, not liberalisation;
  • this growth masked traffic lost due to 'streamlining' in preparation for competition;
  • the competition that materialised wasn't the spread of bold risk-taking new entrants bringing new capital, but the expansion of the most solid publicly owned incumbents into the 'home territories' of others (because railfreight is a business with high financial risks and thus strong merger pressures);
  • the various parties involved battled each other not just with rates and quality of service but with all available tricks, most of which were made possible by the separation of infrastructure, passenger and freight operations;
  • the new system also brought new bureaucracies and complexities which reduced efficiency and safety, while costs were saved on workers, with added negative safety effect.

The second point is largely about wagonload traffic. An example is German Railway DB's "MORA C" programme from 2000, which in the next two years reduced the number of loading points by more than a third (the original plans even intended a 50% reduction). According to Alexander Vogt, who reviewed the development of the German wagonload market for his doctoral thesis and got to publish a summary of that in the February issue of the International Railway Journal, only 10% of these were taken over by other operators.

More startlingly, according to Vogt, while 25% of the wagonload cargo carried on DB trains started its journey in trains of local or industrial railways (who handed the wagons over to DB), only 3% of all wagonload cargo in Germany is carried on its entire journey without DB's participation. That is, intra-mode competition is virtually non-existent, instead, DB saves costs by cooperating with low-cost local operators. Even overall, 60% of the traffic conducted by operators other than DB is done as subcontractor of DB!

Vogt also argues that competition is not merely virtually non-existent in the present, but undesirable in the future: to increase wagonload traffic, costs can be cut by reducing infrastructure access and tax charges and by increasing the efficiency and cohesion of the existing network, not by adding redundancies.

Railfreight is most competitive over distances of a few hundred kilometres or more, which in Europe often includes the crossing of borders. In this field, too, cooperation rather than competition can help – in this context Vogt mentions Xrail, an initiative of seven major established operators to improve wagonload traffic, launched in 2010 (discussed f.e. in this IRJ article from a year ago).

The end of a mixed train heads into the sunset after having passed from Hungary to Slovakia on the border bridge near Szob

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Check the Train Blogging index page for a (hopefully) complete list of ET diaries and stories related to railways and trains.

On the extra photo below, a train of modern slide-door wagons passes Jalná along the Hron river in central Slovakia last autumn. This is probably a block train (for a single customer), but hard to tell with this type of wagon.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Sun Feb 26th, 2012 at 05:20:18 AM EST
Looks like the EU needs a Cooperation Commission instead of or in addition to a Competition Commission. But neocons don't do cooperation very well.

"It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Sun Feb 26th, 2012 at 11:22:22 AM EST
Nor do they really understand competition. In this case, the competition between modes. Wouldn't it be nice, an intervention of the Competition Commission against tax breaks for airplane fuel...

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Feb 26th, 2012 at 12:46:05 PM EST
[ Parent ]
Policymakers don't understand competition or cooperation very well because they don't understand systems at all. To them, at best, "the economy is a complex system and so it will self-regulate". This echoes Metatone's diary Learned Helplessness (December 29th, 2011)
One of the crucial failures in both the practice of financial regulation and the discussions about fixing it is the insistence on a small, strange duet of options. Either:

a) A perfect set of regulations that involves no human judgement is developed to do the job.


b) Nothing useful can be done to prevent anything, so we should just leave it as it is.

I'm inclined to call this the most effective right-wing frame of our times. But I'm starting to wonder if it's bigger than that, since it seems that this type of thinking has overtaken many minds on the left too.

Almost every problem is too difficult for the economic policymakers to understand in its detail so all they do is focus on "competition" as an end in itself because their cargo-cult tells them that all they need is competition and all will be well.

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 28th, 2012 at 06:20:25 AM EST
[ Parent ]
Our most fundamental problem is that our societies don't understand systems at all. They're not designed to deal with systems or even with any understanding of their own nature as systems.

As a result we can't deal with economics, we can't deal with resource usage, we can't deal with climate change, we can't deal with the effects of poverty, we can't deal with ecology, we can't use antibiotics responsibly.

by Colman (colman at eurotrib.com) on Tue Feb 28th, 2012 at 06:26:46 AM EST
[ Parent ]
It's worse than that. Societies fight the development of systems in the first place. Then, even when the systems are in place and society depends on them, the fight continues. Current examples:

  • NHS
  • Birth control
by asdf on Tue Feb 28th, 2012 at 12:28:19 PM EST
[ Parent ]
I don't see why the wagonload-scale case must be inefficient. In previous times, shopping centers were built alongside rail lines to enable bulk deliveries.

  • To assemble a train, we already use hump yards to minimize locomotive trips.
  • If all you have to do is drop off the last car on a train at a given siding, it's pretty easy to imagine a gravity-powered system to allow it to roll to the desired location.

I wonder if our 150 years of assumption of free energy has biased our approach to engineering problems.
by asdf on Sun Feb 26th, 2012 at 06:29:25 PM EST
Well I think actually doing something to improve the efficiency of the assembly, re-assembly and separation of trains would be a way to go, instead of closures and deregulation; but it's not that easy:

  • When you re-assemble trains in marshalling yards [using UK rail-English here], you wait for the arrival and separation of several freight trains before full new trains can be assembled from the separated parts. Thus, a wagon can spend up to a day in a marshalling yard. This is less of a problem if there are one or two marshalling yards on a 10,000-km journey (as it can happen in the USA), but slow down traffic flows rather radically if the journey is 1,000 km long.

  • When you assemble a train by picking up cars at sidings, the loco can't avoid going forward and back and forward again at all of the sidings.

  • At least in Europe, many loading points are on dead-end tracks, which the trains can only approach by going back and forth, during drop-off runs, too.

  • An extra complication at sidings is that on most stations along double-track lines that, either during pick-up or delivery, the train has to cross the main track for the opposed direction.

  • An extra cost factor in UIC-Europe relative to the USA or the former Soviet region is the lack of automatic coupler: you need shunting personnel to do the job.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Mon Feb 27th, 2012 at 01:40:13 AM EST
[ Parent ]
If you have dead-end siding, I guess you're out of luck. Freight volumes here are concentrated to the point where most yards have local switching engines so the road engines don't have to make up the trains. Which is nice because it means there are a lot of interesting old locomotives mostly just sitting around for the enjoyment of the local populace.

Even with knuckle couplers, you still have to connect the brake lines.

by asdf on Mon Feb 27th, 2012 at 01:12:33 PM EST
[ Parent ]
EMU wagons seem like a good idea. (especially where electrification is standard).  Any reason why they haven't been developed?

I'm imagining a 10HP direct drive motor mounted on an axle with a trolley pole.

by njh on Mon Mar 5th, 2012 at 11:27:40 PM EST
[ Parent ]
Now a new study of wagonload traffic showed that the overall development of wagonload traffic since liberalisation has been negative, virtually no competition developed, and the direction is towards cooperation rather than competition of rail transport companies.
Isn't the latter bit a good thing?

There are three stories about the euro crisis: the Republican story, the German story, and the truth. -- Paul Krugman
by Migeru (migeru at eurotrib dot com) on Tue Feb 28th, 2012 at 06:16:10 AM EST
It is. Does "negative" in that sentence seem to apply to the second two in the enumeration?

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Tue Feb 28th, 2012 at 07:31:15 AM EST
[ Parent ]
That's how I read it as well. Which I found incongruent with the rest of the text, as well as my picture of your stance on the relative merits of competition and collaboration.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue Feb 28th, 2012 at 07:46:52 AM EST
[ Parent ]
I now turned the enumeration into a list to avoid confusion.

Let me add a broader note that is only implicit in the diary: the whole liberalisation is based on a silly notion that there is no competitive pressure on national railways. But railways are just one mode within the transport sector, and there is plenty of cross-mode competitive pressure. So this cooperation between rail companies is about competition, too, about improving in the competition with truckers.

(Of course, for fossil fuel use reduction reasons, I would even favour measures suppressing competition in favour of railways and river barges, but that's another issue.)

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Tue Feb 28th, 2012 at 03:37:12 PM EST
[ Parent ]
Competitive pressure from other rail companies affects mostly to trainload and intermodal freight while competitive pressure from modes affects mostly to passenger and wagonload traffic.
by Jute on Tue Mar 6th, 2012 at 10:53:17 AM EST
[ Parent ]
I know the rudiments, but I have never looked at any numbers.

In a time when fossil fuel costs are trending ever upwards, it's confusing that rail freight's share should diminish. Some of it is indeed market-driven : I know that SNCF has abandoned a certain amount of unprofitable freight business, as soon as it was no longer obliged to keep it on by the state.

I'm thinking that, in large part, it's the just-in-time economy which is the driver. There are logistical advantages in not stocking anything, but having truckload (or sub-truckload) materials arriving and departing exactly when required.

And not only logistical advantages, but substantial financial advantages. Transport costs are, overall, pretty low, and a minor component of overall costs for all but very low-value materials (trainload candidates). Business investors expect a high return on their money. Goods in transit represent immobilized capital.

However, I would expect that in the immediate future, two important changes will shake up this model :

  1. Oil price : what do truck freight costs look like with oil at $150? $200? Has the market even adjusted to $100+ oil, or is it working on the assumption that it will go down again?

  2. Lower returns on capital. If expectations are closer to 5% than to the recently-fashionable 10%+, this might tip the balance considerably in favour of slower, cheaper transport.

Does anyone do any modeling on these subjects? The demand for rail freight might take off dramatically, with certain parameters, and it may be that nobody would be ready to ramp it up.

It is rightly acknowledged that people of faith have no monopoly of virtue - Queen Elizabeth II
by eurogreen on Wed Feb 29th, 2012 at 07:30:59 AM EST
A very quick reply on one point: I forgot to include in the diary one of the recommendations of the study, namely that this traffic (I guess local shunting is meant) should get a tax break on diesel fuel.

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Wed Feb 29th, 2012 at 08:47:17 AM EST
[ Parent ]
Interesting point.
I'm thinking that, in large part, it's the just-in-time economy which is the driver.

I'm thinking how this applies in the US economy, which is almost entirely road-truck supplied as nearly as I can tell. You can see how much it's just-in-time whenever there's a major weather problem, such as snow, or a damaged stretch of interstate highway -- store shelves are bare after a couple of days.

If there were a functioning national rail system here, it might be intersting to compare the two areas.

by Mnemosyne on Sun Mar 4th, 2012 at 02:29:23 PM EST
[ Parent ]
Finland's Matkahuolto is a parcel service run on buses. They have 2000 service outlets around Finland. It is a cheap and easy way to ship stuff around (even internationally), with extra-charge home delivery. My electric trike arrived that way last year, and my broken iMac left and returned by bus and local van.

You can't be me, I'm taken
by Sven Triloqvist on Sun Mar 4th, 2012 at 03:37:23 PM EST
[ Parent ]
That second picture in the diary itself is quite marvelous. It evokes, for me, all manner of thoughts and factoids about history of travel and European history.
by Mnemosyne on Sun Mar 4th, 2012 at 02:31:29 PM EST
I was itching for posting it in a context suitable for its mood ever since I shot it :-)

*Lunatic*, n.
One whose delusions are out of fashion.
by DoDo on Sun Mar 4th, 2012 at 05:06:28 PM EST
[ Parent ]

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