The European intermodal network does not always offer carmakers the flexible and low cost service that most seek today, and without investment and legislative reform, Andrew Williams discovers that the longterm trend toward road may continue
Recent years have witnessed an increased interest amongst policymakers in the viability of using intermodal transport. One of the main drivers behind this surge in interest is the belief that a shift to more environmentally friendly modes of freight transport will help to reduce global emissions of carbon. However, in Europe, the long-term trend has been towards a continuing movement away from intermodal logistics options in favour of a very strong reliance on road transport, meaning that to date there are still very few examples of efficient container movements by rail or sea that are in a position to compete with roads.
One of the main reasons for the slow growth in European intermodal transit is a chronic lack of confidence in the existing physical infrastructure. Although the 2010 World Bank Logistics Performance Index (LPI) indicates that overall levels of satisfaction with infrastructure quality as a whole are very high within Europe, rail infrastructure appears to be a continuing problem, with compelling evidence of a deep rooted and systematic dissatisfaction with services on the ground. Moreover, although confidence in the maritime transport infrastructure tends to be higher, there is growing evidence that many automotive manufacturers–particularly lower volume ones–are even beginning to move away from seaborne transport in favour of inland road freight solutions.
As a result of these trends, the discussion over the existing weaknesses of the European infrastructure for intermodal transport, as well as effective strategies to remedy the situation, is becoming an increasingly important part of the transport sector development agenda.
A key problem with the existing European rail infrastructure, at least as far as its usefulness for the automotive logistics sector is concerned, is its perceived lack of flexibility, particularly for its inability to cater for lower volume users. According to Antoine Redier, vice president of leading transport and logistics provider Gefco, apart from large ‘block trains’, which require significant volumes of cargo, there is currently no specific rail infrastructure for automotive transport in Europe that is capable of providing an efficient ‘single wagon system.’
Echoing these concerns about the lack of flexibility for low volume users, Bas de Groenewoud, logistics operations manager at Mitsubishi Motors Europe, points out that smaller market players can sometimes struggle to fill an entire block train, even over a whole week. “One of my suggestions would be to have just one or two wagons filled as opposed to a whole block train to enable more flexibility,” he says.
A related problem is that those wagons that are capable of carrying finished vehicles are often also linked to wagons carrying other types of freight, meaning that it can be difficult for users to guarantee the proper handling and sufficient safety and security of their goods.
“Since the loaded weight of car-carrying wagons is much, much lighter than most other cargoes on rail, whenever wagons are shunted at a rail platform there is a risk that cars will run over their chocks and become damaged,” says Redier.
Another limitation of the existing European rail system is the complex variation in rail gauge width, particularly across ‘peripheral’ regions such as the United Kingdom, Spain, Russia and many of the former Soviet states such as Ukraine, leaving many logistics providers with little option but to assess the viability of other transport modes. Alain Leray, deputy managing director at STVA, points out that whereas, for example, the German gauge would enable rail freight companies to position two large people carriers on the lower and upper deck of a wagon, in the UK, this would be impossible, even if a special wagon was used. “As a result, a lot of the vehicles flowing into the UK or manufactured in the UK and flowing outside the country can’t use rail,” he says.
However, it is not just in the peripheral areas that problems with the rail freight infrastructure are seen to exist. Speaking about problems in his own country, France, Leray warns of the crucial importance of directing any future investment in the correct areas. “France has over invested in highspeed passenger trains for 35 years, which means that the infrastructure for freight has deteriorated at a very rapid rate,” he says.
In terms of sea transport, several industry commentators have raised concerns about the sometimes substantial discrepancies between the quality and capacity of individual ports across Europe. Although there are many efficient ports, like Zeebrugge for example, others suffer from an ongoing and severe lack of capacity, which often leads to considerable bottlenecks and delays. Leray points out that some Russian and Turkish ports are simply too small to cope with the volume of traffic passing through them. “Some ports are a complete mess. I know that many wagons are standing there idle because the ports are either disorganised, clogged or both,” he says.
“If the Russian market recovers to levels close to what we saw a year-and-a-half ago we have a problem because St Petersburg can’t handle it. The Black sea ports would also be completely clogged; the infrastructure is just not sufficient to handle high volumes.
“And yet the good thing is that you have some ports which are nearly empty for one reason or another, for example Dunkirk in France, which is ready to offer services at a very low price and has a very good infrastructure,” he added.
Another concern is that seaborne services are often not frequent enough to meet the tight schedules demanded by automotive OEMs, with many companies reverting to inland road transport because of a combination of more attractive rates and much shorter lead times. According to Francesca Gamboni, head of global inbound logistics at Renault-Nissan Europe, “sea transport is not economically viable unless the manufacturing plant is located within the port facility.”
Stressing the central importance of economic and financial realities, Gefco’s Redier says that the existing European port infrastructures are simply too expensive to enable any significant switch in volume from land to sea. This is largely down to the high cost of dock labour, he says, which comes on top of the necessary deviation to connect to ports at the points of departure and arrival.
He also points out that, particularly for outbound, automotive is not very welcome in many ports for a number of reasons. Firstly, because there is a high need for a large surface area in comparison with other trades; secondly, because the port location must be environmentally clean to prevent damages related to pollution or dust, and thirdly because the ranking of international ports is based on containers, not cars.
Given such a gloomy picture, it is clear that significant changes need to take place before a critical mass of automotive companies will be encouraged to shift to rail and sea transport in anything like the volumes desired by European governments and the stakeholders in the environmental lobby. However, it is difficult to deny that, when we consider the pressing sustainable development concerns currently faced by every country across the world, it is vital to promote rail as much as possible to reduce the environmental consequences of burning fossil fuels. So, what might be the most appropriate way ahead?
According to Redier, if the use of rail transport continues to be largely limited to block trains, it is destined to maintain only a very limited share in the automotive logistics business. In this respect, he says, if we want to reduce cost and lead times, and thereby increase uptake, the need to split volumes from an assembly plant to many destinations is obvious.
“The only real possibility to develop rail transportation is an efficient European ‘single or multiple wagon system’, able to deliver one or more wagons from a plant to a final destination, with a high degree of flexibility and reliability,” he says.
Other commentators point out that relatively small incremental changes might just be enough to engender significant improvements in intermodal performance. For example, in overcoming the challenges faced by varying gauge widths across Europe, it could well be sufficient to invest in a comparatively small number of high-speed rail links directly to important locations, such as London, Bristol or Coventry in the UK. Sometimes the solution could be even easier. According to Leray, the simple laying of a third rail alongside existing railway tracks would quickly improve links to key sites such as the General Motors plant in Zaragoza or the Volkswagen facility in Pamplona, both in Spain.
However, even though it is probable that environmental considerations will continue to become a more powerful driver, the main constraint to the large-scale adoption of intermodal transport remains cost. Any initiative aimed at moving cargo, including cars, off the roads will have to make it significantly cheaper, since it will have to compensate for the longer lead time generated by rail or ship transport.
“Technical improvements can contribute to facilitate intermodal transfer, but if it is not economically efficient, it will not be successful,” says Redier.
Groenewoud agrees, saying, “I know that governments are still promoting intermodal transport but at the moment it is still not attractive enough cost wise to take rail transport.”
At least in the short term, Leray is sceptical that the situation will improve. Even if the required high levels of investment were forthcoming, he says, rail would continue to be economically uncompetitive unless there was a parallel move to tax road transport heavily to ensure a “level playing field.”
“For rail to be competitive, including the huge investment, that would mean substantial fiscal pressure on roads that politically I don’t think is smart,” he says.
In terms of moving by water, Redier adds that there is a clear and pressing need for permanent subsidies to encourage the movement of goods from land to sea. These subsidies should not be confined to limited incentives such as the Marco Polo awards, he says, but instead be extended to cover any trade transporting goods by sea. The ultimate aim of this compensation should be the elimination of the added cost resulting from the current port services cost structure.
Picking up on the vital role of government in encouraging an increased uptake in intermodal transport, Leray is keen to stress that the public sector is the only entity currently in a position to invest in rail to any significant degree. This is largely because the private vehicle logistics sector is often under such enormous downward pressure in terms of price that they simply don’t have the margins to invest in infrastructure.
“In any negotiations with manufacturers, they don’t leave any margin to us, and if they don’t leave any margin to us, how are we going to invest in infrastructure? It’s simply public or none,” he stresses.
Judging by the above analysis, it would seem that the prospects for any form of substantial increase in the use of intermodal transport, at least within the automotive sector, are at best limited. As Leray indicates, private companies are still under serious financial strain; meanwhile, the escalating government debt across much of Europe may not bode well for increases in public spending either.
For rail, commentators point to the fact that years of chronic under investment have led to a situation where the sector is hopelessly uncompetitive when compared with road transport. However, a deeper analysis reveals that there may be several reasons why the situation may not be as bleak as it at first appears.
Firstly, and perhaps most importantly, the environmental pressures faced by the logistics sector are likely to become ever more pressing over the coming years and decades. As a result, governments will almost certainly continue to impose ever stricter and more stringent standards and requirements on those within the industry. Against this background, and faced with the growing need to substantially reduce carbon emissions, many companies may well seek to move into intermodal as a means of improving their overall environmental performance.
Secondly, in spite of the fact that the rail infrastructure is held in such universally low regard, it remains a fact that, in terms of overall performance the European logistics sector continues to outperform the rest of the world. This is surely an indication that European rail service providers are doing very well to overcome the current limitations in infrastructure and should perhaps be taken as a positive sign that they are well placed to respond to any future improvements. In the maritime sector too, stakeholders are significantly more satisfied with service providers than with infrastructure quality, according to the World Bank’s LPI, suggesting an important ongoing role for the continued development of the seaborne transport infrastructure in Europe.
Finally, since it is likely that economic policy will continue to exert a strong influence on logistics sector performance, any move by governments to provide financial incentives for less carbon intensive transport modes, whether through punitive taxes on road transport or via subsidising more environmentally friendly alternatives, cannot help but lead to a greater uptake in the use of rail and sea.