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Shrinking trade volumes due to the global economic crises led to an estimated 15% drop in
railfreight traffic worldwide last year, taking traffic back to the level of 2005. But, says
Maria Leenen, CEO of SCI Verkehr, Germany, the downturn has winners and losers.
the North American railfreght market saw a decline of 19% in 2009 and fell well below the level of 2000. For Europe
and the former Soviet Union, we observed declines of 25 to 30%.In contrast, Asia, the world's second largest
railfreight market by transport volume,only suffered a reduction in the rate of growth, while India ever had
positive growth.
The structure of the global railfreight business continues to change, especially in diverse markets like North
America and Europe. The landscape of freight operators in Europe is versatile and dynamic with more than 1000
private railfreight companies with varying portfolios in addition to the large state railways.
North America's railfreight transport market is privately run and profitable. In 2008 the average earnings before
interest and tax (Ebit) margin for the Class I railways amounted to around 25%, and Berkshire Hathaway's massive
investment in BNSF in 2009 backs profitability prospects.
Europe is an attractive operator market with an average income of around E0.04 per tonne-km, but high fixed costs
and competition from road transport put profit margins under constant pressure. However, in the face of falling
freight rates, European operators are reacting with extensive restructuring programmes coupled with steps to expand their geographic market presence.
Fret SNCF, for instance, took over the international business of Veolia Cargo in 2009, despite
announcing the phasing out of its loss-making wagonload service. DB Schenker Rail acquired two private railfreight
operators in Poland and increased its holding in Nordcargo, Italy, to become the majority shareholder in 2009
despite restructuring and laying-off staff. A push into eastern Europe and towards the former Soviet Union is a
major objective for German Rail (DB), the European market leader. However, DB lost some market share in 2009 to
private operators at home in Germany.
Nevertheless, a lasting change to the competitive structure in favour of former state railways is becoming apparent
as state railways increase their power m shaping Europe's railfreight market by promoting efficiency and expanding
abroad.
Restructuring
Restructuring measures by European operators are aimed at stemming falling turnover today, but will these programmes
turn structural changes to their benefit tomorrow?
The economic structure of an area plays a major role in the value placed on railfreight compared with other modes.
On the one hand, the amount of traffic ideally suited to rail in Europe, such as coal and other bulk commodities,
has reduced, while on the other hand a shift towards container transport is strengthening road's competitive
advantage over rail. At the same time customers are calling for integrated logistics solutions for their
increasingly internationalised businesses. Automotive clusters as well as steel production moving east
Of course internationalising one's business through acquisitions or cooperation is a step towards an international
rail network. Nevertheless, in order to offer full logistics services to a broad range ofindustries, a regional
presence with an effective wagonload service is equally essential.
container transport from ports towards eastern and southern Europe will gain furtherimportance. As soon as the
economy rebounds, efficient and flexible handling of that
The freight transport boom in 2007 and 2008 has already revealed capacity problemsespecially at major rail
hubs.Rationalisation programmes by most European railways have gradually reduced capacity since the beginning of the
1990s. In Germany, for example, the number of sidings has been more thanhalved since the launch of the rail reform
programme in 1993. As a consequence, railfreight operators were not able to provide sufficient capacity and
flexibility when needed,and incurred extracosts through delays, rerouting and a lack of service
quality which absorbed turnover gains
To sum up, I believe there is a good chance that railfreight operators will catch up with economic recovery, and by
2015 traffic volume will be as high as in the boom year of 2008. There is also a good chance that restructuring
programmes together with further internationalisation will improve efficiency and flexibility and expand market
coverage.
But there are also dangers. What if the restructuring measures result in a further
reduction in capacity which hampers rail's ability to handlefuture demand? What if integrated logistics solutions
give way to cutbacks in a broad regional presence where large incumbents are dominant single wagon providers for any
industry? What if it proves more difficult to improve flexibility and efficiency because the integration of newly-
acquired companiestakes too much effort? IRJ
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