Freight
Rail freight - a developing market
This is an exciting time for rail freight says Chris MacRae in an outline of key developments, opportunities, but also threats, as recently discussed by the FTA’s Rail Freight Council
Market Developments F
igures from Network Rail for its billing of track access charges to Foc’s (freight train operating companies) shows that seven periods into the financial year, bulk traffics are keeping volumes up, including aggregates that have now recovered from the recession double dip. While there have been well-publicised problems with the UK steel industry which have affected its volumes by rail, intermodal traffic (while down this month) is now the biggest commodity on rail, having overtaken coal - largely as a result of changes in UK energy generation policy and carbon taxation.
The new £0.5 billion port and logistics centre at London Gateway has opened and the first train has run from it. This has great potential, especially as it has a new rail linked distribution park - something of a novelty given the recent and well- publicised difficulties in getting planning permission for such facilities in the south-east! Overall the rail freight market is 3.5 per cent up on last year. The aggregates sector reports that it is flat out and would run more trains if it could: the key issues there are wagons, locos and drivers, and the need for weekend availability of the network at a time when engineering takes place.
Great potential of London Gateway The developments at London Gateway offer great potential. While Felixstowe may be the port of choice for the logistics distribution centres in Daventry, it has comparatively little capacity to expand compared with what London Gateway has on tap. More rail freight train paths may be available out of London Gateway which could lead to modal shift. Important to this is that while trains outbound from Felixstowe are full, inbound is only around one third loaded. Arguably because of London Gateway’s location it has potential for more balanced loadings and filling trains
December 2013 Page 65
on the return back leg, leading to better economics and less empty running that helps logistics triangulation. This all potentially helps return rates and makes more Trafford Park to London Gateway traffic possible even with the end road shunt leg. The retail sector in particular is interested in opportunities here.
Freight charges are going up
But perhaps now some not so good news… as FTA has commented (see Delivering the goods page 47 this month for the technical detail), rail freight track access charges are to go up for Control Period 5 (CP5) 2014 – 2019. While the increases imposed are towards the bottom end of the scale that ORR (the Office of Rail Regulation) consulted upon, and are to be heavily back-ended in their application toward the end of CP5, with some deferred in their application till CP6, the fact is that track access charges for freight are going up. This is in contrast to previous control periods where freight track access charges came down. Two aspects are really disturbing here. Firstly that the principle of ‘marginal’
freight track access charging for the directly imposed wear and tear cost imposed on the infrastructure by freight trains is being increasingly abandoned in favour of targeting market segments deemed ‘inelastic’ and therefore able to bear mark ups in charging. This is allowed under the EC Directive that governs this area, but sends very negative signals to shippers contemplating investment in rail freight usage or modal switch. The second disturbing aspect of this is the process itself. The consultation process by ORR has been inclusive and transparent…very transparent, very open, drawn out and very worrying for those involved. While the actual increases imposed are at the lower end of the scale consulted upon and back ended in application or even deferred, the higher end scale and other potential charges that were consulted on sent alarm bells ringing and have seriously damaged customer confidence. When rail freight assets have an economic life of 25 – 30 years with a business economic payback model of at least ten, then potential changes by ORR to the access charge costings of these at
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112 |
Page 113 |
Page 114 |
Page 115 |
Page 116 |
Page 117 |
Page 118 |
Page 119 |
Page 120 |
Page 121 |
Page 122 |
Page 123 |
Page 124 |
Page 125 |
Page 126 |
Page 127 |
Page 128 |
Page 129 |
Page 130 |
Page 131 |
Page 132 |
Page 133 |
Page 134 |
Page 135 |
Page 136 |
Page 137 |
Page 138 |
Page 139 |
Page 140