Single Wagon Report

On 7th July 2005, representatives of the steel as well as of the chemical industries (Mr. Kreins/ Mr. Sunnen from Arcelor, and Mr. Frères/ Mr. Poirier from Solvay) accepted the Eurofer invitation to exchange views on the current developments of the single wagon in Europe. Mrs. Erlichman (EWS) was also present. The present report is based on this exchange of views.

Participants stressed that it would be useful to join forces with scrap merchants in our consideration of, and our lobbying on this issue.

Reminder: Single wagon shipping takes place as soon as block trains are not used.

Single wagon shipping is essential to both sectors’ activities and plays a strategic role in their transport policy

Indeed, of the 24 000 wagons used by Solvay on a yearly basis, 17000 are single wagons. In general terms, rail freight is considered as particularly appropriate for the transport of dangerous chemical products. Multi modal transport also plays an important role, in the chemical industry. However, Solvay laments that some railway operators no longer support shipping by single wagon and that tariff for single wagons are often uncompetitive with trucking and may represent as much as twice the price of the equivalent road transport.

The single wagon also plays a key role in Arcelor’s transport policy. For example, single wagons represent 50% of the 200000 wagons/year used by Arcelor in France. Further, recourse to single wagon shipping is vital, as the automotive industry requires that 70% of deliveries be made by train. However, the deficient quality of rail freight services is the source of difficulties, in particular with “just in time” deliveries. In addition, the ongoing closure of lines connecting the network with industrial facilities puts in jeopardy the capacity to continue delivering freight by train to the corresponding destinations.

A. Threats to single wagon shipping

The drastic changes in the economic framework within which rail companies operate, the deficient quality of the services offered by rail freight companies, and the absence of a true European dimension pose serious threats to the development of single wagon shipping, in the future.

I. The economy of the system

The European transport policy has caused dramatic changes to the economic framework within which rail companies operate:

• It is putting an end to the subsidisation of rail operators
• It is dividing the traditional rail operators into three different kinds of companies respectively in charge of,:
  • infrastructures management;
  • passenger transportation;
  • rail freight.
• It is opening national railways to competition.

As a consequence, the new rail freight companies have had to look for new ways of operating in order to become profitable. In this context, it is noteworthy that:

• Some companies have chosen to increase their tariffs (in particular for single wagons) rather than proceeding with drastic cost-cutting policies;
• Some companies have decided to put an end to their support to single wagon shipping;
• Some companies have decided to close a series of shunting stations and “private” railways serving industrial facilities;
• Some companies have significantly limited their support to multimodal transport through the closure of dedicated subsidiaries and by implementing unrealistic tariffs.

II. The deficient quality of services

There is a wide consensus concerning the present inadequacy of rail freight services:

• Protection of the products transported is insufficient to ensure that they won’t be damaged when delivered;
• Delivery delays are hazardous;
• Freight tracking is unsatisfactory, and close to inexistent, as soon as an intra European border is crossed;
• Final destinations may not/no longer be connected to the network.
• Business conditions for single wagon shipping frequently are inappropriate or even surrealistic. For example, when Stinnes puts an acceptable 7.5% premium on its quality offer (guaranteed delivery delays with a penalty clause) with respect to the regular one, SNCF requests a three months advance notice to guarantee delivery delays at a reasonable price.

III. No single market for the single wagon

The European transport policy is lacking, in ways that hinder the realisation of the single market for single wagon shipping. In particular, it is striking that:

• There is no harmonized definition of block trains and single wagon throughout the EU. For example, a block train is composed of 7/8 wagons in Italy, while 20 wagons are necessary to form a block train in France. The practical consequences are that an Italian block train is considered as a single wagon shipment when it crosses the French border, and logistically dealt with as such. This means that it is usually sent to a shunting station, waiting to be integrated into (a) French block train(s), instead of continuing to its destination. On the other hand, when a French block train crosses the Italian border, it has to wait to be subdivided into various Italian block trains and/or single wagons. The end results are the same: additional delays, increased costs, and, most of the time, uncertainty concerning the fate of the products shipped.
• There is no common approach to single wagon shipping in the EU. Consequently, when some companies have maintained their commitment to the single wagon (DB, SNCF) others have simply decided to suppress it (RENFE, from January 1st 2006) while the situation in other countries (i.e. Italy) is currently uncertain. Such absence of coherence is promoting road transport at the expense of rail freight, in blatant contradiction with the EU objective to re-balance the different transport modes and avoid road congestion.

B. Possible ways forward

Loaders generally believe that traditional rail freight operators should look, first and foremost, at decreasing their costs, in particular, for single wagon shipping. The following avenues are worth exploring:

I. Restructuring of the shunting stations network

Currently, single wagons are immobilised during 60% of their journey, most of the time, at shunting stations, which is at the origin of significant costs and additional delays as, in many instances, single wagons are directed to shunting stations quite apart of their direct itinerary . Part of the problem comes from the fact that most of the shunting stations’ network has been created on a purely national basis and to answer needs of a different era. Many of them do not reach today’s critical size, recur to antiquated working methods to slow down or sort wagons out, and employ too many people compared to what modern technologies would allow. It is excluded that increased tariffs could pay off the capital costs of modernizing all these shunting stations. Accordingly, it should be a priority to decide on the grid of shunting stations to maintain and modernize, based upon an objective analysis of the present and future needs arising from the character of current and expected European and national flows of rail freight.

Shippers, on the other hand, also are responsible for part of the wagons immobilisation time. They need to continue improving their management of unloaded wagons in order to return them to rail freight companies within the shortest possible delays.

II. Optimizing the European rail network and the North American experience

Rail freight market share is in the range of 8% in the European Union when it is about 40% in North America. Furthermore, around 60% of rail freight in North America is made up of single wagons. To a large extent, this huge difference is accounted for by:

• The competitiveness of rail freight
• The seamless operation of trains between Canada and the US;
• The concentration of the traffic of the main rail freight operators on key transport axis serving strategically located “dispatching” stations equipped with warehouses from which “short line” operators deliver the merchandises to their consignees.

Clearly, in a competitive economy, it is no longer possible that trains carry freight from anywhere to everywhere. However, 80% of European traffic connect major economic centres and should be profitable. On this strong basis, it should be feasible to restructure the European network on the North American model.

Accordingly, the European authorities should strongly support:

• The restructuring of the European network around such backbones;
• The development of “short lines” run by dedicated operators to complement the backbones, and maintain/develop the “door to door” rail freight services that economic operators need;
• The development of modern shunting stations equipped with the appropriate warehouses at the nodes with the “short lines”.

III. Logistic Interoperability

European networks interoperability issues are currently addressed from the legal (COTIF) and technical (ERTMS etc...) standpoints. The corresponding developments should bring significant progress in the domains of cross border traffic and of wagons tracking, thus providing valuable results in terms of costs, delays, and quality of service.

However, it is urgent to develop a new, complementary, logistic approach of interoperability. This clearly results from the needs to optimize the European network and its related grid of shunting stations, and to create a secondary network of “short lines”. It is also necessary in order to:

• Harmonize the definition and practice of single wagon shipping, throughout Europe;
• Generalize the commitment of rail freight operators to support single wagon shipping.

Consequently, the European authorities should take the appropriate steps to suppress the roadblocks to single wagon development at EU level and foster harmonized support to, and common practices of single wagon shipping.

C. Conclusion

Globalization and the intensification of competition have led companies to restructure and re-engineer their production processes in order to maintain and increase their competitive position. Specialisation of production facilities and subcontracting have made transports an integral part of the supply chain. Increased competition implies a permanent drive to cut costs at every stage of the supply chain, including transport.

The competitiveness and customer orientation of the transport companies is, thus, crucial to the competitiveness of the manufacturing sector.

In this respect, some aspects of the current European transport policy that increase the cost of road transport to foster a modal switch benefiting the other transport modes, raise serious concerns as they impact negatively on the competitiveness of EU companies. Furthermore:

• they reduce the pressure on rail freight companies to implement the critical cost-cutting policies that, in some instances, are dearly needed;
• delayed cost-cutting combined with increased competition may well lead to the closure of more lines, and to more incumbent operators decreasing or altogether terminating their support to single wagon shipping.

On the other hand, a series of constructive steps should be taken by the European authorities to strengthen the competitiveness of rail freight. They should:

• induce traditional rail infrastructure companies to adopt a much more European vision of their national network;
• complement TEN to restructure the European rail network with a European perspective, around key backbones and their corresponding “shunting nodes”;
• foster the creation of a grid of short lines with dedicated operators, to complement the network of European “backbones”;
• Harmonize the definition and practice of single wagon shipping, throughout Europe;
• Generalize the commitment of rail freight operators to support single wagon shipping.