Challenges for Rail Freight

OSJD Freight Commission

Odessa, 30 May 2011

Oliver Sellnick, Director Freight UIC

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UIC – a global association with over 200 members around the world

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8080Members Active 8282 3535Associate Affiliate

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The World-wide organization for co-operation among Railways

Provider

Facilitator

OrganiserDeveloper

Know How, technicaland operational expertise

Technical solutions Regulations, standards,

best practises

Exchange platforms,Innovation: new ideas, new concepts

Project management Support policies of

development of key infrastructure projects

Forums Platforms Study groups International conferences Congresses

Specifications Standards Interfaces Studies Interoperability for international rail corridors

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Promoting the development of rail transport at world level,

in order to meet the challenges

of mobility and sustainable development

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Mission of freight department

„What“− Increase revenues of members by improving the

competitiveness of international products and services

− Reduce costs of members by harmonizing international business, operational and information processes

„How“− Being the major facilitator and neutral manager of

multilateral cooperation in non-competitive areas among members

− Organising knowledge transfer among members and from other industries with benchmarking, workshops, conferences

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Freight railways expanding around the world

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Different characteristics and framework conditions of freight markets – development in isolation

Western Europe Eastern Europe North America Asia

COMPETITION -Road

-Barges

-Coastal shipping

-Increasingly rail

-Increasingly road

-Increasingly rail

-Road

-Rail

-Shipping

-Road

AVERAGE

TRANSPORT

DISTANCE

350 km 500 km > 2.000 km 1.200 km

INTERMODAL

MARKET SHARE

10%-15% stabilizing

15-25% still declining

30% stable >30% China / India growing

BOTTOM LINE Loss making Breakeven to profitable

Profitable Profitable

KEY CHALLENGES

Ensure long-term survival of sector

Stabilize volume at sustainable level

Attract capital to ensure moderate growth

Build infrastructure to support rapid growth

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Key trends rail freight

>Opportunities Growing world trade needs more transportation. Modal shift to rail

important for sustainable transport Rail freight increasingly integrates into logistic solution International corridors in Europe, Asia, the Middle East promoting efficient

long-distance rail traffic

>Challenges Interoperability and cooperation:

- intramodal in terms of technology / administration / law / operations

- but also intermodal connectivity Productivity: train length and weight, capacity utilization Integration with customers and information transparency

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The European railway policy

EU Vision

« Creation of an integrated European railway area to allow cross border services under a single responsibility in order to guarantee the quality of services to the customer »

The cornerstones of the EU approach

Open access in rail transport to favour competition and create incentives for product innovation and service quality

Fostering the interoperability of the national networks (and hence international services) through technical harmonisation

Develop a common rail safety approach to facilitate market access while maintaining a reasonably high level of safety

Develop the trans-European Network for rail

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> Free access improves competitives of rail

but …

> Lower infrastructure investments in rail

> Infrastructure access more expensive

> High external costs of road not internalised

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Around 600 rail operating licenses in freight in Europe

Scope

Outside scope

Scope (EU 27 – Cyprus, Malta & Ireland) + Norway + Switzerland

Source: ** European Commission - rail market monitoring scheme_2008, *VDV website 2010

FINLAND (1, 0)

Country (number of valid RU licenses, market share non-incumbent [%])

ESTONIA (13, 49)

LATVIA (4, 9.6)

SWEDEN (17, 20*)

LITHUANIA (1, 0)

NORWAY (8, 21)

POLAND (67, 24)

UNITED KINGDOM (26, 45)

DENMARK (11, 5*)

GERMANY (315, 22)

NETHERLANDS (26, 45)

BELGIUM (5, 6.1)

LUXEMBOURG (2, 100)

SWITZERLAND (20, y)

CHECK REPUBLIC (33, 5*)

AUSTRIA (17, 14)

SLOVAKIA (1, 0)

FRANCE (7, 10)

SPAIN (10, 5)

PORTUGAL (2, 0)ITALY (17*, 12*)

GREECE (1, 0)

ROMANIA (25, 41)

BULGARIA (6, 3)

HUNGARY (22, 14.4)

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Creation of a European Rail Network for Competitive Freight

Creation of internationally integrated infrastructure Investment and capacity planning Parameters (train lenghts, axle load, etc) Operational rules Path requests (OSS) Quality monitoring

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Market segments of European rail freightSegments Commodities Share of

volumeCompetitive environment

Coal, Steel

Constructionmaterials

~ 35%

Traditionally barge competition

Focus of intra-modal rail competition

Price decline

Chemicals

Paper and pulp

Automotive

Steel

~ 45% Focus of road competition

Complex production process,high barriers to entry

Finished goods

Containerizedgoods

~ 20%

Strong road competition

Intermodal Operator and Freight Forwarder as partner

Block Train

Wagonload

Combined traffic

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Combined Traffic

Wagon Load

Freight Forwarders

InformationTechnology

Quality Mgm.

Wagon Exchange

Freight Ops.

TAF TSIMigration

Global Freight

Active cooperation of members on freight projects

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> Zurich, 18 February 2010: signing of alliance and press conference

> Xrail: production alliance

> For international wagonload business

> Uniform production standards

Leading railways launched wagonload production alliance

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Xrail features address customer needs1

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Improving the productivity of intermodal rail-road/sea transport

– Strong volume growth projections but infrastructure capacity constraints

– Roles and responsibilities along the value chain complex with numerous interfaces and duplicities

– High volatility in business und non optimal resource deployment:

–Peak work loads–Train lengths / weights

– Unsatisfactory financial results of players in highly fragmented market

Productivity has to increase regarding network, hub & terminal infrastructure and rolling stock to enable profitable growth

Business has to be “industrialized” employing international best-practice processes, systems & price incentives

Improved cooperation & coordination needed along the value chain both vertically and horizontally

Agenda 2015 for Combined Traffic in Europe Actions IM RU IO TO MoT EC Other

Employment of infrastructure-efficient, train path-saving rail production systems □ nApplication of incentives in infrastructure access charging systems n □ □ □

Improvement of punctuality of rail traction services nEnhanced process organization of rail traction services □ n □

Advanced train and network capacity management systems □ nImplementation of longer and/or heavier trains including minor infrastructure adaptations □ n □ □1)

Increased wagon axle loads n □ □ □1)

Best practices in terminal operation and management □ □ □ n

Implementation of ongoing and envisaged rail network investments n □ □

International agreement on “Achilles’ heels” removal programme □ □ □ □ nRealization of ongoing and envisaged terminal investments and intermodal hub programme □ □ □ n □Standardized process for international co-ordination of CT terminal development □ □ □ □ n

1) Railway Industry ■ Main Actor □ Involved Party

More infrastructure investments and international co-ordination

More efficient use of infrastructure

The future is paperless

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Goals

− paperless transport

− No manual intervention, thus improved quality

− avoiding physical paper transport, thus reduced costs

EUR Pallet – invented in 1961 and kept young since then by UIC

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Measuring GHG emissions and energy consumption with www.EcoTransIT.org

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www.RailFreightPortal.com – the central information hub for rail freight

Thank you for your attention

OSJD Freight Commission

Odessa, 30 May 2011

Oliver Sellnick, Director Freight UIC