Tuesday 25th Oct 2016 - Logistics Manager

Faster track to growth

Everyone agrees that getting more freight onto rail is a good thing, but while there has been an increase, there are plenty of obstacles to be negotiated to achieve more rapid growth. Malory Davies looks at the issues.

If you ever had doubts about the level of competition in the rail freight industry, just look at what has been happening at Britain’s newest port, London Gateway.

Both DB Schenker Rail and Freightliner have been competing to get the first train out of the port. In the end DB Schenker jumped in first when the fire damaged vessel, ZIM Rotterdam, made an emergency call at the port in September despite the fact that is was not officially open.

Carsten Hinne, managing director, logistics for DB Schenker Rail UK, said: “We realised that a solution was needed quickly and viewed this as an opportunity to help ZIM, the London Gateway team and the cargo owners in providing a service from the port.”

As a result the first train out of London Gateway left the port at 02:00 Tuesday 24th September, fully laden with containers bound for DB Schenker Rail’s Trafford Park terminal.

Not to be outdone, Freightliner can claim the first official train out of the port on the 7th November when it ran a service up to the Daventry International Rail Freight Terminal for customer Hillebrand Group.

“Freightliner is delighted to provide the first train service and looks forward to welcoming London Gateway into its unique intermodal network, serving over 37 UK destinations,” said managing director Adam Cunliffe.

The UK’s rail freight industry can point to steady growth over the past few years – and after the recession-driven fall it is now approaching the peak achieved 2006-7, according to figures from the Office of Rail Regulation.

Data since privatisation in the mid-1990s shows that freight-moved peaked in 2006-07 when 21.9 billion net tonne kilometres were moved. It fell to 19.1 billion net tonne kilometres, at the height of the recession but has recovered to 21.5 billion net tonne kilometres in 2012-13. And it is clear that the nature of the goods being carried is slowly changing. Historically coal has accounted for most of the tonne kilometres moved – by a big margin – while other bulk goods have been very important.

But the only product group that has seen consistent growth has been domestic intermodal traffic.

In the first quarter of 2013-14 the amount of freight lifted increased 4.5 per cent compared to the previous year, while the amount of freight moved increased by 3.7 per cent over the same time frame.  Also, during the quarter  a total of 5.7 billion net tonne kilometres of freight was moved, this was an increase of 3.7 per cent compared to Q1 in the previous year and an increase of 5.0 per cent compared to the previous quarter.

Nevertheless, the industry still faces challenges and the five major rail freight operating companies have joined forces with Network Rail to form the Rail Freight Alliance.

The five are: DB Schenker Rail UK, Freightliner Group, GB Railfreight, Direct Rail Services and Colas Rail.

The alliance has set three objectives: delivering whole-industry cost savings; developing “smarter use” of the network; and a sustainable charging framework for freight.

“I’m delighted that The Rail Freight Alliance has been agreed. Greater collaboration between the operators and Network Rail will enable us all to better address the challenges and the opportunities that the sector faces in the next five years and beyond,” says Paul McMahon, freight director of Network Rail.

And Peter Maybury, chair of the Rail Delivery Group’s Freight Group, says: “The Alliance will give the rail freight sector a stronger voice in the rail industry and give an opportunity to resolve some significant issues that remain for the sector.”

One of the biggest blockages to rail freight growth is the lack of suitable terminals in specific locations and the difficulty of building new terminals.

Nick Radcliffe, managing director of FreightArranger, says: “Terminals are absolutely vital to the growth of rail freight.   There are a number of challenges which need to be overcome: making land available in a shape which allows a rail freight terminal to be operated efficiently; reducing the costs of construction and connection to the rail network; local planning issues.”

The problem is exemplified by the saga of Radlett Aerodrome where HelioSlough’s plan for a strategic rail freight interchange has faced a storm of opposition.

Logistics Manager first reported on this in July 2006 when “A new organisation calling itself LOOPS (Lorries Out Of Park Street) plans to oppose the 3.5 million sq ft scheme by the Helios Properties and Slough Estates joint venture on the 250-acre former Radlett Airfield.” Radlett would be the only major rail freight interchange in the north and west quadrants of London and could play an important role in the development of intermodal services in the UK.

But strong local opposition has been delaying the development for years. Just before Christmas last year Eric Pickles, secretary of state for communities and local government, said he was minded to approve the £400m scheme leading to hopes that it will now get off the ground. Nevertheless, the opposition has not diminished. In September, St Albans City and District Council went to the High Court to apply for a judicial review of Pickles decision. That was turned down – but there is still a long way to go.

And rail freight faces another problem – the number of slots available for freight trains on the network. Freight is in competition for track space with passenger, and capacity will be an increasing problem as use of the network increases. High Speed 2, the proposed high speed rail line linking London to the North West and Scotland has aroused a huge amount of opposition particularly in places like Buckinghamshire.

But for rail freight, it offers the best opportunity to increase capacity on the rail network opening the way for further freight growth.

The Rail Freight Group pointed out that HS2 is expected to provide significant benefits for rail freight by releasing capacity on the existing rail network, in particular the West and East Coast Main Lines.

Speaking earlier this year, chairman Tony Berkeley said: “Efficient rail logistics is vital for supplying consumers in the East Midlands and North of England, and supporting businesses in those areas.”

And in September, John Smith, managing director of GB Railfreight, welcomed a report by KPMG as recognising the wider benefits of the high-speed network. He pointed out that not enough time and energy had been spent considering the economic value of rail freight in the HS2 debate.

“By freeing up rail freight capacity on the West Coast Main Line, HS2 has the potential to radically transform the volume of goods moved around the country, resulting in a much-needed increase in UK productivity, an energetic growth in our exports market and relief for our congested road system,” said Smith.

“GB Railfreight calls on Network Rail to give equal attention to the opportunity for rail freight as for passenger trains when considering the allocation of the released capacity from HS2, and on the government to consider the opportunity for rail freight as part of the overall business case.”

There are few in the freight industry that would disagree with that.

Costs: Warning over rail freight charges

New track access charges for freight operators have caused concern in the logistics industry that traffic could be driven off rail and onto road.

The new charges, which come into force from April 2014, were confirmed by the Office of Rail Regulation at the end of October.

And while Maggie Simpson, executive director at the Rail Freight Group, describes them as “broadly affordable and fair”, the Freight Transport Association said it remained concerned at the change of approach to freight track access charging and consequential longer-term implications for rail freight.

The ORR’s final determination will increase freight rates by 21 per cent over the control period – four per cent per year. The FTA reckons this will be a major setback for promoting future growth for the sector if this is passed through in full to end users.

It argued that “there is still the need for better understanding of the rail freight market and the expectations of existing and potential new customers.”

The association said the ORR appeared to have listened to industry concerns and capped the proposed increase below that initially intended, thereby reducing the impact of the new charging regime.

However, rail freight policy manager Chris MacRae said: “FTA remains concerned that the new higher freight track access charging announced today by the ORR could still cause future uncertainty as to the direction of rail freight policy. We believe that rail must find ways of becoming more price competitive with road, where costs to customers have gone down in real terms.”

Technology: Easier access to rail freight services

FreightArranger is an online system designed to make it easy for companies to book freight onto rail.

The core of the system is an online brokerage for finding, booking and tracking intermodal freight transport. It is aimed at all organisations with containerised freight to move: importers, retailers, manufacturers, 3PLs, shipping lines and forwarders.

Managing director Nick Radcliffe says: “The big opportunity is domestic intermodal as it is relatively unexplored.   However, domestic intermodal is also challenging, because one needs large continuous freight flows to make trains economic.  The presence of a port consolidates freight flows naturally, which is why rail freight penetration of the deep sea market is much greater and will continue to grow, but in a domestic scenario, this doesn’t exist. This is why the people making progress with domestic intermodal rail freight at the moment are the large retailers who do have sufficient volumes to fill or nearly fill an entire train. 

“What is needed is a system for pooling freight flows with similar origins and destinations; a technology solution like FreightArranger,” he says.

FreightArranger is a consortium of TruckTrain Brokerage, Rockshore, GB Railfreight, John G Russell (Transport) and Coventry University, which is part funded by the Technology Strategy Board.

Radcliffe points out that pallet and parcel networks are now moving substantial volumes of goods.  

“The longer distance journeys should all be by rail, but this is an unexplored sector with challenging delivery time needs.”

Radcliffe points out that retail secondary logistics is a developing sector too, as are pallet and parcel networks.  

“The impetus behind portcentric logistics is also likely to change the nature of demand for inland transport, with goods needing to go straight to a retail outlet rather than to a warehouse for processing.  This is likely to lead to more fragmented routes, and full train loads will need a capacity sharing system to build economic train loads.”