Rail – Full steam ahead into new markets

It may be hard to believe in the current climate, but the rail freight business is on the up, reports Chris Lewis
Despite the widely publicised problems surrounding the Channel Tunnel and post-Hatfield crash disruptions, growth in the UK rail freight business over the past 12 months has been around 8%-9% – enough to deliver the government's target of 80% growth over the next 10 years, says Julia Clarke, head of freight at the Strategic Rail Authority (SRA).

"The industry is engaging in a growth agenda, and there are new services springing up – such as GB Railfreight's service from Felixstowe to Selby and DRS's Grangemouth/ Daventry service for WH Malcolm, " she says.

The task facing the rail industry is twofold. It needs to ensure that service standards are maintained for its traditional customers – the coal and power industry and shippers of steel, cars and deepsea containers. But it must also recognise that growth in these markets is likely to be limited and that if the 80% target is to be achieved, rail must succeed in new markets, notably FMCG – an area where it has been almost entirely absent these past two decades.

Railways are good at moving large volumes of traffic quickly over long distances, and Freightliner 's latest rethink is designed to allow it to do that. The old hub-and-spoke service pattern, with the multiportion operating of trains to and from a yard near Crewe, has been largely discarded in favour of point-to-point services from the UK's four major container ports (Thamesport, Tilbury, Felixstowe and Southampton) to major inland centres, with a particular emphasis on Manchester, Glasgow, Leeds and Birmingham. All major traffic flows have been retained, although services from Thamesport and Tilbury have been rationalised and a domestic flow operated on behalf of TDG between Grangemouth and north-west England has now ceased Earlier, Freightliner made a strategic decision to move out of some small niche markets – its international business and Freightlinerbulk – although some flows have been subsumed into the existing business. It also set up Freightliner Heavy Haul, aimed at the non-intermodal trainload bulk market, which now accounts for 30% of Freightliner 's turnover.

Peter Maybury, joint MD of Freightliner 's intermodal division, explains: "We've worked very hard on getting the business and service levels right by essentially concentrating on direct routes. The new service gives better asset utilisation and a product that is deliverable in a consistent way." While the new system is only a few weeks old, early experience suggests that it has delivered a more robust timetable in the face of inevitable operating problems, such as Railtrack engineering work. It also helps Freightliner sweat expensive assets, such as the 17 new Class 66 locomotives, recently purchased for £1.5m ( t2.3m) each.

Freightliner is heavily dependent on the deepsea shipping business, and while volumes were growing briskly until about 2000, the market has stagnated and for a short while was actually shrinking. "Encouragingly, " says Maybury, "there are some signs that in volume terms we're getting back into growth, but this has been a difficult market." Freightliner is working hard at partnerships with customers, encouraging shipping lines to commit volumes and treat Freightliner as the "mode of first choice – that way we get certainty of volume and delivery, " says Maybury.

"Shipping lines should also be able to benefit from the fact that we can pre-plan services." The prime example of this is OOCL's recent signing of a 10-year dedicated train contract from Southampton to Manchester.

Freightliner will concentrate on existing flows from the main ports to the major inland destinations, although it is mindful of port developments. None of the three major schemes currently on the drawingboard – Shell Haven, Dibden Bay or Bathside Bay – would require major redrawing of the Freightliner network and all locations would be railserved.

One traffic that must be pursued is the 9ft 6in container, says Maybury. The taller boxes can be moved on well wagons within the UK's restricted loading gauge, but fewer boxes can be carried per given train length because the space above the wheels cannot be used. "The population of these boxes is currently growing at 3% a year, and it's not economically viable to move them on rail at the moment.

"The Strategic Rail Authority is committed to a gauge enhancement programme on routes from Southampton and Felixstowe, and the current timing is for it to be completed in 2005. We're lobbying very strongly for this, " says Maybury.

It is a major project, expected to cost millions, and entails alterations to dozens of bridges. But with 9ft 6in boxes already accounting for 20% of the world container fleet, it is a problem that needs to be addressed if rail is to have a viable market share by the end of the decade.

The SRA's Clarke promised recently that work on this project would start this year.

"Work on four or five bridges should be complete by the fourth quarter of this financial year, and we're hoping that the routes from Felixstowe will be completed by 2005, " she says.

While acknowledging that the work has not moved forward as quickly as Freightliner and other operators would like, she points out that having infrastructure operator Railtrack in receivership has hardly been an aid to rapid decision making. However, she hopes that the process will be streamlined when the new Network Rail company is up and running – although when that will be is anyone's guess at the moment.

While Freightliner is acknowledged as the master of the deepsea container business – although EWS moves some maritime boxes from smaller container ports on its wagonload Enterprise network – it is now facing some direct competition for blocktrains out of the major ports. This comes in the shape of GB Railfreight, which has bid successfully to operate a dedicated blocktrain for shipping line Medite from Felixstowe to the Potter Group terminal at Selby, and to the Hams Hall facility in Birmingham, now operated by ABP Connect, following Parsec's withdrawal.

While GB Railfreight is currently operating only one train a day for Medite (on three days it goes to Selby, on two to Hams Hall) with five more diesel locomotives due to arrive from Canada this month, the operator – a subsidiary of Anglia Railways – is looking to expand.

"We're looking at other destinations and also at domestic intermodal traffic, " explains GB Railfreight MD John Smith. He is encouraged by the SRA's promised review of the track access regime, expected in about six months' time which, says Smith, promises to be more "company neutral".

To some extent, GB is competing with Freightliner, but Smith sees his company as operating in the "hook and haul" business, providing a train service with road haulage or terminals.

With growth prospects in the heavy haul segment of the market distinctly limited, the question inevitably arises: can rail break into the FMCG segment?

One attempt to help is the Railfreight Online project, sponsored by logistics operator Exel, rail equipment and infrastructure provider Amec and communications specialist Isotrak. This is evaluating the feasibility of using smaller double-ended freight multiple unit (FMU) trains. Similar units are already used by the rail infrastructure companies, including Amec, for track maintenance operations. In the longer term, it is hoped the concept could enable freight trains to operate into hitherto no-go areas, such as city centres.

The FMU is one way of realising the wish expressed by Derrick Potter, MD of intermodal logistics specialist the Potter Group, of creating a rail system capable of catering for smaller-load customers unable or unwilling to commit themselves to full trainloads.

However, the EWS Enterprise network does cater for this need, although the operation has been trimmed back recently in a bid to cut costs.

Potter explains: "The government, through the SRA, has put forward its wish to increase freight on rail by 80% over the next 10 years. This will only happen if the road transport industry and private rail operators create mixed trains which start by moving small volumes and creating a good service to enable customers to gain confidence in rail freight." Rail could also break into new markets on the basis of existing technology. For example, 145kph freight trains could soon be cruising the UK's railways using existing wagons that have been fully tested and "tweaked" where necessary, according to the UK's main operator, EWS. The company has successfully completed tests of the Multifret wagons inherited from British Rail's Railfreight Distribution arm to assess the effects of turbulence around containers or swapbodies as they rush along. EWS has a fleet of 200kph diesel locomotives.

The move could help rail break into new markets, says EWS spokesman Andy Lickfold. "Moving at 145kph, rather than the 120kph previously regarded as the maximum speed for freight, in itself saves minutes rather than hours – but there is more to it than that, " he says.

"Freight trains moving at a top speed of only 120kph get in the way of 175kph or 200kph passenger trains. The normal practice is to divert them into passing loops, to wait for passenger trains to overtake, or relegate them to the slow lines. This can be very time consuming and can drag down the average speeds of freight trains even further. But at 145kph, they would be able to keep ahead of passenger trains at all but the busiest times of day, so it should be possible to achieve average end-to-end speeds of 110kph or even more – potentially cutting journey times in half." EWS, however, is no stranger to the high-speed freight business, as it has been operating 175kph services for several months. These are a rather different concept – they use mail and parcels carriages and in design and suspension are essentially the same as passenger vehicles (nonpassengercarrying coaching stock, in railway jargon).

The service operates from Walsall near Birmingham to the Glasgow region and on to Aberdeen and Inverness.

Currently it caters for Securicor 's Anglo-Scottish and Scottish domestic business, but the train is open to other interested operators. "We have had positive indications from other parcels-type operators, " says Lickfold.

The Securicor train is technically very similar to the mail services operated by EWS for Royal Mail.

Ironically, though, just as the private sector carriers are showing interest in rail, Royal Mail has said it wants to switch its premium firstclass post to road and air, leaving rail to concentrate on second-class and bulk mail.

The unique travelling post offices, which allow mail to be sorted en route, will be scrapped.

The most gloomy spot in the UK rail freight market is undoubtedly the international segment, and here the industry's future is largely out of the rail operators' hands. While, at the time of going to press, there was talk of a deal between the UK and French governments to close the refugee centre at Sangatte, to help reduce instances of stowaways breaking into Channel Tunnel freight trains, Lickfold said there was no real sign of a resolution to the problem.

"The situation remains thoroughly unsatisfactory, " he says. "Frankly, I admire the fortitude and patience of those companies that continue to send goods by rail through the Tunnel. If we could crack the problem, it would be a glorious opportunity, and in fact we need the international business if we are to achieve the government's 80% growth target over 10 years." If it was allowed to function properly, rail could cut 24 hours off delivery times from the continent for supermarket deliveries and other FMCGs.

It is not just EWS that has suffered. The Potter Group's business includes some Channel Tunnel traffic which is causing Derrick Potter great concern. He was part of a delegation from lobbying organisation the Rail Freight Group that met transport minister John Spellar last month. Potter explains: "The question of helping those UK companies which are experiencing real financial hardship was discussed. It is important to keep in place companies which helped service the Tunnel, yet today are not financially viable due to the poor volumes coming through it." All operators using the Tunnel say much damage is being done to both equipment and goods as a result of forced entry by stowaways.

"Customers have had to make alternative transport arrangements and the Potter Group is thereby losing 70,000 tonnes of business, " says Potter.

Tibbett & Britten, another logistics operator that has invested in rail recently, reports that while its north London terminal, which handles mainly nonintermodal traffic from the continent, is still doing reasonably well, rail business at the Daventry terminal, which handles intermodal business, is greatly diminished, with traffic reverting to shortsea and road.

"It will need a lot more confidence in the market before anyone even starts thinking about it again, " says Tibbett & Britten's director of rail and intermodal logistics, Steve Blencowe. n

Posted: 10/06/2002