6.2.3 BUSINESS CASES FOR NEW/IMPROVED FREIGHT TRANSPORT SERVICES. Version: 1 Date: Partner: pp5 (GySev)

Transcription

1 6.2.3 BUSINESS CASES FOR NEW/IMPROVED FREIGHT TRANSPORT SERVICES Version: 1 Date: Partner: pp5 (GySev) 1

2 Table of contents Executive summary Introduction Freight transportation in the SETA corridor Modal split Road transportation Railway transportation Railway infrastructure Industry along the SETA corridor Survey of the industry and rail forwarders Business cases Regular container train service between ILC Sopron and Rijeka or Koper with combined transport operator MSC Introduction Competition Sales and marketing concept Logistics concept Feasibility analysis and benchmarking Summary and conclusions Regular transport of cars between Slovakia (Devinska Nová Ves) and Port of Koper with car transport owner STVA Introduction Competition Sales and marketing concept Logistics concept Feasibility analysis and benchmarking Summary and conclusion Polish coal export from Poland to the Port of Rijeka with PKP International Introduction Competition Sales and marketing concept Logistics concept Feasibility analysis and benchmarking Summary and conclusions

3 List of Figures 1. Figure: transport share per country southbound Figure: Transport share per country northbound Figure: SETA rail corridor for passenger and freight transportation Figure: Routes of the services proposed for business case Figure: Route of the service proposed for business case Figure: Route of the service proposed for business case List of Tables 1. Table: Daily traffic volume on transit road E86 in Hungary Table: line characteristics Table: Benchmark for case study Table: Benchmark for case study Table: Benchmark in case study

4 Executive summary The document demonstrates three practical business cases taken from the praxis based on inquiries from the loading industry. The first one is a complex logistical solution for the Sopron region s industries with high value added services to reach the Adriatic Ports by rail. The success of this business case depends on the critical mass of the commodity at start-up as well on the competition against road transport. The second business case deals with Volkswagen group to transport finished cars between Devinska Nova Ves in Slovakia and Port of Koper which is a classical door-to-door transport loading at the factory and unloading in the Port with low value added services. In this case Port of Koper is in competition with Bremerhaven and GYSEV CARGO as rail service provider competes with other railway companies, with road transport and with connection via Bremerhaven. The third inquiry is a typical railway suited transport exporting coal from Poland. The consigner checks its possibilities via Gdansk and via Rijeka and decides finally about the transport route. At all three cases GYSEV CARGO faces both intra- and intermodal competition where price and presence of existing systems are the most important factor for the loading industry to make their decision to determine the transport success along the SETA corridor. 1 Introduction The objective of this document is to demonstrate 3 practical business cases for freight transport along the SETA Corridor. There connections are based on inquiries coming from the loading industry indirectly through an operator, a railway undertaking (RU) or forwarder. The first part presents the general characteristics of road and rail transport including their market share. This part is followed by a brief outline of the most important production entities in the region. To obtain more detailed information about the requirements of the industry, modal split, availability of rolling stock and propensity to use the proposed railway service a survey has been sent out to forwarders, operators and RUs. The second part of the study describes the 3 business cases with all its factors mentioned to give a general overview about present situation, price and quality of transport. 2 Freight transportation in the SETA corridor 2.1 Modal split The freight flow between the northern part of Central Europe (Poland, Slovakia and Czech Republic) and Adriatic Ports as well as Northern Italy plays an important role along the Hungarian freight transport corridor. The two transport modes rail and road compete with each other in this region. According to the information of GYSEV as infrastructure manager and data about road traffic flow along main road No. 86 (E65) the modal split is approximately 15% - 85% 1 in favour of the road. This figure is calculated on the basis of the following data: 1 Source: GYSEV Infrastructure Manager, KTI 4

5 Railway freight traffic along the Hungarian section of the SETA corridor was gross tons 2 per day in 2012, which is equal to net tons per day on average. Heavy goods vehicle (>3.5 tons) traffic on No. 86 (E65) is shown in 1. Location Year of counting Nr. of vehicles Change Nr. of vehicles (2012) Net tons/day 3 Rajka (HU % SK border) 4 Rédics (HU- SI border) % Table: Daily traffic volume on transit road E86 in Hungary5 2.2 Road transportation The European transit route E65 enters Hungary from Slovakia southbound at Rajka and leaves the country in Rédics toward Slovenia passing through the towns of Csorna, Szombathely and Körmend. The length of this transit route in Hungary is 206 kilometres, of which only 21 km is motorway. The remaining 185 km is a normal road going through the centres of Csorna and Körmend while in Szombathely the bypass road was completed in The towns have to suffer from the high number of heavy goods vehicles passing through by day by day. The average traffic for this route is about 1 truck in every 45 seconds per direction, which is the highest in Hungary for any road which is not a motorway. A bypass road has been planned for Csorna since beginning of the 1990s to increase the quality of life and reduce to air pollution and noise, but only in 2013 did the construction start. It is expected that from 2016 Csorna will be relieved from the traffic of heavy trucks. According the origin and destination countries of the commodities a survey has been done among the truck drivers that are demonstrated in figures 1 and 2 6. A further data about the exact destinations and producers are not available as these are confidential. It is just supposed that most of the goods are palletised. Unfortunately with the today existing railway systems and transport times rail has a weaker performance in flexibility than road. From point of view of the transport cost it is difficult to beat the road prices provided by Eastern European road forwarders at the moment. If we consider that the cost of transhipment into closed wagons or the handling of containers already makes up of gross tons: weight of all wagons and commodity but without locomotive weight 3 experts estimation 4 to any direction, not only toward Slovenia 5 Source: Traffic counts : 6 Source: KTI 5

6 % of road transport prices, it is most often unprofitable to use the railway for short and medium distances. 1. Figure: transport share per country southbound 7 7 Source: KTI 6

7 2. Figure: Transport share per country northbound8 2.3 Railway transportation Rail traffic between Slovakia/Czech Republic/Poland and the Adriatic Ports is organized by 3 significant operators and railway undertakings. The biggest operator is AdriaKombi / SKD Intrans with a yearly volume of about 600 trains in 2011 (1 train per day per direction) between the port of Koper and Slovakia and vice versa. Another market player is Metrans that connects the port of Koper with its terminal in Dunajska Streda forwarding a volume of +/- 150 trains in 2011 with approx. 2 trains per week per direction. These two train projects are dedicated regular connections between the port and a hinterland terminal forwarding goods in containers. There are also other operators that have spot business in this region their market share is approximately 5 % of the overall quantity of freight. Most of these are dedicated trains of one specified client with the estimated frequency of one train per week. The third market player, the former Hungarian incumbent railway undertaking Rail Cargo Hungaria covers nearly 30 % of the total rail freight volume in import, export and transit. This quantity comes from single wagon loads in the region where the wagons are loaded directly at the factories with direct rail connection and assembled into trains at marshalling yards. Most of these single wagon volumes are bulk, steel products, construction materials, 8 Source: KTI 7

8 cars and car parts and different consumer goods loaded in different kinds of open and closed normal and special wagons except for containers. There is no rolling highway (RO-LA) connection to the ports from this area. The reason is on the one hand because there are no traffic restrictions for road transit in the EU countries like in Switzerland; and on the other hand due to the lack of RO-LA terminals and demand. 3 Railway infrastructure The SETA corridor starts at the triangle of Vienna/Bratislava/Sopron and ends at Rijeka/Koper/Monfalcone (figure 3). 3. Figure: SETA rail corridor for passenger and freight transportation A railway undertaker running freight trains for the loading industry is obliged to pay infrastructure usage fees to the infrastructure manager. Other extra costs occur due to usage of the rolling stock (locomotives and railcars) and additional services of infrastructure managers (e.g. brake tests, technical inspection of railcars, etc.). All these costs together determine the market price to be offered for the loading industry. The railway infrastructure also determines the maximum weight of trains and axle load per wagon, train length as well as mode of traction (diesel or electric) which influences decision makers concerning the use of rail services. The most important characteristics of the present infrastructure are summarized in table 2. Based on the present state of infrastructure the heaviest possible train with one locomotive on the SETA corridor would weigh gross tons to Rijeka and Koper whereas only

9 gross tons to Monfalcone. Using 2 locomotives in some sections in Hungary freight trains with 1520 gross tons to Slovenia and with 1719 gross tons to Croatia are possible. Due to some non-electrified sections and different electrification systems 2-4 locomotive changes are necessary depending on the final destination. After GYSEV took over some railway lines in Western Hungary in October 2011 modernization plans were presented that include new train safety and signalling systems, electrification as well refurbishment of tracks. The objective of the company with these plans is to develop a better railway connection in this region both for passenger and freight transportation. This requires electrification, upgrade of the infrastructure on the one hand and modernization of the rolling stock on the other hand. Only with electrifying the railway lines a cost cut of 20% in Hungary is possible, which would reduce the total cost of train forwarding along the whole corridor by 8-10 % and it would increase competitiveness against other transport modes. Slovenia is also planning reconstruction works including the electrification of the Hodos Pragersko line by After the implementation of these plans, both Koper and Monfalcone in Italy can be reached by electric locomotives. In Croatia, the main line between Rijeka and Koprivnica border is electrified. Electrification systems also vary between countries. In Hungary and Croatia a system of 25kv/50Hz is installed, while Slovenia and Italy has 3kV AC. As the signalling systems vary from country to country, railway undertakings can choose either to purchase expensive multi-system locomotives and equip them with different train control systems or change locomotives using the existing equipment at border crossings. As in Eastern Europe the handover procedure of trains between railways in the cross-border stations is only partly based on mutual trust, railways calculate on SETA corridors with a train check time of 3 hours extra. During the stops the locomotive change will be done within the cross-border technology time. In conclusion, the electrification of the SETA railway sections would offer a 4-hour reduction in travel time per train and direction, which is not significant but notable. Travel time reduction has more impact on passenger transport. To set the maximum parameters of a freight train running along the SETA corridor infrastructure along the whole route has been analysed with the following output: 9

10 Line/Country Electrified Nr. of tracks Max. speed (kph) Distance in km Max. train length in m Axle load Max. gradient Max. gross tons of trains Hungary Sopron Szombathely Yes ,0 600 D Rajka Mosonszolnok Yes ,6 600 D Mosonszolnok Csorna No ,4 600 D Szombathely No ,2 600 D ( ) Zalaszentiván Hodos Yes ,4 600 D Zalaszentiván Nagykanizsa No ,0 600 D Nagykanizsa Gyékényes Yes ,7 600 D határ Croatia Koprivnica Dugo Selo Yes ,1 362 D Dugo Selo Zagreb Yes ,0 362 D Zagreb Hrvatski Leskovac Yes ,4 362 D Hrvatski Leskovac Lokve Yes ,3 362 D Lokve Rijeka Yes ,3 362 D Slovenia Hodos Pragersko No ,0 500 D Pragersko Divaca Yes ,4 500 D Divaca - Koper Yes ,1 500 D Divaca Sezana/Villa Yes ,2 500 D Opicina Italy Sez./Villa Op. Monfalcone Yes ,1 500 D4 n.a Table: line characteristics 9 Axle load classifications: A: 16 gross tons/axle; B: 18 gt/a; C: 20 gt/a; D: 22,5 gt/a 10 Meter load classifications: 1: 5 gt/meter; 2: 6,4 gt/m; 3: 7,2 gt/m; 4: 8gt/m 11 with 2 locomotives 10

11 4 Industry along the SETA corridor The SETA project does not focus on establishing a detailed database of industrially that would provide demand along the corridor. We think it is, however, necessary to give a brief overview of economic actors that could induce demand for rail freight transport to/from the Adriatic ports along the SETA corridor. The following industries produce large quantities of products that could potentially be transported by rail: Poland: metals and mining industry export to ports and to the region automotive industry (GM: Gliwicze, Fiat: Tichy) export to the region chemical industry export and import from/to all over the world Slovakia: automotive industry (VW: Bratislava, Kia Motors: Zilina) import and export from/to all over Europe and overseas electronics industry (Samsung, Sony, Whirlpool) export and import from/to all over the world Czech Republic: automotive industry (Skoda) import and export from/to whole Europe and overseas metals and mining industry (Ostrava) export to whole Europe Hungary (Western Hungarian region): automotive industry (Audi, GM) export of cars to all over Europe and motors to all over the world; electronic industry (GE, Huawei) - import and export from/to all over Europe and overseas; household products industry (Samsung, Whirlpool, Bosch) - import and export from/to all over Europe and overseas; 5 Survey of the industry and rail forwarders A questionnaire has been sent out to 46 transport operators mainly in Hungary, Austria, Slovakia, Poland and Czech Republic but also from other countries to get a more detailed picture of the sector and their preferences. The survey consisted of 22 questions about the activity of the companies in the region, comparison of rail-road activities, question related to the wagon fleet, expectations concerning train frequency, flexibility, tracking and tracing, transport time and additional services. The response rate was 31.1 %. The survey has not 11

12 been sent out to the named operators in chapter 2.3. (AK/SKD, Metrans and RCH) as they are intramodal competitors in which case it s not expected to receive any answer. Based on the replies most companies are active in this region and their modal split share in freight transport is at estimated by 20% that is almost equal to the EU-27 (18%). Although the SETA countries have a rail transport share of 31% due to the high share of rail transport of raw materials and the Adriatic ports have an extraordinarily high rail transport share of the compared to other ports within Europe. Only 23 % of the operators in the region own wagons, which means they either use the services of incumbent railway undertakings in single wagon load and blocktrain services or they rent the wagon fleet to run business with the national or private railways. The answers point out that with higher weight per loaded units (wagons, containers) the competitiveness of rail transport increases in both single wagon load and full loaded train services. It is the incumbent railway companies that bear the risk for trains assembled of single wagon loads in marshalling yards (none of private operators cover single wagon load network within Europe). Therefore transport operators have to pay higher transport prices to compensate this risk of the railway undertakings. In case of full loaded trains by one consigner the loading industry or operator bears the risk of capacity utilisation for a more sustainable market price of transport. The acceptable market price varies between 0.8 and 1.2 EUR/km in general which is competitive with road transport prices. To establish a new railway connection also other key figures are very important for the loading industry like train frequency. 3 regular connections per week in both directions are requested with a fixed timetable and information upon departure, arrival, position of commodity and delays. The SETA project is also concerned with a planned and tested information system for operators; forwarders and the loading industry (see detailed information in WP 6.1.3). Besides price, reliability and information flow transport time is very important especially for commodities destined for ports that need to reach a vessel's departure. For the existing transports the train departure time from terminals/ports are customized to vessels arrival and departure time. Transit times between 20 and 30 hours from the northern Adriatic ports to the Central European region (Sopron, Slovakia and South Poland) are acceptable. 6 Business cases During the SETA project period, negotiations have been started with different operators, forwarders and private railway undertakings to create a currently non-existent freight connection between the Adriatic ports and hinterland. 3 different proposals will be presented below. 12

13 6.1 Regular container train service between ILC Sopron and Rijeka or Koper with combined transport operator MSC Introduction MSC Mediterranean Shipping Company S.A. with headquarters in Switzerland provides a service network with own offices throughout the world as an independent private company operating 450 container vessels. The company is active on 6 continents calling at 316 ports through 200 direct and combined weekly liner services with established agencies to improve and control the quality of service. GYSEV CARGO and MSC Hungary Ltd. started negotiations in order to create a regular train service between the Western Hungarian region and the Adriatic ports of Rijeka or Koper. Basis for the quantities would be delivered from the industry within a circle of approx. 100 km with centre Sopron from 37 companies. Related the company size 3% of them are small enterprises, 40% medium-sized enterprises with employees between 50 and 250 and 57% are large companies. Producers vary from the automotive industry to food industry in 21 different industrial branches % of the companies have already existing traffic or direct contact to MSC the rest are new companies for them. MSC estimated its transport volume by approximately 1 train per week, which is not enough as regular basis for a port-hinterland connection for the optimal transport quality. To reach the critical mass a core business is necessary with a volume of 1 trainset per week, which can only be guaranteed by large-scale industry (e.g. Audi or General Motors). 4. Figure: Routes of the services proposed for business case 1 13

14 6.1.2 Competition Product quantities distributed by small- and medium-sized enterprises to/from this region are mainly smaller quantities preferably transported on the road due to the flexibility, short transport time and affordable market prices. As the average modal split figures in Europe demonstrate rail is here in direct competition with the road on the one hand and with other transport routes (e.g. via Nordic Ports) on rail and road. According to an unofficial survey of GYSEV CARGO of the market, the most important factor for decision making in favour of a transport mode is the price weighted with an estimated importance between % 12 to other factors. Since the crisis started in 2008, road transport has been increasing its share of palletized commodities as railways have been losing quantities in single wagon load for both conventional and combined transport. Some of the reasons are better quality and reliability of road transport and primarily the flexible pricing policy of road hauliers while railways operate mainly with tariffs set for yearly basis with a low willingness of changing prices within the period. Railway operators say there is a higher competition for transports between ports and areas with high population and concentrated presence of industry. It s because at existing higher transport volumes more operators see their chance ot operate a successful transport connection. Another competition field between the railway and road is transport time and reliability. In case of daily train departures the railway is competitive. The disadvantage in this case is that in most of cases the consignee of the goods is not located at the terminals so the last mile by road is necessary with an extra handling that incurs higher costs and possibly longer transport time Sales and marketing concept As this is a new product between the Adriatic Ports and ILC Sopron, an intensive marketing campaign is necessary to build up the connection. First of all it is important to find out about the region s industry with the most important export and import destinations, existing freight flows and competition (e.g. transport mode, prices, reliability of existing transports etc.). Within the SETA project, transnational dialogue groups have been organized to invite the loading industry first to inform them about the planned logistics concept and to introduce them to the partners in the supply chain. It s necessary from service provider point of view to have the prices, timetable studies, planned departures, complete service range and distribution plans before organize meetings with the role players.. The approximate start of the demonstration train shall also be communicated to the loading industry to provide information for transport planning. Based on the practical experience the attendance of the loading industry at such meetings is very low. Only 10% of the invited companies participated at a meeting in Sopron in April Bilateral meetings between the 12 Based on practical experience of the editor 14

15 loading industry and the service providers are better marketing instruments to get information about the loading industry and to offer them a tailor-made solution for their needs. MSC and GYSEV CARGO carried out a tour of potential companies during the autumn of 2013 to collect goods at least for one demonstration train and hopefully for a regular traffic between the Adriatic Ports and ILC Sopron Logistics concept The logistics concept is built on to the services of Adriatic Ports, railway undertakers and ILC Sopron including handling of containers, making (a) blocktrain(s), transport of trains, antenna-like distribution, customs issues, empty logistics of containers and on other required logistical solutions. As at the moment the project investigates two possible alternative port destinations the logistics concept has two possible routes marked with A and B described below. A. ILC Sopron Port of Koper connection The logistics service provider at the Intermodal Logistics Centre in Sopron is GYSEV CARGO on the infrastructure of GYSEV with a full range of services such as: receiving and forming complete trains shunting activities in the logistics centre handling of containers depot of containers trucking services transport documentation customs services transhipment truck-wagon and v.v. storage of palletized and heavy project commodity commissioning services container cleaning and repair These value added services are necessary to offer a reliable service on the market. Containers to be loaded are provided by MSC (as possible partner) and other equipment owners. For optimal capacity utilisation 20 pieces of 4-axle flat wagons will be used with 60 (3 TEU) loading capacity each suitable for 20 and 40 containers provided by GYSEV CARGO. The maximum gross weight of the train is approx tons and the maximum length is 400 meters. One of the wagons is equipped with a GPS device for tracking and tracing as foreseen in Work Package within the SETA project. Traction of the train in Hungary is provided by GYSEV CARGO while in Slovenia either by SZ (Slovenske Železnice d.o.o.) or Adria Transport, which is a Subsidiary of Port of Koper. The transport time has been estimated at 20 hours with locomotive changes in Szombathely, Zalaszentiván, Hodos and Pragersko towards Koper. After electrification of the whole SETA railway corridor in both 15

16 countries transport can be organized with one locomotive change only. Shunting activities at the port and handling of containers will be provided by the Port of Koper. Transport documentation will be prepared either by GYSEV CARGO or by the Slovenian transport provider depending on the train direction. Customs formalities must be arranged by the exporter/importer. B. ILC Sopron Port of Rijeka connection The logistics service provider at the Intermodal Logistics Centre in Sopron is GYSEV CARGO on the infrastructure of GYSEV with a full range of services as mentioned above under point A. Containers to be loaded will be provided by MSC (as potential partner) and other equipment owners. For optimal capacity utilisation 20 pieces of 4-axle flat wagons will be used with 60 (3 TEU) loading capacity each suitable for 20 and 40 containers provided by GYSEV CARGO. The maximum gross weight of the train is approx tons and the maximum length is 360 meters. One of the wagons is equipped with a GPS device for tracking and tracing as foreseen in Work Package within the SETA project. Traction of the train in Hungary is provided by GYSEV CARGO while in Croatia by HZ Cargo. The transport time has been estimated at 20 hours with locomotive changes in Szombathely, Zalaszentiván, Gyékényes and in Zagreb towards Rijeka. After the electrification of the Zalaszentiván-Nagykanizsa section in Hungary (operated by MÁV) transport can be organized with one locomotive change only. Shunting activities in Rijeka will be organized by HZ Cargo, while handling of the containers will be carried out by Adriatic Gate Container Terminal. Transport documentation will be prepared either by GYSEV CARGO or by HZ Cargo depending on the train direction. Customs formalities must be arranged by the exporter/importer Feasibility analysis and benchmarking The most important factor in the decision making of clients about the mode of transport is price. Therefore it has to be competitive with road transport and in some cases short-sea shipping. Since the economic crisis road hauliers have been offering prices as low as approximately 1.10 EUR/km between Sopron and Koper and Rijeka for a round trip, which equals 1,200 EUR for a 40 or two 20 containers. Calculated with the smaller capacity (1.300 gross tons) a train can transport 20 wagons with 30 TEU. So the targeted market price is about 18,000 EUR for a round trip including commercial and technical terminal activities on both ends, antenna-like distribution from/to ILC Sopron and use of wagons. Without the electrification of the SETA corridor and internalisation of the external costs of road transport (e.g. higher road usage fees) this price is hard to compete with. But there are also other factors apart from the price, which have an influence on decision making. The most important of them are summarized as a benchmark in the chart below measured from 1 to 5 for the SETA Corridor. 16

17 Measures: 1 bad 2 weak 3 average 4 good 5 excellent Road Factor Importance 13 Rating Weighted Rating Weighted Price Security Information flow Transport time Logistics service availability Total: Rail 3. Table: Benchmark for case study 1 In general, security on rail has better performance than on road because of two significant factors: lower accident rate on rail than on the road; door-to-door loading of containers onto railway wagons can prevent thefts. Information flow is better organized in road transport as there is one-to-one communication directly between the consigner and consignee about one transport unit. Railways, however, transport whole trains with several different consigners, in the best case with one operator. It is also common to use the service of different railway providers in the different countries due to price and quality reasons. Experience shows that in case of block trains by loading and with a proper communication matrix between the participating key players the communication in the rail sector has been improving since the opening of the freight rail market with the emergence of private railway undertakings Summary and conclusions A transport time of the train from ILC Sopron to an Adriatic port would be approximately 20 hours with at least 2 locomotive changes with the current infrastructure and traction possibilities. After electrification such traffic can be organized with maximum 1 change at the border station. This would result in a transit time reduction of about 4 hours. In this case, however, the price advantage of electric traction against diesel traction is more important. (In Hungary the price difference is about % depending on the payload of the train.) Based on the Hungarian infrastructure prices and if presuming the same 13 Weighting based on experts opinion 17

18 conditions for Slovenia, a price advantage of up to 15 % to Koper and up to 10 % to Rijeka is reasonable. 6.2 Regular transport of cars between Slovakia (Devinska Nová Ves) and Port of Koper with car transport owner STVA Introduction Volkswagen Group produces cars in Devinska Nová Ves. The main logistics provider for finished cars and inbound car parts is Volkswagen Logistics in Germany. The logistics company organises inbound overseas container transport via Hamburg, and outbound transport (finished cars) via Bremerhaven. As a case study for an alternative route different railcar 15 owners were requested to deliver solutions via the Port of Koper. STVA as wagon owner made an offered directly to Volkswagen based on train and wagon prices incl. intermediate HUB function in Csorna to optimize loading capacity along the SETA corridor. Final quantity in 2014 is about cars of Volkswagen Touareg and Audi Q7 which is equal to a quantity of 3 trains per week. 5. Figure: Route of the service proposed for business case 2 14 STVA: Société de Transports de Véhicules Automobiles, a subsidiary of SNCF was founded on 25 October 1950 with its initial task being the transport of motor vehicles by rail Source : 15 Railcar: railway wagons for finished car transport 18

19 6.2.2 Competition In the second case study rail competes with road transport towards the Port of Koper but it also competes with other transport routes via Northern European ports. As car production has been cut back since 2008, competition has also increased as transport operators have surplus capacity available. Road hauliers in general act much quicker and more flexibly in reaction to market changes compared to railway companies. This is the reason why a shift from rail to road occurred in short and medium distance transport (e.g. in the transport of cars from Hungary to Italy) Sales and marketing concept This is a classic sales situation between service provider and consigner with low value added services compared to case study 1, so the price must be defined taking into consideration the market needs and prices of the competition (road transport). The negotiation process is usually quite short with a few phone calls and bilateral meetings between the first inquiry and the transport order Logistics concept The logistics concept is basic and includes the provision of wagons in shuttle service. As the roundtrip transport time is approximately 5 days including loading and unloading, 3 trainsets are required. As the weight of a complete train is low, train length determines the transport quantity. STVA uses 4-axle railcars with a length of 27 and 31 meters. Maximal train length is 500 meters excluding the locomotive, so a trainset consists of either 18 wagons 27 meters each or 16 wagons 31 meters each. Combination between the two different wagon types would lead to increasing loading time due to the different wagon parameters. The railway service providers would be ZSSK Cargo and SZ (Slovakian Railways) on behalf of GYSEV CARGO, which is responsible for organizing the transport from departure till arrival Feasibility analysis and benchmarking The most important factor in the decision making of clients about the mode of transport is price. Therefore it has to be competitive with road transport. Since the economic crisis road hauliers have been offering prices as low as approximately 1.20 EUR/km between Bratislava and Koper which equals 750 EUR/truck (one way) transporting max. 6 SUV s 16 equal to a price of 125 EUR/car. Calculated with the smaller capacity a train can transport 196 cars. So the targeted market price is at about 25,000 EUR for a round trip including commercial and technical terminal activities on both ends. Without the electrification of the SETA corridor and internalisation of the external costs of road transport (e.g. higher road usage fees) this price is hard to compete with. But there are also other factors apart from the price, which have an influence on decision making. The most important of them are summarized as a benchmark in the chart below measured from 1 to 5 for the SETA Corridor. 16 SUV: Sport Utility Vehicle 19

20 Measures: 1 bad 2 weak 3 average 4 good 5 excellent Road Factor Importance Rating Weighted Rating Weighted Price Security Information flow Transport time Logistics service availability Total: Table: Benchmark for case study 2 Rail In general, security on rail has better performance than on road because of two significant factors: lower accident rate on rail than on the road; due to low difference between loading row and smoother suspension system of trucks damages happen more often during road transport. As this is confidential information it can be only estimated that the chance of damages to cars transported on trailers is 10 times higher than by transport by rail. On the other hand, there is a chance of vandalism of cars during railway transport by young people throwing stones at trains passing by (generally between the ages of 14-20). Information flow is better organized in road transport as there is one-to-one communication directly between the consigner and consignee about one transport unit. Even though there is only one consigner in the rail transport, the main railway undertaking is also responsible for communication in Slovakia and Slovenia. Experience shows that in case of block trains by loading and with a proper communication matrix between the participating key players the communication in the rail sector has been improving since the opening of the freight rail market with the emergence of private railway undertakings Summary and conclusion In this business case, rail could be competitive with the road. But as long as Volkswagen Logistics uses the Northern ports due to better service performance and probably more affordable prices considering the quantities being shipped, the primary decision is not about mode of transport but the route. Northern ports are in some areas over the top of their 20

21 optimum logistics capacity, key players in the loading industry have to make their own decision about the logistics chain and the routes they prefer. 6.3 Polish coal export from Poland to the Port of Rijeka with PKP International Introduction Poland exports black coal from its mines to overseas (for example to the Port of Haifa). The bulk transport of raw materials in general is well suited for railways. Hereby the distance of railway transport is an important factor as short sea shipping prices from Polish ports are currently low. Due to the relatively low value of coal (approx. 50 EUR/metric tons 17 ) transport time is not the most important factor. 6. Figure: Route of the service proposed for business case Competition Coal in big quantities and on long distances is transported either directly by sea or as a combination of rail and sea. In this case the two competing routes are the Gdansk Haifa direct short-sea shipping route and the rail-sea combined route from Poland via Slovakia, Hungary and Croatia to the port of Rijeka from where coal would be shipped to Haifa after transhipment. The first route is very long because the ships need to circumnavigate Northern and Western Europe. The route via the port of Rijeka could, however, offer considerable savings in the distance travelled

22 6.3.3 Sales and marketing concept This is a classic sales situation between service provider and consigner with low value added services compared to case study 1, so the price must be defined taking into consideration the market needs and prices of the competition (road transport). The negotiation process is usually quite short with a few phone calls and bilateral meetings between the first inquiry and the transport order Logistics concept The logistics concept is basic and includes the provision of wagons by PKP CARGO International in shuttle service. As the roundtrip transport time is approximately 10 days including loading and unloading 10 trainsets are required with daily departure. As the weight of a complete train is very high, it determines maximum capacity. For trains heavier than gross tons an extra locomotive is needed in Hungary between Szombathely and Zalaszentiván. The maximum gross weight on the Croatian stretch is 1719 tons. PKP CARGO International uses 4-axle Ea type railcars with a length of 15 meters. The maximum train length is 362 meters excluding the locomotive, so a trainset with 80 tons per wagon can forward maximum 21 loaded wagons with a length of 315 meters. The railway service providers would be GYSEV CARGO and HZ CARGO on behalf of PKP CARGO International which is also responsible for organizing the transport from departure till arrival Feasibility analysis and benchmarking The average sea transport price between the ARA 18 ports and the Port of Constanta is about EUR/metric ton 19 for the distance of approx. 1, nautical miles. Calculated at this price level the estimated transport cost between the Port of Gdansk and the Port of Haifa would be about EUR/metric ton for the 4,178 nautical miles. With the same calculation the distance between Port of Rijeka and Port of Haifa is 1,323 nautical miles with a transport cost of EUR/metric ton. The price difference between the two sea routes is EUR/metric ton. As exact costs of railway transport via Gdansk is confidential information it s supposed that the price difference covers the longer railway route with lower maximal gross tons per train.. But there are also other factors apart from the price, which have an influence on decision making. The most important of them are summarized as a benchmark in the chart below measured from 1 to 5 for the SETA Corridor. 18 Antwerp, Rotterdam, Amsterdam

23 Measures: 1 bad 2 weak 3 average 4 good 5 excellent longer short sea transport longer rail transport Factor Importance Rating Weighted Rating Weighted Price Security Information flow Transport time Logistics service availability Total: Table: Benchmark in case study 3 While the price is in favour of sea transport, journey times on the rail section between Poland and Rijeka are much faster, although it is not a primary concern in case of bulk cargo. Other factors as security, information flow and service availability are in this case less important Summary and conclusions As the price is almost equal for both routes, decision about the route is a political and strategic question Transport within Poland needs shorter time and less wagon fleet due to shorter transport time. It has an impact on such kind of additional costs which can t be estimated easily and influence the decision. Such extra costs are lower wagon usage charges, less infrastructure usage prices, traction prices, and less repair and maintenance costs for wagon usage. 23