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www.ara.net.au ABN 64 217 302 489
Getting more containers on rail
Bryan Nye OAM- CEO AustIntermodal 10 September 2014
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Agenda
1. Current state of rail 2. Challenges of getting more freight on
rail and opportunities 3. Solutions
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Current State of Rail Freight
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6TH Largest Rail Network Globally
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Source: Royal Bank of Scotland Transport Equities Update (2012)
Grains 3-4%
Bulk Commodities 93 0 million tons
Non-Bulk Commodities 20 million tons
Rail Freight
Rail Freight moves nearly 1billion tons of goods p.a. (2011)
Coal Ore Sugar Bauxite Grain Other Bulk
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Rail freight – The big picture 2010/11 2011/12 Change Ore 435.08 496.25 14.06% Coal 305.06 306.77 0.56% Sugar 25.23 25.43 0.79% Bauxite 17.79 17.35 -2.47% Other Bulk 56.76 61.52 8.39% Non-Bulk 19.58 22.32 13.99% Total 859.5 929.64 8.16% * Numbers in million tones.
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Rail Industry: Size • Labour force: 44,210 people
(+70,000 working in industries supporting rail)
• Investment commitments in rollingstock and track $36 billion
• Track 44,262 km in Australia • Over 2,276 locomotives and 32,000
wagons and carriages
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Key Freight Challenges and Opportunities
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Long term challenges • Fast growing economies in Asia will increase demand for Australian commodities yet we see
rail freights poor market share on North- South corridor- i.e between Brisbane, Sydney and Melbourne
• Ongoing demand for mining and agricultural products yet we see decreasing market share of movement of agricultural products by rail
• Depleting local oil reserves and the volatile price of oil
• Climate change can hinder the movement of freight by compromising critical freight infrastructure
• Environmental concerns such as heavy reliance on carbon intensive sources
• Australia’s population growth is expected to reach 30 million by 2030
• Fiscal constraints and declining investment in rail freight infrastructure by the Federal Government
• Regulatory burden which disadvantages freight rail
• Technological developments and innovation will create opportunities to drive growth, efficiency and productivity yet we see aging locomotives
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Rail Market Share of Interstate Freight Movements
TARCOOLA BROKEN HILL
BRISBANE
ALICE SPRINGS
ADELAIDE
DARWIN
PERTH
SYDNEY
MELBOURNE
90%+
80%+
80%+
5% 5%
21% 5%
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Trends In Modal Share – Road vs Rail
Key questions: • Is inter-city rail freight in
terminal decline, or can it make a significant contribution to the national economy?
• If it can make a significant contribution, what in broad terms is required to make this happen? 20%"
40%"
60%"
80%"
100%"
Road!
Rail!
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Rail’s share declining in some products
Rail’s share of agricultural products has significantly decreased in some markets (source- Graincorp submission to QLD Parliament)
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Some lines need work!
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Locomotive Fleet
0
20
40
60
80
100
0
100
200
300
400
500
600
less than 5 years
6 to 10 years 11 to 15 years 16 to 20 years 21 to 25 years 26 to 30 years more than 30 years
Cum
ulat
ive
tota
l (%
)
Num
ber o
f loc
os
Diesel
Electric/ XPT
Average age Australia 21 years
Average age USA 8 years
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Solutions and New Opportunities
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Solutions for rail freight • Industry working as one • Government to adopt long term, nationally consistent planning for freight rail
infrastructure to meet growing freight demand
– The completion of the Inland Rail project must be used to develop further opportunities for freight rail along the corridor
– Opportunities to expand short haul rail operations must be explored and encouraged – A national intermodal strategy must be developed – Untangling freight and passenger networks must be a priority – Duplication to enhance freight transit must be promoted – Port shuttles in Melbourne must be encouraged – Increasing the productivity of rail through heavier track and longer trains and passing
loops must be promoted
• Key markets such as agriculture must be developed • Regional development though rail and intermodal activity must be progressed • Government to explore alternative mechanisms to invest in infrastructure • Appropriate access, investment and charging for heavy vehicles • Better and nationally consistent transport regulation
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Solution: Long term, consistent planning
• Government to adopt long term, nationally consistent planning for freight rail infrastructure to meet growing freight demand
– The completion of the Inland Rail project must be used to develop further opportunities for freight rail along the corridor
– Opportunities to expand short haul rail operations must be explored and encouraged
– A national intermodal strategy must be developed – Untangling freight and passenger networks must be a priority – Duplication to enhance freight transit must be promoted – Port shuttles in Melbourne must be encouraged – Increasing the productivity of rail through heavier track and
longer trains and passing loops must be promoted
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Inland Rail: TRANSFORMING the transport sector
• Increase rail’s reliability and efficiency – double stacking, longer trains
– agricultural benefits- terminals etc.
– avoids Sydney bottlenecks
– 2m tonnes of freight each year simply pass through Sydney
– reduce travel times by up to 7hrs, train speeds of 110kmph
• Increase rail’s market share – 80% on Brisbane - Melbourne
– up to 25% for shorter legs
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Inland Rail – progress • $300m currently in Federal budget from 2014/15 for pre
construction works – A 10 year timeline for construction from 2016-2026
– Stated link to a Port of Brisbane proposed new corridor through Brisbane.
• Critical element is the tunnel through the Toowoomba Range and route down to Port of Brisbane
• Remainder of funding to be determined
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Inland Rail- Implementation Group
• Announced November 2013
• First priority is to settle alignment and reserve corridor.
• Chaired by former Deputy PM John Anderson
• VIC, QLD, NSW Governments each have a representative on the group, as does the ARTC
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Short haul rail
• Most freight moves less than 500kms • Strong fundamental case for support
– Congested freight corridors & high density of population in east coast region in particular
– Labour / Fuel relative growth – Growth in projected freight task
• Reality – Rail is no longer present in many of the short haul
markets • Why / What is holding the industry back?
– History of underinvestment, lack of innovation, poor labour practices, bureaucracy at all levels, poor road interfaces
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US & Canada • Vertical integration above/below rail • Staggers Act • Short line rail industry vibrant 550+ operators • Enormous variation in size and operational
configuration – from mum and dad one loco shunting operators through to public companies
• Strong secondary market for rail assets • Regulatory environment tailored to environment • Service culture and community relationships
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Transloading & Expressway
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UK – success of short haul
• Success of privatisation • Tailoring operations to environment -
passenger and freight cohabitation • Investment in technology • Secondary market for assets • Focus on road rail interface and
customer service
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Europe – success of short haul • Success of co-operation across nations • Common standards to enable interoperability • Understanding of environmental and social
impacts • Secondary market for assets • Focus on road rail interface in particular
terminals • Over 300 rail operators in Germany alone
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Issues in Australia
• Lack of innovation and investment • Lack of competition • Regulatory burden
– Comparison to road freight industry is stark
• Cultural separation of rail and road industries
• Lack of secondary market for rail assets • Limited access to terminals
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MENA
Sub-Saharan Africa
Asia
Sub-Saharan Africa
Asia (ex-China)
45% 76% 7% 100% ??% 57% 10%
Imports % of consumption
Sources: USDA, US Wheat Associates
Middle East North Africa
Projected World Wheat Imports Growth to 2050
Solution: Key markets such as agricultural products must be developed – opportunities around the world
27
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Rail is the ‘bottleneck’
28
All figures refer to Eastern Australia Source: Graincorp, 2014
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Costs of grain production, Australia $/t, annual average, 2010–11 to 2012–13
Source: Based on ABARES farm survey data
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1. Cost
$10/t
Incremental cost to growers ~$180m pa
Source: Graincorp, 2014
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250+ road carriers
Rail
15 Exporters
Owners at every site +50% 1.6 grain
swapped changes in
order
40% 60% trains
to plan trucks
against slot
ONLY
Logistics complexity
Multiple carriers
3 gauges 5 rail providers
ONLY
17+
100 Domestic
Multiple grain owners 2. Complexity
Source: Graincorp, 2014
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90% Export
50% Export
2004-06 2012-13
2mt RAIL
RAIL
More trucks = • Higher transport cost • Delivery complexity • Less export capacity
Plus community • Road repair costs • Reduced road safety
Bulk exports
3. Capacity
Source: Graincorp, 2014
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Solution: Government to explore alternative mechanisms to invest in infrastructure
• Along with much publicised scrapping of federal funds for passenger rail, freight rail funding is also in decline.
• The partially funded Inland Rail is arguably the only major new federally funded infrastructure project on the horizon.
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Funding challenges of Rail
• Almost every state has a different ownership structure for rail freight lines
• Differences within state networks also (eg John Holland and ARTC in NSW, Aurizon and QR in QLD)
• New project funding hard to ‘sell’ to politicians. Maintenance funding even harder.
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Asset recycling fund
• 15% incentive to invest proceeds from recycled assets back into infrastructure > A much needed micro-economic reform to address debilitating infrastructure bottlenecks, stimulate construction and drive real activity in the economy.
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Variability of Agricultural Production
Source: ABARE 2010
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
kt
Variability of production
New South Wales
Western Australia
Victoria
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Solution: Appropriate access, investment and charging for heavy vehicles
• Levelling playing field, not subsidising
• Supporting costs of maintenance and new infrastructure
• Transport Service Contracts in Queensland are a positive small scale example- providing support for livestock transportation
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Equity of Pricing
• A 36 tonne truck does as much equivalent damage to roads as 9,600 cars.
• Yet weight is not a factor in what road freight is charged, in contrast to rail freight.
• Proper road pricing not a new concept. Even Adam Smith advocated road pricing in 1776! From ‘The Wealth of Nations’: “When the carriages which pass over a highway or bridge…pay tolls in proportion to their weight or their tonnage, they pay for the maintenance of those public works exactly in proportion to the wear and tear which they occasion of them. It seems scarce possible to invent a more equitable way of maintaining such works”.
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The bottom line
Inland Rail remains non-‐compe11ve
if truck charges are subsidised on
compe1ng highways
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Solution: Reduced regulatory burden for rail
• Environmental and emissions standards and measures which fail to look at the big picture are a risk to the rail industry
• The newly established National Rail Safety Regulator is a win for the industry, but some states are still yet to sign up
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Action • Industry working as one
• Government to adopt long term, nationally consistent planning – Complete the Inland Rail project – Expand short haul rail – A national intermodal strategy – Untangling freight and passenger networks – Duplication to enhance freight transit – Port shuttles in Melbourne – Increasing the productivity of rail through heavier track and longer trains
and passing loops
• Develop key markets e.g. agriculture • Regional development • Alternative mechanisms to invest • Appropriate access, investment and charging for heavy
vehicles • Better and nationally consistent transport regulation