17 October 2019

Inside the industry: Europe chugs towards new intermodal opportunities

Worldwide, many major economic regions rely on rail freight: In Australia and the United States, for example, rail is king, with a market share between 40 and 50 percent. But this is not the case in Europe, where for decades road networks have received a larger share of public investments and rail transport markets have been cut off. Today, the rail freight market share in Europe stands at meagre 17 percent. However, the signal for change has been set: by 2030, the European Union wants at least 30 percent of all cargo transported distances of 300km or more to go by train or inland vessel.

 

Switzerland has been the first European country to truly encourage the shift of freight from highways to railways, setting benchmarks for all other nations. As a result of innovative policy and new infrastructure, the country now boasts of an impressive 72/28 rail-road modal split for transalpine cargo.

But what does the future hold for the continual rejuvenation of Europe’s rail freight logistics system? The latest reports show rail facing momentary setbacks but steaming towards big gains. 

 

Swiss transport trends in 2019

Let’s focus on Switzerland. Over the last few years, the country has seen fewer trucks on the road, and this trend has continued throughout 2019. According to the recent report “Transalpine freight traffic through Switzerland” (Alpenquerender Güterverkehr durch die Schweiz, access here) by the Swiss Federal Office of Transport, the number of trucks crossing the Alps decreased by an additional 2.5 percent during the first half of 2019, marking the lowest level of transalpine trucking traffic seen since 1999.

But despite a decline in the number of trucks on the road, rail freight did not yet receive a boost. Throughout the first half of 2019, fewer goods were transported by rail in Switzerland. However, the sector was still able to maintain its market share of 71 percent.

At face value, the slump in rail freight may sound discouraging, but this short-term setback comes as part of a strategy for long-term success: the construction of the New Railway Link through the Alps (NRLA).

 

Work in progress

To further increase the volume of transalpine freight carried by rail rather than road, the Swiss Parliament has allocated CHF 990 million (894 million EUR) to create a four-metre corridor along the entire length of the Gotthard route. This expansion will allow for longer, heavier and higher trains. According to the Swiss government, freight trains up to 750 metres in length and weighing up to 2000 tonnes will be able to operate between northern Europe and Italy once this crucial north-south route is expanded, corresponding to a 30 percent productivity gain compared to today.

But the numerous measures to construct this four-metre corridor currently represent a big challenge for rail transport today. Rail traffic through the Alps is being restricted by the continuous construction on the tunnels along the Gotthard route, and as a result, transalpine traffic is not likely to meet the volumes achieved in 2018 by the end of this year. 

However, the infrastructure upgrade project is currently scheduled to be complete by 2020, and with the full commissioning of the NRLA, an additional 72 rail routes per day will be provided. Since the bulk of transalpine traffic for Switzerland consists of traffic to and from Italy, this expansion is expected to significantly contribute to Italy’s intra-EU trade as well as to Southern Gateway options for Swiss and Southern European seaborne freight. 

 

Political signals

To ensure railways are able to achieve their maximum potential, decisive political action is being planned in Switzerland. Across Europe, infrastructure charging between road and rail remains an important source of competitive disadvantage to railways, but now, the Swiss Ministry of Transport is preparing to lead the change for Europe. The Ministry not only plans to reduce route charges for trains, but also offer discount incentives for longer trains.

Additionally, the Ministry has expressed intentions to extend subsidies for combined transport beyond 2023, with the goal of increasing the market share of rail in transalpine transport.

These developments make it clear that the rail freight industry’s potential for growth has not been fully exploited; the European rail renaissance is only just beginning. If policymakers and industry leaders continue addressing the challenges facing rail, this mode of transport will continue to gain market share, and intermodal transport will finally be able to help meet the EU’s ambitious goals for modal shift.

 

This article is part of CS WINdow, Contship Italia Group's quarterly newsletter, featuring insights on the global supply chain, with a focus on European intermodal logistics. You can subscribe to learn more:

 

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