Advisories ::
Europe View: Rail missing transport boom
Source: The JOURNAL OF COMMERCE ON-LINE
May
20, 2005
LONDON -- It
takes something special to miss out on the biggest boom in European
transport for decades, but that's what the continent's railways
are managing to do.
Truckers, container shipping lines, terminal operators, freight forwarders and customs brokers are cashing in on the record numbers of containers flowing through European ports, driven mainly by the explosive growth in China's foreign trade.
But the boom is bypassing a largely state-owned rail industry trapped in a spiral of declining market share and mounting financial losses. Rail's share of the EU freight market has plunged from over 20 percent in 1970 to 8 percent in 2000 and is still falling as it loses traffic to trucks, barges and increasingly to short sea shipping.
There have been signs in the past few months, however, that rail's decline has finally flattened out and the industry is poised to recover market share from rival transport modes, especially trucking which is facing a new raft of regulatory, fiscal and environmental burdens that threaten to blunt its competitive edge.
The East European countries that joined the EU just over a year ago are also shaking up the industry by privatizing their state-owned railway companies and opening up their networks to foreign private capital.
The industry is also on the verge of a once-in-a-life boost with the opening in 2007 of the Betuwe line, a $5 billion cargo-only rail corridor running from Rotterdam, the world's biggest port and Europe's leading container hub, to the rail network in Germany, the continent's biggest freight market.
Right now, a rail renaissance seems highly unlikely to those outside the transport sector. While shipping lines, terminal operators and logistics firms are racking up record earnings on the back of the China boom, rail is sinking deeper into the red. Deutsche Bahn, Germany's state-owned railroad, expects its cargo unit to lose over $230 million in 2005 compared with an
earlier forecast of a near-$250 million profit and is bracing for a $57 million loss instead of a targeted $320 million profit in 2006.
SNCF, France's state railway, has lost over $1 billion on freight in the past two years and recently secured approval from EU trust busters for a $1.5 billion government subsidy to turn around the perennially loss-making
unit.
Truckers, container shipping lines, terminal operators, freight forwarders and customs brokers are cashing in on the record numbers of containers flowing through European ports, driven mainly by the explosive growth in China's foreign trade.
But the boom is bypassing a largely state-owned rail industry trapped in a spiral of declining market share and mounting financial losses. Rail's share of the EU freight market has plunged from over 20 percent in 1970 to 8 percent in 2000 and is still falling as it loses traffic to trucks, barges and increasingly to short sea shipping.
There have been signs in the past few months, however, that rail's decline has finally flattened out and the industry is poised to recover market share from rival transport modes, especially trucking which is facing a new raft of regulatory, fiscal and environmental burdens that threaten to blunt its competitive edge.
The East European countries that joined the EU just over a year ago are also shaking up the industry by privatizing their state-owned railway companies and opening up their networks to foreign private capital.
The industry is also on the verge of a once-in-a-life boost with the opening in 2007 of the Betuwe line, a $5 billion cargo-only rail corridor running from Rotterdam, the world's biggest port and Europe's leading container hub, to the rail network in Germany, the continent's biggest freight market.
Right now, a rail renaissance seems highly unlikely to those outside the transport sector. While shipping lines, terminal operators and logistics firms are racking up record earnings on the back of the China boom, rail is sinking deeper into the red. Deutsche Bahn, Germany's state-owned railroad, expects its cargo unit to lose over $230 million in 2005 compared with an
earlier forecast of a near-$250 million profit and is bracing for a $57 million loss instead of a targeted $320 million profit in 2006.
SNCF, France's state railway, has lost over $1 billion on freight in the past two years and recently secured approval from EU trust busters for a $1.5 billion government subsidy to turn around the perennially loss-making
unit.
