The Port of Rotterdam is not really known as a rail port for container transport. The risk associated with starting a new rail connection is high and requires long-term commitment. Is there a way of accelerating this process and generating enthusiasm among more players for establishing such links?
Start of a New Shuttle Service
As soon as a provider takes the first step, he runs into a classical chicken-and-egg conundrum: a shipper has expressed interest, but does not want to make any commitments before a train is actually running. On the other hand, the provider only wants to start work on the project when there are commitments, because operating a train is expensive. For example: a shipper is only likely to commit at a frequency between A and B of at least 3 times per week. And the connection in fact only becomes an interesting proposition when the train makes the trip on a daily basis. Only then does rail transport become a serious competitor to road transport for a shipper. A train generally has an 88 TEU capacity. At a frequency of 3 times per week this represents an annual capacity of over 26,000 TEU. The fixed costs for maintaining the connection are high (lease and use of locomotive and wagons, and infrastructure costs). To put this in perspective: a round trip by a train over a distance of about 600 km costs approximately € 25,000. At a frequency of 3 times per week the fixed annual costs are almost € 4 million.
As a rule, the break-even point of a rail connection lies at around a utilisation rate of 80 percent. Because losses quickly rise when the train operates below this break-even point, the providers of the rail link are often only prepared to start up such a project when the train’s utilisation rate is 80 percent. However, a shipper wants security and is often reluctant to step on board before the connection has proven itself in practice. This is what I mean by a chicken-and-egg conundrum. The result is that work on starting up a new connection often requires extended lead times, because the financial risks are significant as the above-referenced example shows.
Scheduling and Organising the Link
Step two consists of applying for a time slot for running the train on the tracks. For international routes (and this generally applies to links originating from the Netherlands), this requires coordination with the infrastructure managers from other countries through which the connection is routed. To acquire the right to a favourable time slot means that the application must be submitted at the earliest possible opportunity. Generally this is 1.5 years prior to finalising the ultimate schedule. The first and second step could also be implemented in parallel. However, applying for a timetable time slot generally only occurs when there is a high degree of certainty about the start-up of the shuttle service. This does not mean that it is impossible to run a train in the intervening period, but a time slot that is not included in the railway’s timetable is generally not optimal.
Rail connections, as well as inland navigation links, provide increased market reach, which makes a port more attractive to shippers and freight warders. It should be evident that in order to stimulate the growth of the container volume passing through Rotterdam, and consequently the business sector in the Netherlands, it is necessary to accelerate the development of new connections. The time gains appear to be more evident in the first step, the business development process. Reducing or spreading the risk are potential solutions. This can be achieved in various ways:
Reduce risk by making use of a grant scheme. For example, the grant scheme ‘Bundling of Freight Flows for Transport by Rail’ was available from the Ministry of Infrastructure & the Environment last year. In addition, the Port of Rotterdam Authority recently introduced an incentive scheme for sustainable initiatives, such as transport by rail. However, grants are often scarce and offered for a limited time. Moreover, the application and administration of grants often require a significant investment of time.
Risks can also be reduced by making use of new sales channels, such as a website for booking container transport by train. This would make reserving a train slot as easy as reserving an airline ticket, and extend the business developer’s reach all at once.
Spreading the risk by getting multiple parties to invest in a new link offers greater security for the long-term. However, the involvement of multiple parties can also delay the process if they are unable to reach joint agreement. Clarity concerning everyone’s role and objectives are of crucial importance in this respect.
These are interesting options that are all being developed by the Port of Rotterdam authority for the purpose of accelerating the improvement of the port’s link with the European mainland. And they all represent wonderful opportunities for the business sector, wouldn't you agree?