European Rail Freight Freefall Deepens
Journal of Commerce:" Jun 25, 2009
Bruce Barnard
London – The slump in European rail freight traffic that began in the final quarter of 2008 is deepening as major shippers slash production and shutter plants and trucks cut freight rates to boost their share of a shrinking transport market.
France’s SNCF, Europe’s second largest rail freight operator, said cargo volume in May was down by an average of 30 percent from a year ago, and auto, steel and coal traffic has halved.
Deutsche Bahn, Europe’s top freight railway, said traffic in the first five months of 2009 was 24 percent lower than a year ago, forcing the company to put 5,000 employees on short time working and idling 35,000 of its 120,000 freight cars.
UK rail freight traffic fell a more modest 8.6 percent in the first quarter, but the rate of decline has doubled since the final three months of 2008.
Steel shipments have tumbled by 50 per cent in the UK and maritime container traffic is down 16.3 percent, while coal shipments increased 8.6 percent in the quarter.
All four companies in the UK’s privatized rail freight market – DB Schenker, Freightliner, Direct Rail and GG Railfreight – have idled capacity and cut jobs in recent months.
The cargo slump, which shows no sign of bottoming out yet, will swell losses at SNCF’s freight unit to around $840 million in 2009 from $483 million last year, according to Pierre Blayau, chief executive of the state-owned company.
Blayau is due to present a plan to stem SNCF’s “financial haemorrhaging” which is likely to involve increased state aid. The company’s losses amount to a third of its revenues and over $60,000 for each of its 7,000 employees.
SNCF’s rates are between 15 percent and 30 percent below independent rail operators largely due to the fact that its employees have a much shorter working week and can retire earlier than private sector workers.
International rail freight has declined more than domestic shipments, reflecting the global slump in trade. Cross border container traffic in Germany fell by 15.8 percent in the first quarter while overall international traffic was down nearly 32 percent, according to the Federal Statistics Office.
Rail is also losing traffic to trucking companies, which have slashed rates across Europe in a bid to replace lost business and stem a wave of bankruptcies. Trucks had a 71 percent share of the German market, Europe’s largest, in the first quarter, while rail had under 18 percent.