According to the latest 2021 data, rail freight made up 19% of the land transport market in Germany. In Italy, it stood at 12.6%, in France at 10.6%, in Czechia at 22.8%, in Romania at 25.3%, in Poland at 22%, and in Hungary at 26.4%.
Leader’s Advice
Against this backdrop, the Baltic countries stand out significantly, with rail transport claiming a substantial share, sometimes even exceeding half of the market. This is particularly evident in Lithuania, where a remarkable 62.5% of goods were transported by rail in 2021, encompassing all cargo handled on land.
“Lithuania boasts a well-developed railway infrastructure, utilising both narrow-gauge and broad-gauge tracks capable of handling various types of wagons and all sorts of semi-trailers. Given the well-developed seaport infrastructure, some cargo is directly loaded onto wagons at ports, elucidating the prevailing situation,” explains Neli Karapetjan-Baranauskienė, Director of the Intermodal Services Department at Vlantana.
However, even in Lithuania, competing with road transport can pose significant challenges.
When it comes to those challenges, Karapetjan-Baranauskienė highlights the following:
- Long transit times.
- Unreliable schedules of train departures/arrivals, with cancellations or delays occurring for various reasons (e.g., roadworks, employee strikes, etc.).
- Lack of flexibility, making it difficult to alter the route in case of unforeseen situations; terminal opening hours sometimes limit delivery/collection times.
- Inadequate and restrictive infrastructure and a shortage of intermodal trailers.
How can countries increase the use of rail freight?
Neli Karapetjan-Baranauskienė from Vlantana says that first and foremost, there needs to be a shift from competition to collaboration. She wishes to see the establishment of working groups consisting of various institutions and specialists. These group could actively pursue the following tasks:
- Defining intermediate targets for individual countries based on the goals of the Green Deal.
- Assessing the condition of the railway infrastructure in the country, along with the schedule and costs of modernisation and improvements.
- Evaluating the types, quantities, destinations, and modes of transport (sea, rail, air, or road) for domestically transported and transit cargo, identifying those with the greatest potential.
- Assessing whether servicing other carriers, not limited to craneable trailers, would help increase the volume of cargo transported by rail.
- Mapping out the most important and valuable routes.
- Building relationships with transport and logistics companies as well as manufacturers to analyze their needs and expectations.
- Collaborating with the government of a given country to obtain support, assistance, and grants for project development.
- Collaborating with other countries, share good practices, learn from mistakes, and explore new opportunities together.
Meanwhile, in neighboring Poland, shippers and forwarders have expressed dissatisfaction with the limited proportion of rail freight compared to road haulage.
Furthermore, they anticipate that by 2030, the share of rail transport in Poland’s total freight transport will either remain almost stagnant or see only a relatively modest increase.
According to the experts we talked to, rail transport is losing ground to road transport primarily due to economic and organisational factors.
It is perceived as more expensive, less flexible, and equipped with inferior infrastructure.
“In the opinion of the respondents, the railway industry requires targeted infrastructure investments, improved accessibility of yards and cargo terminals, and enhancements in the quality and punctuality of freight transport,” states a excerpt from a recent report published by Poland’s Office for Rail Freight.
Factors Inhibiting the Development of Rail Freight Transport
As for what is slowing down road freight development, the key factors can be divided into external and internal. The aforementioned study lists these factors as follows:
External Factors:
- Costs of using railway infrastructure compared to road: 59.14%
- Competition from other modes of transport in terms of offer: 56.99%
- Generation gap causing insufficient availability of railway staff: 46.77%
- Insufficient financing of development projects (purchase and/or modernisation of rolling stock, infrastructure development, etc.): 41.40%
- Legal environment: 35.48%
Internal Factors:
- Insufficient capacity of the PKP PLK railway network: 67.2%
- Insufficient capacity of railway sections leading from/to ports: 39.78%
- Insufficient capacity of railway infrastructure at border crossings: 31.72%
- Difficulties related to modernisation works on the PKP PLK network: 45.7%
- Limited availability of rolling stock: 33.87%
- Insufficient number of points to handle cargo: 31.18%
Moreover, in recent years, the position of rail transport, and consequently intermodal transport, has deteriorated.
This trend has also been observed in Lithuania, a country traditionally considered a leader in this sector.
“Geopolitical changes and sanctions have significantly impacted Lithuania’s transit cargo. In 2022, the volume of rail freight transport dropped by 39% compared to 2021. Despite this setback, Lithuanian Railways swiftly redirected its focus, exploring new opportunities, diversifying its activities, and venturing into new markets. Within just 2-3 months, the carrier identified an alternative route for transporting cargo, particularly agricultural products, from Ukraine through Poland, bypassing Belarus. The differing railway gauges between Poland (narrow-gauge) and Ukraine (broad-gauge) required wagon replacements at the borders, contributing to border congestion. The imposition of sanctions exacerbated border and terminal congestion, leading to prolonged inspections, and, in some cases, cargoes being turned around and sent back,” comments Neli Karapetjan-Baranauskienė.
He adds that “the decline in the volume of rail transport in Europe is not solely due to the geopolitical situation, but is influenced by various factors, including the global economic slowdown, fluctuations in fuel/electricity prices, outdated and underdeveloped railway infrastructure, and competition with other modes of freight transport.”
Comments by Rafał Mroziński, President of Locotranssped, echo that of Neli Karapetjan-Baranauskienė.
Identifying a single cause for the decline in intermodal transport since the outbreak of the war is challenging. Factors such as inflation, economic slowdown, and the realisation of volumes after the pandemic, have all contributed.
“The increase in energy prices directly linked to the war in Ukraine was another major factor. This certainly affected the attractiveness of intermodal solutions compared to road transport. A decrease in demand and an increase in supply in road transport, coupled with a simultaneous rise in the price of intermodal transport, becomes a significant aspect influencing customers’ choice of transport mode,” he adds.
Dr. Eng. Ignacy Góra, President of the Office of Rail Transport, confirms that “over the last two years, the railway industry has operated under conditions of great uncertainty.”
“After the epidemic was lifted, war broke out in Ukraine, impacting the railway market even more than the COVID-19 pandemic. Sanctions, increases in fuel prices, inflation, blockade of ports on the Black Sea, and economic stagnation in Europe are just some elements negatively affecting rail transport,” he mentions, pointing to periodic congestion in railway networks near borders and ports.
Mateusz Kokosza, Intermodal Project Manager at Omida Group, also notes other events that have brought yet more uncertainty:
“It is worth separating these two issues here because different situations affect congestion in particular places. For example, occasional strikes by employees in ports and terminals can lead to delays. However, at Omida Intermodal, we primarily carry out intermodal transports within the European Union, often bypassing major terminals involved in 'Deep Sea’ transports, which are more susceptible to geopolitical events. Regarding congestion at border crossings, weather conditions and railway network renovations are often the causes, with exceptions like farmers’ strikes in Western Europe recently causing delays.”
The Impact of the War
Market participants and observers in Poland are unequivocal about the significance of the ongoing conflict in neighboring countries. According to the UTK study mentioned earlier, one in three respondents acknowledged the negative effects of the war on the railway freight situation.
Primarily, after the imposition of sanctions on Russia and Belarus, transportation in these countries became challenging, with an increase in Customs Office inspections.
This, coupled with prioritizing the transport of coal and grain, led to delays in fulfilling other contracts, overloading of infrastructure, a decrease in border crossing capacity, and prolonged waiting times for wagons.
Additionally, the post-war energy crisis resulted in an overall increase in transport costs due to rising energy prices.
Reduction in Trade from China
Furthermore, the UTK report notes, “sanctions have impeded trade on the eastern border, especially at the Terespol/Brest border crossing, which has been the main hub for transshipments to/from China and Europe.”
The decline in transport from China to Europe has been substantial. According to data from the Eurasian Rail Alliance Index, nearly 117.6 thousand TEUs were transported from China to Poland last year, representing a 34.11% decrease compared to the previous year. Germany experienced an even more significant decline, with a reduction of 80% (less than 13 thousand TEUs were transported).
Nevertheless, some logistics operators engaged in rail and intermodal transport remain optimistic that the pro-environmental policies pursued by the European Union may contribute to an increased interest in this type of transport in the future.
“We are witnessing a growing trend in intermodal cargo transport, catering to an expanding range of industries. This is partly a result of legal regulations mandating companies to decarbonise and report their environmental impact, including CO2 emissions. Additionally, in our client interactions, we emphasise open dialogue and knowledge-sharing. We willingly address customer expectations, such as providing emission data. Simultaneously, we persuade new clients of the value in investing in sustainable transport, thereby reducing the company’s carbon footprint,” comments Rafał Mroziński.
Featured image credit: Rob Dammers, CC BY 2.0, via Wikimedia Commons