Mega-ships spur growth in Europe's intermodal rail

Malcolm Ramsay, Special Correspondent | Jan 23, 2016 8:00AM EST

With the largest mega-ships now carrying up to 19,000 twenty-foot-equivalent units, modern ports need the capability to transport huge volumes of containers in a short period of time to beat congestion and keep shipments moving. This puts strain on existing rail links and increases demand for multiple rail connections and operators to service ports’ hinterland.

As a result, competition and demand in Europe’s containerized rail market is growing, with a series of investments and technological innovations paving the way for increased rail connectivity on the continent.

The intermodal split of rail varies widely in Europe, with the average port transporting only between 10  to 20 percent of containers by rail, while some ports such as Hamburg and Bremerhaven transport 50 percent or more by rail. 

Throughout Europe, ports are reporting growth in rail transport and data from the Port of Duisburg, one of the leading containerized rail hubs serving North Europe, suggests annual growth in rail of around 5 percent.

"At 17.1 million metric tons (18.8 million tons), rail transport exceeded last year’s value of 16.3 million metric tons,” Duisburg port authorities state in their most recent annual report. “The transport of goods by ship rose to 15.6 million metric tons in 2014. Container handling by ship, rail, and truck grew by 12.8 percent to 3.4 million TEUs and thereby reached yet another record high."

With the cost of rail versus truck is highly dependent on the existing infrastructure at a given port, there is no easy cost comparison. As a result, uncertainty over pricing can often delay decision-making and impede investment in new rail links.

“In terms of costs there is a very general rule of thumb that up to 300-kilometers (186 miles) transport distance, direct road is cheaper than intermodal due to the avoidable handlings (road-to-rail/rail-to-road for the first/last miles),” Dr. Lars Stemmler, head of International Projects at Bremen Ports told JOC.

A number of ambitious projects such as the expansion of rail links to the ports of Bremerhaven, Hamburg andRotterdam and investment of hundreds of millions of euros in the development of rail hubs in Northern Italy, are driving a new wave of rail container companies.

With the majority of container traffic in Europe arriving by sea at major hub ports along the North Sea coast, the rail sector today is focused towards the north.

The ports of Rotterdam, Antwerp and Hamburg are among the most heavily developed in terms of container traffic and between them handle almost 30 million TEUs per year, however it is the German ports of Hamburg and Bremerhaven that lead in terms of the percentage of its traffic that moves by rail.

“The European container market in 2015 was marked by strong export performance from Germany, which remained number one in Europe. More containers are handled by rail to and from the port of Hamburg than for the other three major European ports of Antwerp, Bremerhaven and Rotterdam combined,” Gerhard Oswald, managing director of rail consulting company GoMultimodal told JOC.

Another key development in Germany is the new deep-water port in Wilhelmshaven, which will include construction of sizeable railway infrastructure.

The Jade Weser Port container terminal at Wilhelmshaven was completed in 2013 at a cost of 350 million euros ($378 million). Once fully operational the hinterland rail connections will handle up to half of the port’s 2.7 million TEU annual throughput via a four-kilometer-long feeder route and 16-track formation sidings.

While large markets such as Germany have benefited from strong domestic demand, one of the major issues for container transport across European borders remains political protectionism.

“One of the key ingredients for increased development of rail cargo in Europe is that infrastructure is unbundled, as in the energy sector, and technical operations are separated from marketing and sales of train services, to displace existing monopolies,” Stemmler said.

In many European countries, monopolistic national rail providers still dominate the market, and although some E.U. competition regulation is in place, more still needs to be done to increase competitivity in the sector.

“The European commission faces strong headwinds from national operators, unwilling to lose their currently high market share. In almost all cases, opening up the rail market, such as has happened in Bremen, leads to higher competitivity and more intermodal transport,” Stemmler said.

One of the largest initiatives to absorb incoming container traffic into the rail network is the Trans-European Transport, or Ten-T, project. This high-level strategy aims to build core network corridors between key European countries and will closely integrate rail and sea container traffic and drive further competition.

An estimated 13.1 billion euros will be invested by 2030 and the initiative will see new rail networks stretching  from Romania’s Black sea coast to the Atlantic coast in Portugal.

“When we look at many ports in Europe and throughout the world one of the main issues we see with rail is that there is a distinct mismatch between capacity increases on the nautical side of the port and capacity increases in rail operations and at the hinterland,” Stemmler added.

Alongside investment in new rail links, one of the largest drivers for change in the sector is expected to be the introduction of new technology to tackle the plethora of standards and specifications that container traffic crossing the continent faces.

While initiatives such as the Ten-T project are working to ensure standardization across rail networks, there is still some way to go, and in the meantime new intermodal technologies are growing in popularity.

The Rail Runner system is one such technology. It allows containers to be loaded on regular reinforced rail trailers without the need for heavy lifting equipment, taking some of the difficulty out of switching from road to rail.

Improvements to interoperability and efficiency mean that these new technologies are readily accepted by operators, but a key sticking point for rail growth in Europe remains public opposition.

Many projects are delayed or postponed at the planning stage due to noise and pollution concerns, and for this reason new technology that offers environmental protection and noise reduction is expected to drive the next wave of growth.

“The first step for development of rail is to win over the public and planning  approval. In Germany there is often resistance to new rail projects such as the Y-line project and having public participation helps create workable projects. New equipment is key to tackling resistance to rail development, with technology such as noise reducing brake shoes or emission reduction measures vital,” Stemmler said.

Although a good deal of the growth in rail traffic will be around northern hub ports, a few projects are aiming to redistribute the flow of shipments. One company developing rail connections from the Mediterranean to Central European markets in Germany and Austria is shipping firm Contship Italia.

“The Italian state is now trying to support rail transport as much as possible both as regards the infrastructure as well as incentives for intermodal services…in order to offer a southern gateway alternative for the cargo exchanged by South and central Europe countries with east of Suez and Mediterranean markets,” Daniele Testi, director of marketing & corporate image at Group Contship Italy.

As a high proportion of container traffic arrives in Europe from Asia via the Suez Canal, the ability to unload cargo in Italy potentially saves additional transport time via the Atlantic to reach northern European ports.

“Private rail operators have increased their market share in Italy from 5 percent in 2008 to 33 percent in 2014 and this reflects the effects of intensive liberalization and the high quality of services and integrity along the supply chain,” Testi said.

“Today the port of La Spezia dispatches approximately 35 percent of its total throughput via train which is four times more the average in Italy and the firm aims to increase total dispatch by rail to 50 percent by lengthening the internal rail tracks and optimizing the operation of the trains in the hinterland.”

Contship has already focused significant investment on its terminal at La Spezia and plans to invest a further 200 million euros in order to improve the terminal capacity from 1.4 million TEUs per year to 1.8 million. In 2015 the port became the first Italian gateway able to handle ships with capacities of 16,000 TEUs and up.

A second prospective area of growth lies with Eastern Europe, as rail companies look to invest in cross-land links to Western European markets. As part of the Ten-T project, new rail links are proposed from Greece directly to Germany and France.

“Geographically Eastern Europe is likely to see sustained growth in rail development as companies seek to improve links with Turkey via ex-Yugslav countries. Various operators are already running trials and countries such as Slovenia or Slovakia show great potential. Bratislava, for instance, has a strong automobile cluster that is likely to benefit from improved rail connectivity,” Stemmler said.

Hamburger Hafen und Logistik is one large German rail firm that is backing increased cargo links to the east with a wide-ranging investment program to develop rail inks from its hinterland operations to locations in Poland, Czech Republic, Slovakia and Hungary.

With a greater number of companies than ever before now focused on containerized rail transport in Europe, the outlook for 2016 is promising, but as ever, uncertainty still lies ahead.