15 years deregulated rail freight market – lessons from Sweden Inge Vierth Swedish National Road and Transport Research Institute, VTI 1. INTRODUCTION Sweden was one of the first countries to separate rail infrastructure and running services. In 1988 the National Rail Administration was established as fully legally, organisationally and institutionally independent infrastructure manager. Since 2010, the Transport Administration (Trafikverket), a merger of the rail and the road administrations, is in charge of the national rail and road infrastructure. The national rail freight market was opened in 1996 and the EU freight market completely in 2007. The markets for commercial national and the international passenger services were opened recently; non-commercial passenger services are tendered by regional agencies and the Transport Administration. In 2001, the national state railway SJ was commercialised and split into companies for passenger transport (SJ AB), freight transport (Green Cargo AB), real estate (Jernhusen AB) and maintenance (EuroMaint AB, Swemaint AB) etc. In 2004, the Railway Act was adopted and the Swedish Rail Agency (Järnvägsstyrelsen) was established as regulatory body. Since 2009, the Transport Agency (Transport- styrelsen), a merger of the agencies for all modes, is the regulatory body. The development on the rail market has been monitored by the EU-commission, national agencies, researchers etc. The paper addresses the Swedish rail freight market. This market gets the highest liberalisation index in Europe of (IBM & Kirchner, 2011) while there is no effective competition on this market according to the Swedish Transport Agency (Transportstyrelsen, 2010). We analyze to what extent desired effects as new operators, better services and lower costs have been achieved respectively which hinder and challenges remain 15 years after the opening of the national market and four years after the opening of the international market. Some comparisons are drawn with Germany, The UK and The Netherlands, who also opened their rail freight markets in the middle of the 1990s. The study is carried out with help of literature, official statistics, the Swedish Transport Administration’s information on paid track charges, annual reports of the Swedish operators and interviews with eight operators, five shippers and authorities etc.1 1 Operators: Green Cargo, CargoNet AB,DB Schenker Rail Scandinavia, TGOJ (Trafikaktiebolaget Grängesberg-Oxelösunds Järnvägar), MTAB (Malmtrafik i Kiruna AB), TÅGAB (Tågåkeriet in © Association for European Transport and Contributors 2011 1 2. FOLLOW UP OF SWEDISH RAIL FREIGHT MARKET Sweden registers roughly 20 billion rail tonne-km per year, which is about 5% of the European rail freight market. The rail share of the land based freight transports is much higher for Sweden (2008: 35%) than for Europe EU27 (18 %), EU15 (ca. 16 %) resp. Germany 22 %, The UK 12 % and The Netherlands 5 % (EUROSTAT, 2011). The Swedish rail network comprises some 11 000 km railway lines. The rail infrastructure charges (banavgifter) are based on short term social marginal costs. Track charges (spåravgifter) that are paid per gross tonne-km and are supposed to reflect the extra costs for maintaining the infrastructure are the main component. 2.1. Number of operators and ownership Sweden has a flourishing rail freight market comprising 15 operators in 2010. Already from 1991, a few years before the deregulation, it was possible to perform feeder transports for the state railway SJ. In 1992, the state owned mining company LKAB got also the right to run its iron ore transports in the north of the country. Since the opening of the market in 1996, 34 operators started rail freight services, 17 finished during that period. Between 1996 and 2004 about twelve operators were active. One explanation for the increase to 17 operators in 2004 is the successive opening of the international market, which was fully opened in 2007. There have been few variations in recent years. 20 15 10 Entries 5 Exits 0 Operators -5 -10 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 Source: Swedish Transport Administration (Trafikverket) Figure 1 Operators on Swedish rail freight market, entries and exits 1991-2010 Several spin-offs, mergers, bankruptcies, start-ups and name changes have occurred over time. We aggregate the operators that were in business in 2010 into four categories to show the main developments: Bergslagen AB), Hector Rail, TX Logistik as well as the Association of Swedish Train Operating Companies, shippers: IKEA, LKAB, SSAB, Stora Enso, Volvo Logistics © Association for European Transport and Contributors 2011 2 © Association for European Transport and Contributors 2011 3 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 1 Green Cargo 1 CargoNet AB 1 CargoNet AS 1 DB Schenker 1 TGOJ 2 MTAB 3 Hector Rail 3 TX Logistik 3 TÅGAB 3 Peterson Rail 4 Inlandståget 4 MidCargo 4 RailCare 4 Stena 4 TågfraktRecycling Skånetå Source:g Swedish Transport Administration (Trafikverket) Figure 2 Schema over rail freight operators 1. incumbents in the "Green Cargo group" including Green Cargo AB (until 2000 SJ), TGOJ AB (Green Cargo’s subsidiary till end of 2010, integrated in Green Cargo since 2011), CargoNet AS (jointly owned by Norwegian State Railway NSB (55%) and Green Cargo (45%) till end of 2010, since 2011 owned by NSB), CargoNet AB, subsidiary to CargoNet AS for Swedish market and DB Schenker Rail Scandinavia (since 2008 jointly owned by German State Railway (DB 51 %) and Green Cargo (49 %) performing international transports to mainland Europe. 2. other operators owned by Swedish state: MTAB via mining company LKAB 3. other major operators (with more than 20 employees in 2010), including TÅGAB (a privately owned operator that started as feeder train operator), Hector Rail AB (mainly owned by Norwegian shipping industry), TX Logistik AB (started by German logistics company, since 2010 owned by the Italian State Railway), Peterson Rail AB (subsidiary to Peterson Rail AS in Norway specialised on transports of timber, paper) 4. other minor operators (with less than 20 employees in 2010), including MidCargo AB (former BK Tåg one of the first private operators), RailCare Tåg AB (part of Rail Care group that works rail infrastructure maintenance), Stena Recycling AB (subsidiary to Stena Metall AB), Tågfrakt AB (private company performing terminal services and freight transports) and Inlandståget (former Inlandsbanan owned by 15 municipalities, before the separation in 2009 both infrastructure and operation was in the hand of the municipalities) © Association for European Transport and Contributors 2011 4 One prominent rail transport operator was IKEA Rail AB who performed transports on behalf of IKEA between Älmhult in Sweden and Duisburg in Germany 2002-2005. IKEA Rail finished to carry out these services as operator, partly due to the problems they met as one of the first operators performing international rail transport. Figure 3 illustrates the presence of international players on the Swedish market, both national state railways form other countries and private companies. State Municipality Private S wedish MTAB Inlandståget Tågfrakt Midcargo TÅGAB RailCareTåg TGOJ Stena Recycling Green Cargo Non Swedish CargoNet AB (partly owned by Green Cargo) Hector Rail CargoNet AS ( partly owned by Green Cargo) Peterson Rail * DB Schenker Rail ( partly owned by Green Cargo * TX-Logistik * Figure 3 Overview over ownership in 2010 2.2. Market segments Within the rail freight market, combined (road rail) transports increased from 13% (1997) to 22% (2010) and the number of operators in this segment rose from two to ten. The increase of the combined transports is largely explained by the development of the shuttle trains to/from the port of Gothenburg. The port the shuttles should not have been possible without the deregulation of rail freight market (Nilsson, 2010). The share for system transports, excluding MTAB’s iron ore transports that correspond to ca. 21% of the market, increased from 21% (1997) to 30% (2010) and the number operators rose also from two to nine. The definition of system transports has changed with the entrance of new operators and concepts. Originally a rail operator carried out system transports for one single shipper who requests a transport of a large quantity between two points, for example two factories. Nowadays, also forwarders and logistics providers buy system transports between two points, for example between two marshalling yards, from the rail operators. The operators use block trains that can include wagons from different shippers.2 Hector Rail’s transports that go on fixed lines and are based on three to ten years long contracts (Johansson, 2010) are one example for the new entrants’ services. 2 There are no international regulations and the statistics agencies use the operators’ interpretation of the segment, unless there are obvious reasons for another classification (Sjöberg, 2010). © Association for European Transport and Contributors 2011 5 The sub market for wagon load, that had the largest share of the rail freight market in 1997 (44 %) decreased to 28 % in 2010. Green Cargo is basically the only operator in this segment. This is due to the fact that wagon load transports, as opposed to combined and system transports, require a network of train building points and marshalling yards to meet the demand from a large number of senders and receivers. The wagon load system is associated with greater risk-taking for the rail operator as the shippers in this segment do not have that large regular transports volumes. 2.3. Market shares We use information on paid track charges (spåravgifter) per gross tonne-km3 in Sweden to estimate the different operators’ market shares. The newly established operators have increased their market share but in 2010 the “Green Cargo group“ stood for about 72 % of the tonne-km in Sweden: Green Cargo performed 54 %, CargoNet AB 9 %, TGOJ 5% and Schenker Rail Scandinavia 3% of the tonne-km. MTAB’s: transport volumes are highly influenced by the demand for iron ore, their share went down to 13 % in 2009 and increased again to 15 % in 2010.