RESEARCH REPORT RESEARCH REPORT 139 139 Why short-haulWhy intermodal rail services succeed www.bitre.gov.au Rail bitre Whybitre short-haul intermodal rail services succeed ISBN 978-1-925401-15-8 Bureau of Infrastructure, Transport and Regional Economics Why short-haul intermodal rail services succeed Report 139 Department of Infrastructure and Regional Development Canberra, Australia © Commonwealth of Australia 2016 ISSN: 1440-9569 ISBN: 978-1-925401-15-8 March 2016/INFRA2776 Cover photograph: Qube’s Deniliquin – Port of Melbourne train, carrying containerised rice products for export, pictured in September 2014. Photograph courtesy of John Hoyle. Ownership of intellectual property rights in this publication Unless otherwise noted, copyright (and any other intellectual property rights, if any) in this publication is owned by the Commonwealth of Australia (referred to below as the Commonwealth). Disclaimer The material contained in this publication is made available on the understanding that the Commonwealth is not providing professional advice, and that users exercise their own skill and care with respect to its use, and seek independent advice if necessary. The Commonwealth makes no representations or warranties as to the contents or accuracy of the information contained in this publication. To the extent permitted by law, the Commonwealth disclaims liability to any person or organisation in respect of anything done, or omitted to be done, in reliance upon information contained in this publication. Creative Commons licence With the exception of (a) the Coat of Arms; and (b) the Department of Infrastructure and Regional Development’s photos and graphics, copyright in this publication is licensed under a Creative Commons Attribution 3.0 Australia Licence. Creative Commons Attribution 3.0 Australia Licence is a standard form licence agreement that allows you to copy, communicate and adapt this publication provided that you attribute the work to the Commonwealth and abide by the other licence terms. A summary of the licence terms is available from http://creativecommons.org/licenses/by/3.0/au/deed. en. The full licence terms are available from http://creativecommons.org/licenses/by/3.0/au/legalcode. Use of the Coat of Arms The Department of the Prime Minister and Cabinet sets the terms under which the Coat of Arms is used. Please refer to the Department’s Commonwealth Coat of Arms and Government Branding web page http://www.dpmc.gov.au/pmc/about- pmc/core-priorities/guidelines-and-procedures-other-agencies and in particular, the Commonwealth Coat of Arms Information and Guidelines publication. An appropriate citation for this report is: Bureau of Infrastructure, Transport and Regional Economics (BITRE), 2016, Why short-haul intermodal rail services succeed, Research Report 139, BITRE, Canberra ACT. Contact us This publication is available in PDF format. All other rights are reserved, including in relation to any Departmental logos or trade marks which may exist. For enquiries regarding the licence and any use of this publication, please contact: Bureau of Infrastructure, Transport and Regional Economics (BITRE) Department of Infrastructure and Regional Development GPO Box 501, Canberra ACT 2601, Australia Telephone: (international) +61 2 6274 7210 Fax: (international) +61 2 6274 6855 Email: [email protected] Website: www.bitre.gov.au • ii • Foreword The shipping container has revolutionised freight transport over the last half-century. The container revolution is a pivotal factor in the world growth of trade outpacing growth in output. With goods moving more cheaply and more quickly around the globe, the box has, indeed, “changed the shape of the world economy”.1 That overwhelming success is bringing challenges. Seaborne trade is funnelled through the ports, which are typically located at the hearts of our cities so landside container movements impact on communities around the ports. Road traffic congestion along those arteries also undermines port efficiency. In response to these issues, planners and policymakers worldwide seek to transfer box movements from road to rail; and to use rail to shift port activities away from constrained maritime sites. However, road haulage stubbornly predominates in port–hinterland box movements because economics work against operating trains over shorter distances. That said, in spite of the odds being stacked against the operations, port–hinterland rail services do exist. In that context, then, this report considers the circumstances that can make short-haul urban and regional rail port shuttles viable and whether the circumstances are able to be replicated. Such insights can then provide guidance on the elements needed to enhance port access operations and port efficiency. The research was undertaken by Peter Kain, with assistance from Jeremy Dornan, under the supervision of Dr David Gargett. Preliminary research by Lyn Martin and Carlo Santangelo is acknowledged along with comments by John Hoyle, and by Dr Darrell Bowyer. Louise Oliver provided invaluable editorial guidance. While BITRE is grateful for this assistance, the views expressed in this report are those of BITRE and should not be attributed to any other individual or organisation. Gary Dolman Head of Bureau Bureau of Infrastructure, Transport and Regional Economics March 2016 1 The impact of the container — also known as “the box” — is described in the seminal study by Marc Levinson, The box. How the shipping container made the world smaller and the world economy bigger. • iii • At a glance • Using rail to move containers between ports and the hinterland can reduce road congestion, noise and air pollution. The provision of rail services can also complement the strategy of transferring activities away from constrained port areas. • Usually, moving containers by truck over short-and medium-distances is far cheaper than using intermodal–rail. Despite this, short-haul rail services do operate, for reasons outlined below. Why does short-haul intermodal rail work? • To be sustained, short-haul rail requires at least the following three elements: » minimised road access and egress — drayage — costs between hinterland and intermodal terminal; » low rail linehaul costs and high road costs; and » interest groups with motivations to encourage short-haul and viable hinterland terminals. How the hinterland terminal helps to minimise drayage costs • Drayage is minimised when the value-adding activities are undertaken at the hinterland terminal. Value-adding increases the attractiveness of hinterland terminals. In those circumstances: » shippers are encouraged to co-locate around the facility, thereby minimising drayage; or » shippers are encouraged to route their business via the terminal for processing. When that is done the drayage is not considered an element associated with intermodal freight but, rather, a part of the wider logistics task. Hinterland terminal activity attracts the traffic volumes that lower rail linehaul costs • Hinterland terminals attract volumes through cargo consolidation and deconsolidation. • Vibrant hinterland terminals and logistics areas attract international traffic volumes that provide the necessary volumes of containers to capture rail’s linehaul economics. • Hinterland terminals based around large dominant shippers and logistics operators provide the fundamental anchor traffic that is essential for the terminal vibrancy and, thus, for sustainable short-haul rail. • v • • Large, dominant-shipper flows can enhance individual train volumes, which can be maximised to meet an individual ship, rather than small, multiple-shipper volumes being splintered over several ships. • Terminal–rail sustainability is enhanced when operations commence with solid mature businesses—especially with a large dominant anchor customer—when traffic flows are steady rather than seasonal and when traffic imbalances (backhaul issues) are minimised. • Rail linehaul costs can be reduced markedly when the terminal offers a container rehiring service and can attract export custom: cargo in imported containers is unpacked and the container is reused for exports. Rail short-haul benefits from deficiencies in road haulage • Rail benefits from unproductive road haulage, such as caused by road and terminal congestion. • Truck productivity is undermined especially by road congestion over extended distances, as this reduces truck utilisation markedly. A coalition of agents have an interest in viable hinterland terminals and, hence, short-haul rail • The report illustrates how logistics systems have fostered a broad group of agents with an interest in developing vibrant hinterland terminals, and with that vibrancy comes sustainable short-haul rail. • These agents include » shippers—that is, growers, processors, manufacturers—requiring good hinterland access and egress; » logistics companies working with shippers to manage high-volume consolidation and deconsolidation; » port owners, stevedores and shipping lines, using hinterland terminals, with reliable rail connections, to provide a service as a competitive edge and incursion into other port catchment areas; and as a mechanism to shift operations from scarce and inefficient— constrained—port amenities. » government and other public agents, to pursue hinterland local development policies, to enhance port environment, and to reduce road and port congestion. In a nutshell • Vibrant value-adding hinterland terminals can secure the traffic volumes that are required for short-haul rail to