The verdict on shorthaul

MEYRICK and ASSOCIATES defines the short haul or shuttle freight task before moving to an outline of the benefits and constraints on shuttle services.

We examine why short haul shuttle services are not a commercially viable option in Australian port-related freight systems in the short term.

We list obstacles to short haul, then consider how improved viability might occur, whether through government intervention or because of factors such as increasing road congestion and fuel prices.

We finish by posing actions that could or should be done to preserve short haul shuttle options.

Short haul in the import/export subsystem

Small freight trains of around 600 metres or less, operating over short haulage distances (sometimes as little as 20 or 30 kilometres) are an element in Australia’s import/export subsystem.

Typically these short haul or shuttle services operate at a port; between a city-located intermodal terminal and a port; or at some distance inland, linking the intermodal terminal to the port.

In the longer term, as congestion and fuel prices increase, the level of viability of potential supply chain arrangements involving short haul rail shuttles will improve.

In the short term however, what are the constraints?

Why doesn’t short haul do well?

Although supported in principle by most Australian governments, short haul shuttle services play a minor role in Australian port-related freight systems in the short term due to the significant obstacles they face.

Short haul services, perhaps with the exception of those operating at Sydney, could readily be replaced by trucks.

Some have argued that rail can not compete with road because heavy trucks do not pay their fair share of the cost of providing and maintaining roads.

But the Productivity Commission report on road and rail freight infrastructure pricing, released in April 2007, developed some very cogent arguments, independently supported by work commissioned by the National Transport Commission, that showed that road pricing has little effect on the share of freight enjoyed by rail.

The Commission’s findings conclude that on balance (given distortions in pricing of both road and rail infrastructure) there are no compelling competitive neutrality arguments that would justify government intervention in favour of rail.

At the heart of the problem is Australia’s port freight system, which has evolved since World War 11, and is built around road based landside distribution.

Every shipper’s production facility and warehouse has road access, while very few have rail access.

The road based distribution system has evolved in response to a series of commercial drivers.

Truck sizes have increased while the real cost of truck capital cost has decreased; globalised production management and the pressure to reduce inventories has resulted in Just In Time freight management.

This works best with road based systems for many manufacturers and shippers along the supply chain and allows responsiveness to consumers’ demands for ready access to goods and services.

The result has been a demand for more frequent freight services that are compatible with at least one of the vast range of heavy road vehicles on offer.

As a result of this evolution, in Australia today rail transport is infrequently used to service the port related freight system, particularly in the urban environment.

The limitations

While rail can be competitive with road on long-haul trips using double stacking on long trains, shuttle trains operating over short distances are generally not competitive.

The biggest impediment to urban rail shuttles between the port and outer suburban hubs is the need for an extra transport leg and double handling.

In addition, shuttles may require significant shunting on site if the rail siding within the terminal is constrained, which may cause a loss of time to other train movements.

Shuttle trips are slow because of the existing condition and arrangement of the rail freight network.

In and around cities, commuter rail services are given priority, constraining potential rail shuttles to only off-peak train paths.

Added to these constraints, shuttle trains may be competing with intrastate and interstate freight movements for the off-peak train paths that are available after commuter rail requirements have been satisfied.

Finally, shuttle routes may be constrained by lack of access.

This may occur if the rail passes through land whose owners deny access. Access is likely to be affected by interrelationships between groups and services such as forwarders, third party logistics providers (3PLs) and rail operators; owners of rail track; and lessees of intermodal terminals and abutting leases, in particular rail sidings.

Attempts to develop port-based intermodal businesses are often constrained by the existing design, condition and operational requirements relating to the rail infrastructure network.

Many and varied commercial relationships may have to be navigated in order to secure train paths, necessary access rights and time slots.

As a result of the associated inefficiencies, service times are increased.

In short, why take freight to a rail terminal and be constrained by cut off timetables and limited service frequency when you have the option of (once the container is on the truck) delivering it straight to the port, within the time frame that best suits you, without having to pay the expense of the double handling at the rail terminal?

The future of short haul

The future of short haul seems uncertain given the commercial reality presented by the limitations of the operating environment. There may be opportunities to cut costs and trim budgets.

Can costs be reduced by better planning for example?

We see evidence that logistics planning can ensure better utilisation of rolling stock, which in turn can reduce rail operating costs.

However, some would argue that at the heart of the problem is a requirement for more government intervention.

Arguments for government intervention centre on public objectives of improving mode split of freight movements to port in favour of rail in support of economic considerations.

These economic arguments look to the environmental and social benefits of rail.

They are not necessarily consistent with the commercial objectives of terminal operators or shippers.

It is possible that increasing fuel prices, especially when combined with increasing road congestion, will drive improved viability of short haul rail shuttles.

There have been signs for some time that industry may be feeling other cost pressures, notably the rise in fuel prices, that may encourage the move from road to rail.

Responding to the Neville Inquiry (June 2005), the Victorian Freight Logistics Council said that, ‘Rail usage for cargoes which may have previously been considered uneconomical because of short distance or time constraints is now under review by producers, manufacturers and wholesalers, given an expectation of continuing high fuel costs.’

It is possible that increasing fuel prices, especially when combined with increasing road congestion, will drive improved viability of short haul rail shuttles all else being constant — ‘all else being constant’, because it is possible that over time the obstacles to short haul rail shuttles might increase, not decrease.

For example, as the number of commuter rail services increase in response to growth in population we can expect that less and less train paths may be available for shuttle services.

What could or should governments do? If, in most cities, short haul rail is not at present commercially viable, then what, if anything, could (and should) governments do?

A strong case can be made for ensuring that the full costs of road use — including the cost of congestion and the effect of road use on the environment — are born by road users.

There is scope to reduce some of the impediments posed by the inadequacies of the current rail and intermodal terminal infrastructure, particularly where this can be done at modest cost.

Even if these things were done, it is unlikely that it would, at present, make much difference to short-haul rail volumes.

Providing direct subsidies to rail could make a difference, but, provided road users bear the full costs, the economic (and environment case) for doing so is weak.

Given the uncertainties in the current environment, these is more to be said for focusing on strategies that will keep our future options open.

These include planning to preserve potential intermodal terminal locations and buffers around them; preserving rail corridors that may be needed to transit between intermodal terminals and the ports.

It may also extend to landbanking to allow the release of land for intermodal terminal development in the future.

The future viability of short haul shuttle services will depend on the actions taken now in these areas.

[1] VFLC, Intermodal terminal discussion paper, Melbourne, Meyrick and Associates, draft May 2006, p.7


“In the earlier version of this article published in Logistics Magazine e-Newsletter, Meyrick and Associates made an unauthorised reference to unpublished material that correctly belongs to the Victorian Freight Logistics Council.”

“Meyrick unreservedly apologises for this and for the concerns that it may have caused to VFLC or any of its members.”

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