Analysis of the freight transport market in Poland
From January until July 2016 railway freight transport noted down a decrease in comparison with the analogous period in the previous year. The Office of Rail Transport (UTK) reported that during the first seven months of 2016 the overall weight of transported cargo decreased by nearly 2.4% to 122 602 thousand tonnes (in 2015 it amounted to 125 570 thousand tonnes). In turn, the number of kilometres travelled decreased by about 0.4% — from January to July 2016 it amounted to 28 151.69 million tonne kilometres (tkm). In the analogous period in 2015 it was 28 268.34 million tkm. In terms of weight of the transported cargo, the leader in freight transport was still PKP Cargo (43.49%). It was followed by DB Cargo Polska (18.17%) and LOTOS Kolej (5.86%). PKP Cargo was also a leader in terms of the number of tkm (51.15%). Here, LOTOS Kolej (10.33%) was second and PKP LHS (6.4%) third.
Is coal passé?
Due to the downward trend in hard coal transport forecasted for the coming years, freight carriers diversify their existing activities even more strongly. It is estimated that by 2020 the share of coal will decrease from 55 to 40%. PKP Cargo in its strategy for 2016—2020 expects an increase in the demand for aggregate transport due to the Road and Motorway Construction Programme. The Programme provides for expenditure of around PLN 130 billion by 2020. In addition, an increase in the requirement of coke, ore, metals, as well as oil and refined oil products. The carriers also anticipate around a 7% increase in intermodal transport. All of this made the carriers understand that they must transform in order to offer their customers as comprehensive services as possible.
Battle for complexity?
2015 was a very good year for the largest railway freight carrier in Poland and the second in Europe — PKP Cargo. According to the Central Statistical Office (GUS), in October 2015 freight carriers transported 694 thousand tonnes more than in September, of which 513 thousand tonnes were carried by PKP Cargo. After three quarters of 2015 the Group earned PLN 221 million. In May 2015 the company purchased 80 per cent of shares in the Czech company Advanced World Transport (AWT), and in November of the same year it entered into an agreement concerning the purchase of Orlen’s railway assets: Orlen Koltrans and Euronaft Trzebinia for PLN 250 million. From January 2015 PKP Cargo began collaboration with container giant, Maersk Line, and in November 2015, despite adverse coal transport forecasts, the carrier signed a 3-year contract to transport 12 million tonnes of coal for Polska Grupa Energetyczna (PGE). Now, the company operates more than 40 sidetracks.
After 7 months of 2016, PKP Group recorded a 51.2% share in the market in terms of labour and 43.6% in terms of mass – as indicated by data of the Central Statistical Office. In comparison to previous years’ results, in July 2016 the Group increased transport of containers and coke. The reason for a decrease in railway transport in July compared to the previous year was, among other things, poor dynamics in the market of hard coal, stone, metals, iron ores and wood. Cumulatively, after 7 months the market share
of the Group as regards the mass was by 4.4% lower than a year ago and in terms of labour it increased by 5.1%.
In total, according to information provided by the Central Statistical Office (GUS), in 2016 PKP Cargo Group had 55.55% share in the market in terms of tonne kilometers (tkm) travelled and 44.1% in terms of cargo weight transported. In total, in 2016 the company transported 98.2 million tonnes (which was 8.4% less in comparison to analogous figure for 2015), and travelled 26.1 billion tkm, that is, 7.5% less than in the preceding year.
At present, 1,000 trains of PKP Cargo carry about 300–400 thousand tonnes of cargo on a daily basis. At the moment (after the acquisition of AWT) the company has the following at its disposal: 48,000 coal wagons, 3,000 intermodal platforms and 15,000 other wagons. The rolling stock also comprises 1,200 electric locomotives and of 1,400 diesel locomotives. During the first seven months of 2016 the carrier received nine out of fifteen multi-system locomotives from Siemens (contract signed for fifteen units with an option to order additional five vehicles) for handling transports outside the territory of Poland. The Group received three more Vectrons in August 2016, and the three last locomotives are planned to be delivered by the end of June 2017.
However, the first railway freight transport company that was listed at the Warsaw Stock Exchange as soon as in 2015 started preparations for developing its activities to become a full-service logistics operator in the period from 2016 to 2020.
Its strategy is underlain by four main pillars: Cargo Lider (utilising the growth potential in the niche segments such as chemicals, timber, metal products or agricultural products); Cargo International (developing a strong position in Europe, mainly in connection with cooperation with AWT acquired in May – transport of cargo to South European countries along the Baltic–Adriatic corridor); Cargo Intermodal (expansion in the fast growing intermodal market); and Cargo Connect (complementary service chain). In particular, the last pillar makes immediate reference to developing the range of services for customers. PKP Cargo wants to achieve this by the so-called One Stop Shop, including the following stages in sequence: customer order, organisation of transport, first sidetrack mile, road transport, transshipment, storage, railway or ferry transport, delivery – last mile, sidetrack, road transport. The carrier also wants to develop containerisation on a larger scale.
In its Cargo’20 strategy published on 28 October 2015 PKP Cargo forecasts that by 2020 it will carry about 600 million tonnes of cargo, employ up to 2 thousand train drivers, transport up to 3.5 million containers, including distribute up to 850 thousand containers from China, trans-ship up to 110 million tonnes on its terminals and invest PLN 125 million in IT.
A few years ago, in order to satisfy customer expectations in a very competitive market, CTL Logistics decided to become a full-service logistics operator from a railway freight carrier. The company provides, among other services, railway and motor transport of goods, forwarding and customs service, sidetrack service, transshipment in marine ports, terminals and on the eastern border and bulk cargo deliveries logistics. Despite the fact that the company strictly protects information about its customers, contracts or rolling stock, referring to business secret, it is known that at the end of November 2015, in consortium with DB Schenker Rail Polska (now DB Cargo Polska), it signed a 3-year contract for the transportation of 5.3 million tonnes of hard coal for Polska Grupa Energetyczna (PGE) – from Silesian mines to power stations in Opole. CTL Group can also boast stable transport results: despite continuing fluctuations in railway freight transport, the Group, recorded, for instance, in August 2015, a 6.09% share in the cargo weight transported and 6.78% in the distance travelled. In total in 2016 CTL Logistics transported 9.73 million tonnes of cargo,
that is, more than 1.6 million tonnes than in the preceding year; whereas the Group’s market share in terms of kilometers travelled was more than 3 million tkm, that is, it did not differ a lot from that in year 2015 when it was less than 3 million tkm.
Germans and the intermodal rule
CTL also decided to establish a carrier company in Germany as the German market is believed to be very promising. The company’s forecasts turned out to be true — analyses indicate that CTL Logistics GmbH in 2016 will transport ca. 3.3—3.4 million tonnes, which, according to CTL, will be a record result. In turn, the volume of cargo transported between Poland and Germany increased by ca. 25%. The German company recorded the highest growth in 2015 in the transportation of fuels and construction materials. Its rolling stock comprises 16 electric locomotives, e.g. Bombadier Traxxes. Next year the company intends to purchase three new diesel locomotives.
In 2015 CTL also created one of its largest investments — the Control Tower — an operating centre in charge of comprehensive planning and performance of the transport process throughout the CTL Group. As a result of implementing this project, the Group had to reorganise the departments of logistics and operations, set up a new competence centre and take care of informatisation of processes connected with rolling stock, human resources and transport management.
In that year CTL also purchased a new multi-system locomotive Bombardier Traxx DAPL (series 186 MS) to handle transports between Poland and Germany.
In 2015 Lotos Kolej entered into transport in the German market because, similar to CTL Logistics, it considered that market very promising. The daughter company of Lotos also decided to develop intermodal transport. For several years the company has been vice-leader in that segment. Intermodal transport carried out by the trains of Lotos Kolej last year was 19%, which was 5% more than in the preceding year. Loto Group decided that in the fourth quarter of 2016 Lotos Kolej could make its IPO on the Warsaw Stock Exchange.
In June 2015 DB Schenker Rail Polska, a daughter company of Europe’s largest railway freight carrier DB Schenker Rail, also made an attempt at improving the transport service between Poland and Germany. International transport service, mainly for the automotive industry, made use of 17 multi-system BR189 locomotives. Ten pairs of trains run in both directions a week (on average two circles a day), on the routes: Hannover Nordhafen-Swarzędz; Seelze-Poznań Franowo and Swarzędz- Braunschweig and Poznań Franowo-Seelze. On the last mile to and from the station in Swarzędz and Poznań Wschód some of the carriages are transported by satellite trains.
More than 50% of the company’s transports are cross-border transports with highly processed goods having a significant share. In addition, the company noted a dynamic increase in its share in the intermodal segment over two years: up to more than 20%, according to the company. The present share of intermodal transport in the Polish market, amounting to 6 per cent only compared to 20% in Europe, shows that a potential for growth still exists.
Deja vu — let’s talk about rates and speed again
Generally, the activity of railway freight carriers does not differ from that of their foreign counterparts. All carriers feel the need for development, follow current trends and attempt to adapt to them as far as possible. The key boomerang issue for a few years has been very low commercial speed — ca. 23 km/h (while it is ca. 50 km/h in Germany), which is connected with the long-lasting infrastructure modernisation process, insufficient liquidation of bottlenecks and still insufficient access to seaports. For many years the carriers have also fought to reduce the rates for access to the railway infrastructure that are among the highest rates in Europe.
Investment as a cure for problems?
The most important investment tasks covered by the National Railway Programme (KPK) to 2023, adopted on 15 September 2015, include: improving the technical condition of railway lines forming the freight corridors, providing efficient railway connections to sea ports, improving the technical condition of lines important for freight traffic such as lines bypassing the conurbations of Warsaw, Poznań and Upper Silesia, and improving access to sea ports in Gdańsk, Gdynia, Szczecin and Świnoujście as the outlets from other points which generate the largest transport streams. Extensive modernisation activities aim increasing the length of tracks with an admissible axle load (equal and higher than) of 221 kN, which is equivalent to an improvement in the conditions of freight transport, increasing the throughput of the transport infrastructure for sea ports in Gdynia, Szczecin and Świnoujście, increasing the weight of goods transported, increasing the speed of freight trains on railway lines administered by PKP Polskie Linie Kolejowe, as well as increasing the share of railway intermodal transport in railway freight transport.