European rail freight gets back on track, boosting both the economy and the environment
While almost all European industries were affected in 2020 due to the coronavirus pandemic, some sectors were particularly affected, including rail transport. While rail freight revenues have not collapsed as catastrophically as rail freight rents, European rail freight registered a loss of 2 billion euros in 2020, a 12% drop in turnover. This pressure on rail freight has been of particular concern given the vital role the sector has to play in ensuring the EU meets its emissions targets – an environmental imperative that underpinned EU transport ministers. agreement at their meeting in June that a modal shift is required so that the rail sector can recover even faster than the economy at large, while reducing emissions.
While the European transport sector accounts for more than 25% of greenhouse gas emissions in the European bloc, rail is responsible for only 0.4% and is the only mode of transport to have reduced its emissions and energy consumption since 1990. It is therefore not surprising that the EU is determined to shift much of the existing road freight transport to rail. EU plans to celebrate the ‘Year of the Rail’ were somewhat frozen during the most acute phases of the public health crisis, but, promising for the economy and the environment, attention and Renewed investments are now flowing into European rail. freight.
Public sector: Spain sees pandemic recovery money as chance to boost rail freight
This renewed confidence in rail freight comes from European governments as well as from private companies. In June, the Spanish Ministry of Transport ad that it plans to devote 1.5 billion euros of its recovery funds in the event of a pandemic to improving the country’s freight movements, with a large part of the expenditure being devoted to the transfer of freight traffic from road to rail. Madrid hope the influx of money will help meet its ambitious goal of increasing rail market share from its current 4% net tonne-km (a figure that delays far behind the European average of 18%) to 10% by 2030.
Approximately € 1 billion of the funding will be spent on modernizing Spain’s freight distribution network with a focus on its railways, including through the development of four new rail freight terminals in Madrid, Barcelona, Valencia and in the Basque province of Álava and the improvement of rail freight links with other European countries. An additional 365 million euros are planned to help promote sustainable rail transport, including by offering eco-incentives and purchasing dual-voltage, variable gauge rolling stock. The funding comes at a crucial time, because as Spain’s Infrastructure Secretary Sergio Vásquez Torrón noted, Spain has already seen its freight traffic, especially on the road, rebound to pre-pandemic levels.
Private sector: the leading Belgian operator Lineas finds funds to accelerate its growth
This rebound in freight traffic experienced by Spain and other European countries is also prompting private companies to seek new sources of financing in order to take advantage of investment opportunities. Belgian market leader Lineas, the largest private rail freight company in Europe, secured additional funding of € 60 million in January. the agreement, which saw the Belgian National Railways Company (SNCB) renounce its last 10% of what was once its subsidiary is intended to support Lineas’s international expansion plans.
Although Lineas is already present in Belgium, France, Germany, the Netherlands, Italy and Spain, its network remains fairly centralized. As CEO Geert Pauwels Explain, “Until now, each of the routes was linked directly or indirectly to Belgium.” With the help of the new influx of capital, “the idea will now be to create new hubs, from which [Lineas] will leave to connect other destinations. “Lineas has already launched its first international investments after the capital injection; in April, the Belgian freight company acquired the International Rail Partner (IRP) of the Netherlands in order to strengthen its access to the port of Rotterdam and recover the 12 locomotives of the IRP.
More substantial acquisitions could be underway, in particular given information from industrial sources that Lineas is in the process of finalizing a sale-leaseback operation which could bring the Belgian company several hundred million euros for its approximately 250 locomotives and 7,000 wagons. . Such an operation, if confirmed, would likely result in further questions on the fact that SNCB sold nearly 70% of its stake in these same assets for only 20 million euros in 2015, especially since the company which became Lineas was valued at 510 million euros in 2011. Lineas did not respond to a request for comment on the announced sale-leaseback program, but such a substantial deal would significantly increase the private company’s financial flexibility and allow it to make significant acquisitions in order to compete with its public competitors DB Cargo and SNCF Logistique.
Reason for optimism, but more support is probably needed
The fact that public and private actors in Europe are taking substantial steps to consolidate their rail freight networks is an encouraging sign that the darker days of the pandemic-induced recession may be over for the transport sector. It is also a promising sign for European emissions targets which can probably only be achieved by moving a substantial part of road freight back onto the rails.
Despite this, the coronavirus crisis is still weighing heavily on the European rail sector – despite the positive developments in the sector, rail freight revenues are still substantially lower than in 2019. In addition, operators have voiced their concern about what will happen if pandemic support measures, such as runway access waivers, expire before the market fully recovers. In these circumstances, it is not surprising that railway associations have called on the EU to to deploy themselves Also the “Year of Rail” until 2022: clearly more time is needed to take advantage of the current positive market signals.