Introduction to SCI Verkehr
RM: Can you provide an overview of SCI Verkehr and its role in the international railway and logistics industry?
Maria Leenen: SCI Verkehr is an independent, midsized consultancy company specialising in strategic issues within the international railway, infrastructure and logistic sector. We are professionals in our markets around the world and advise our clients in developing and implementing strategies since 1994.
Current Trends in Rail Freight
RM: What are the most significant trends currently shaping the rail freight industry internationally?
Maria Leenen: Large-scale significant changes are currently emerging in European rail freight transport: investments of shipping companies with a lot of power within the market in the intermodal market are having an impact on transport flows in the hinterland transport business, the war in Ukraine necessitates a restructuring of east-west transport and the EU Competition Commission’s state aid proceedings against essential Member States can also cause structural changes. This is one of the results we have come to in our recent study “The European rail freight transport market 2023“, which was published in July 2023.
RM: How are technological advancements, such as automation and IoT, influencing rail freight operations?
Maria Leenen: Great expectations are directed towards rail as a climate-friendly transport mode. The deciding factor in this regard is the consistent automatization of rail: With the help of digital processes, a higher quantity as well as quality of transport can be carried out on the existing infrastructure with the available rolling stock and the present workers. By doing so, the productivity and the customer benefit could be increased noticeably and sustainably. Many changes are already underway and currently being implemented such as the Digital Automatic Coupling (DAC). In addition, active start-ups and proven IT professionals offer comprehensive digital solutions to the railway industry. In order to find the perfect match between solution provider and user, we at SCI Verkehr have launched the Rail Digitisation Assistant KLUSII – the first expert platform for digital railway solutions. We will go online with the platform in late autumn 2023 and are very much looking forward to making a contribution to the digitalisation of the rail in this way.
RM: Are there notable eco-friendly initiatives or practices that are becoming more prevalent in rail freight operations?
Maria Leenen: On the way towards a decarbonisation of the transport sector – which more and more governments in the world have declared as a goal – rail is the deciding solution. Driving rail as a whole and the decarbonisation of rail transport is a crucial investment in sustainability and environmental friendliness. By refining the focus and looking into details, a trend can be detected e.g. with manufacturers of track components, that are increasingly developing and marketing environmentally friendly products. One example is that Saarstahl Rail has signed a contract with Belgian railway infrastructure operator Infrabel in 2023 worth over EUR 200 million for the delivery of rails – which are being produced from recycled scrap metal in an electric oven. As we have also analysed in our study “Railway Track Systems – Global Market Trends 2023”, network operators are increasingly changing purchasing criteria from an orientation towards the price to decision-making processes oriented at life cycles, also investing the improvement of sustainability in the process.
Challenges and Solutions
RM: What are the primary challenges faced by companies in the rail freight sector today, and how can these challenges be addressed?
Maria Leenen: Despite many political commitments, rail freight transport in Europe remains not profitable for most players, as the analysis of economic figures in our latest study on rail freight transport shows. Rail still suffers from dissimilar competition conditions in comparison to road as well as comparably low infrastructure investments. Other than the competition between road and rail, the competition within the transport mode rail is intensifying, because former state-owned railway companies continue to lose market shares to their competitors. In addition to these basic challenges, however, companies are also confronted with issues such as a shortage of specialists. The scarcity of train drivers as a valuable resource are reducing capacities of rail transport operating companies and will only aggravate more in the future. Digital applications can help here as well: applied solutions such as WILSON, that support railway companies with personnel sharing, are available now.
Global Market Dynamics
RM: Are there emerging markets or regions where you foresee significant growth in rail freight activities?
Maria Leenen: India is a great example for this: Indian state railway IR has ordered 84,000 freight wagons in order to increase the rail’s market share in the total freight transport mix from currently 27% to 45% by 2030. For 2023, IR expects a freight volume of 1.5 billion t. Emerging markets can also be seen in Saudi Arabia, Indonesia or Ethiopia.
RM: Looking ahead, what do you foresee as the key developments and challenges in the rail freight industry over the next 5-10 years?
Maria Leenen: Looking at Europe, an important development will be the further growth of intermodal transport, also by implementing handling solutions for craneable trailers. The GDP growth in Eastern Europe is also paying into this. As already mentioned, a great challenge in this regard will be to harmonise the high costs with the profitability of companies.
Advice for Industry Professionals
RM: For professionals and businesses in the rail freight sector, what advice would you give to stay ahead of the curve and remain competitive in the evolving industry landscape?
Maria Leenen: A new mindset is required within the companies to be competitive in the long term, and that is defined by action and a willingness for cooperation. In the past, railways have often struggled with this – the focus has been on their own operations most of the time. In the context of macroeconomically necessary transformations, however, the climate has also changed in the sector. The industry has become more open towards cooperations because we are dealing with a heavily asset-intensive business. In this context, a high capacity is the key to success.