Monday, 29 April 2013

Can Australia sustain two competing parallel rail networks? The Warwick connection

So we've seen it is possible to build an alternate east coast corridor as far north as Warwick for as little as $200-million. But what about bulk traffics that will not be readily road convertible east of Warwick? Should this line's operator only be interested in intermodal or will realities demand a standard gauge rail connection between Warwick and Brisbane? In the end, the only reality is price. It is my belief that the 'Warwick' option will be viable for the outset as an intermodal corridor - however from the outset it will also experience a demand for use as a bulk commodity corridor as well.

As has been experience by other Inland Rail corridor proponents, there is no easy solution for moving standard gauge trains down the Great Dividing Range to Brisbane. A planned rail route via Toowoomba is already looking at a $1-billion price tag. But heading north from Warwick an often over-looked range crossing exists that could provide a lower cost, have no tunnelling and potentially achieve a one percent (1 in 100) ruling grade. This is the Ma Ma Creek corridor - a rail route diverging near Clifton and following Kings Creek towards the summit of the range and then following Ma Ma Creek all the way to the Toowoomba line at Grantham. It avoids national parks and the rapidly urbanising range faces further north and for the moment resumption costs will be relatively low.

This alternate rail route would be around 55km long, and with some heavy earthworks needed it will probably exceed the $500-million mark - and even with this route in place, revisions of the Little Liverpool Range to the east and development of a planned standard gauge rail corridor between Rosewood and Bromelton will also need cash. My best guess is a standard gauge rail corridor east of Warwick to Bromelton will cost at least $1.5-billion - a lot of money to replace a 'zero infrastructure cost' road haul from Warwick. Still demand is demand, if coal and grain from NSW's North West and Queensland's Darling Downs can be combined into tonnages exceeding 20-million tonnes, then this is still an option that will offer returns to the bravest of rail operator/providers.

Okay, so here's a corridor mapped out - but what's the point? With Open Access no one will ever bother will they? Well...they might if Government policy changes, and next time we'll see why.

Sunday, 28 April 2013

Can Australia sustain two parallel competing networks? The southern east coast corridor

So we've seen that an intermodal focused corridor between Warwick and Cootamundra could produce fundamental changes to the Melbourne-South East Queensland freight mix, and do it for just $200-million - but what about south of Cootamundra? A realistic alternative to the current Albury rail route does exist, but the rewards for rebuilding it remain far less than for the northern leg to Warwick. However since the point of this argument is to describe an alternative corridor to the existing open access route, then it does tick that box.

What I'm talking about is the Junee-Narrandera-Tocumwal-Seymour route. This corridor continues to exist in its entirety, but has many hurdles to overcome before it could be described as useful. For starters 189km of track has been out of use for more than two decades, and another 144km would need to be dual gauged or gauge converted. It's also a longer route, in it's current form it is 627km from Junee to Melbourne via Tocumwal, compared to 549km via Albury. However a 30km cut-off between Jerilderie and Finley would reduce the distance to 605km. The short section of shared gradient-restrained track between Cootamundra and Junee could also be replaced by another 61km cut-off between Temora and Coolamon, which would reduce the Tocumwal route to 587km. It would still be longer, but longer tangents and fewer grades could provide a competitive corridor nonetheless. But there's no denying the cost. Up to 91km of new track, and up to 333km of rail reconstruction won't come cheap - the low end cost would still be around $400-million, but it could easily exceed that figure.

So what advantages would it provide? Completed with the Temora cut-off, this southern leg could provide an entirely separate second rail corridor from Seymour to South East Queensland - should the question of open access being replaceable with parallel exclusive franchise corridors arise, this is the lowest cost answer.    The advantages of a north-south rail route linking the Goulburn and Murumbidgee Valleys with Queensland consumers and exporters shouldn't be understated either.

However there remains one more question - can a rail connection ending at Warwick survive on intermodal alone? Or will bulk freight demand a port connection between Warwick and Brisbane? Are there options? Well, we'll have to look at that next time.   

Thursday, 25 April 2013

Can Australia sustain two competing parallel rail networks - a workable option

As things currently stand, the Australian east coast - with a population of almost twenty million and a general (non-coal) freight task now exceeding sixty million tonnes has one interstate rail corridor and three interstate highway corridors. Not surprisingly rail freight is only moving about one sixth of the tonnages on offer, and it's freight market share has actually fallen since the implementation of 'open access' regimes. So the question is - does the Australian east coast have a demonstrable alternative to the 'single' rail corridor now in use? The answer - for the moment at least - remains yes, but really depends on how much money a rail operator or provider is prepared to pay to create this 'second' corridor. The Inland Rail corridor is not a new idea, and if all the cash spent on studies had been spent on standard gauge sleepers, then it might already be operating.

But instead of looking at the gold plated Toowoomba hub and tunnel plan, lets look at the lowest cost option available - and this means Warwick. Warwick? Don't laugh, unlike Toowoomba, which has only a single highway connection to South East Queensland, Warwick has access to three highway connections and one secondary road to the east - as an intermodal hub it is in a far better and cheaper location than the proposed Toowoomba hub. And it does make sense - it's 150km and 2-hours by truck from Acacia Ridge - compared to the favoured Bromelton hub on the existing interstate rail corridor, which will be a 71km, 1-hour drive from Acacia Ridge. 

So if Warwick were to become the northern hub for an Inland interstate corridor - then what? Lets look at the northern end of the 'second' corridor - Warwick to Cootamundra, the latter being where the existing and 'second' corridor are most likely to meet. Almost thirty million tonnes of intermediate and through freight is currently available to the 'second' corridor and potential intermodal traffic makes up about half of that tonnage. In 2013 terms, this is already the largest general freight corridor in the country but is far better served by road than rail.

Even so, there are actually two legacy rail corridors south from Warwick, the shortest, via New England is 1046km - but this corridor will need 420km of reconstruction, re-gauging and will suffer from vertical clearance issues, heavy grades and generate little 'on line' traffic. Going via Moree will mean a Cootamundra rail route of 1179km, but will only need 250km of reconstruction - mostly re-gauging. This alternative has almost no vertical clearance issues and offers much higher average speeds than the New England route and the existing coastal route. Better still, it remains 110km shorter than the existing corridor from Acacia Ridge and is not restricted by Sydney congestion. Rail transit times via Moree to Cootamundra are likely to be several hours less than the existing Acacia Ridge corridor, which means - despite the trucking leg east of Warwick - this corridor is in a very competitive position, and more importantly, could be achieved for perhaps as little as $200-million (based on the similarly sized build/rebuild Karara project in WA).

$200-million to create a second interstate network accessing the country's largest general freight task? This is an honest to goodness bargain, with returns that could even match that outlay on an annual basis. Still, this is about creating a second corridor to Melbourne - not just to Cootamundra - so next time we'll look at the Southern New South Wales and Victorian options.

Tuesday, 23 April 2013

Can Australia sustain two parallel competing rail networks? Part One

For the last twenty years the national focus for Australian interstate rail operations has been a single mutli-user network with the choice of just one corridor down the east coast and the choice of two between Sydney and Adelaide. The argument made throughout the implementation of the open access regime and continuing to the present, is that Australia is not large enough to sustain more than one national rail network. This belief is true in respect to the construction of an entirely new network overlaying existing corridors, but it  is a misrepresentation of just what the existing Australian economy could sustain. So the day after Australia welcomed its 23-millionth resident, lets look at the economic demands on the Australian interstate system.

Today it's the big picture - with a GDP of $1.57-trillion Australia is now the 12th largest economy in the world, and it just so happens the 11th is Canada (with a GDP of $1.84-trillion). Now Canada offers an interesting comparison to Australia. Its resource economy is similar to Australia's, as is its periods of settlement and rail construction. Unlike Australia, Canada has essentially been a two network country since the end of World War One when several bankrupt private roads were folded together to become Canadian National to compete on the same corridors as long term private operator Canadian Pacific. In this respect Canada has the advantage of two legacy networks that Australia cannot hope to replicate in the present day, but Canada does prove that at times when its GDP was the same as Australia's, it could sustain two parallel networks.

So what does this mean? It means another post tomorrow.  

Thursday, 18 April 2013

More on the 'small' train theory

I totally except I might be talking out of my bottom on this one, and 'real' world and 'theoretical' world don't always match up...but, here goes anyway...

The 'big' train is a creation of rail operators to reduce their crewing, line capacity and pathing costs. The 'big' train suits rail operators and it works for customers who just need their shipments to 'get there'. But where a 'big' train saves in 'on line' costs it loses money in terminal and utilisation costs. The 'big' train doesn't suit customers who want their shipments to get moving ASAP - that's why they use trucks.

In other words, for intermodal/general freight, 'big' trains stymie growth and ultimately cost shareholders their dividend. In the US - since at least the late forties - the most profitable railroads weren't the ones who tied every diesel to the front of the one daily train like SP, it was the ones who focussed on timely, frequent services - ATSF and the NKP.

Now this is where I'll talk a little crazy on terminal costs and utilisation - theoretically a 1500m train will take up the same amount of room and time to unload and load as two 750m trains. But the advantage of those two 750m trains is that one can be leaving when the other is arriving - which means those wagons and locomotives on a 750m wagon train spend only half the time sitting around in a terminal and are moving on the mainline instead. This is where utilisation savings kick in - over the course of a week/month/year the locomotives and wagons on the shorter train will make more return trips than one 1500m train, so theoretically over a year an operator might actually need fewer wagons and locomotives to run two 750m trains than running one 1500m train.

Now I know we can't go cutting an NR in half...but the 93/6000/LDP offer a game changer for the 'short' train theory that I don't think rail operators have really thought about. If two 93s can haul a 1500m train instead of three NRs, then a 750m train should be within the capacity of a single AC loco.

So in the end, the 'short' train costs more in pathing and crewing, but it saves money by reducing terminal dwell times and increasing asset utilisation. Whether that balances each other out, I don't know, but I'm pretty sure it creates a more attractive service for customers using trucks instead of trains at the moment.

Wednesday, 17 April 2013

Why multiple departures work

Further to the problems facing the 'big' train concept, the May TRAINS magazine has an article on the Florida East Coast railway in which the CEO is asked what makes his intermodal focused railroad so successful - answer "Multiple train-starts...we're running five to six trains a day south. If you (a shipper) miss a cutoff, you're going to wait maybe 3 to 4 hours, and the next train's going."

This focus by PN and Aurizon of running one or two 'big' trains a day and creating peak terminal capacity for just a few hours a day might save on crew and pathing costs, but it's not giving shippers flexibility. The same could even be said for the narrow gauge NCL, where Aurizon might run multiple 'smaller' trains, but still restricts particular loading to just one train.  

The FEC CEO (an ex-trucker) has another comment on this, "Frequency of departures and on-time departures are both very important. Do what you say you're going to do and don't be afraid to look at new market opportunities."

Thursday, 27 December 2012

The 'big' train trap

They were the next big thing for the Australian rail industry in the 1990s - the Superfreighter - vast trains of containers sweeping from one terminal to the next doing with one train crew the work three or four might have done. It was the great cost saver - the godsend to the rail industry. Or was it? What has largely been lost in the Australian 'big train' experiment is the reason for running longer intermodal trains at all. Generally, longer trains should be the result of capacity and congestion between terminals. In Australia, as in the US, the coal and iron industry were the first to embrace the 'big' train. Bigger trains meant a given rail corridor could carry more tonnage. Bigger trains meant longer crossing loops could obviate the need for more expensive duplication. Bigger trains weren't meant to make their individual operating costs lower, they were meant to make more money per train. And then someone decided to translate the rumbling unit coal train into the freight-forwarding business. Multiple daily terminal departures were replaced with just one or two a day. CTC equipped mainlines capable of moving thirty or forty trains a day now see fewer than ten. The 'big' intermodal train didn't resolve capacity issues out on the mainline, instead it saw each train's terminal dwell time increase, it saw contingencies reduced and took away the multiple departure and arrival times customers  used - giving the freight forwarded a single departure time, convenient or not.

This is the cost of the 'big' train. The extra time it takes to unload and load reduces the utilisation of those individual wagons that are the first to be unloaded and the last to be loaded. Say - for example - a 1500m train takes three hours to unload and three hours to reload. If it were two 750m trains, the first could be departing the terminal as the other arrives, maximising rollingstock utilisation and reducing terminal dwell time.   Meanwhile, spreading arrival and departure times across terminal shifts means that instead of paying staff to work flat out for six hours and then kick dirt for the rest of their shifts. It's not rocket science - more frequent/shorter trains spreads terminal workload - in fact terminal congestion may actually be reduced by regular arrivals and departures throughout the day rather than having one or two 'big' trains arriving in the morning and then departing in the evening.

A-ha, you say, but those short trains will need more crews - so that's more cost right? Well, yes, crewing costs would rise, but terminal costs would fall. Mainline capacity is hardly an issue on any of Australia's mainline corridors, in fact most of these corridors retain legacy infrastructure from the days when they did see forty trains a day rather than the current eight. And more trains means more contingencies out on the road. In today's environment an operator's primary freight forwarding train can break down and wait a full day before the next service comes along with spare equipment or capacity. More frequent trains means more choices for  operators to prioritise a recovery.

And then there's the customer. There's almost certainly a percentage of freight now on road simply because rail arrival/departure times don't suit the freight forwarder - running those two 750m trains could mean could actually mean a third 750m train with a third departure time. Crew costs are one thing, but working out whether that's the cost a rail operator should worry about it quite another. The simple fact is, if your 'big train' isn't preventing a capacity crunch on the mainline, then it's costing you business rather than making you money.

Of course, the elephant in the room is the 'slot pricing' rail infrastructure providers expose rail operators to. Once again, the good old 'slot' rewards rail operators who run less trains. Do investors really want to hear - "We don't want growth because it costs us money" - somehow I don't think so. Perhaps now is the time for someone to find a way around 'slots' rather than just being another victim of them.

   Check out my latest Christmas e-book releases