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.

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Wednesday, 26 December 2012

Lessons from the past...yes, there are some

As I've mentioned before, this blog is not about remembering the 'good old days' - it's about pitting new and proven ideas against the entrenched ideologies of Australia's current rail executives and their industry. Still, having said that, there are some examples of rail operation dating back to the 1930s - now largely lost in the modern Australian rail freight sector - that if implemented could reduce costs, increase capacity and do so at virtually zero charge.

Let's start at the beginning. In the early 1920s, a mid-sized mid-western railroad in the United States found itself with a simple route structure, a low operating cost model and plenty of much larger competitors unable to match its service reliability. This was the New York, Chicago & St Louis Railroad - more commonly known as the Nickel Plate Road (NKP). With literally a fraction of the assets (about one ninth), the NKP was able to move 33-percent of the tonnage its largest competitor could. With almost no branchlines and very little double track, the NKP's sole focus was getting freight from its western terminals to its eastern terminals in the least amount of time. It knew what it was good at, and it stuck at it. It's busiest single track mainlines received centralised traffic control that could handle up to ninety trains a day when pressed. Rather than running long drag freights weighing over 10,000-tons, it focused on several mid-sized 4,000-ton trains leaving its terminals throughout the day - providing multiple alternatives for shippers - and powered each train at about 1hp/ton. The NKP also did its best to run all of its trains at similar speeds, to keep traffic flows fluid. And in an era when steam locomotives might travel just 100-miles a day, the NKP could service its modern fleet in fifteen minutes and haul the same tonnages with 300 locomotives that took nearly 1,000 on neighbouring railroads. And this was all happening by the mid-thirties. Fast forward to the 1990s and the great US rail renaissance relied on many of these techniques to coax time sensitive intermodal traffic off the freeways. However there was one other aspect of these operations that few US rail executives chose to replicate until the last decade. It was the NKP senior management's hyper vigilance of on-time arrivals for its most important freight services. Throughout the 1940s and 1950s, the first thing the NKP's CEO read every morning was the arrival reports for each terminal - if there was an issue causing repeated late arrivals, it was dealt with quickly - and from the top.

Delays are an everyday distraction for rail operators the world over, however containing them, and avoiding them is something largely lapsed in Australian intermodal operations. If the CEOs of Pacific National and Aurizon read the daily reports for terminal arrival times there's not a lot of evidence they do much about delays. A train that fails between Melbourne and Sydney might spend 24-hours awaiting rescue. If trains run endlessly late due to an infrastructure provider's assets, they might do so for months without any apparent direct attention from senior management. Frankly, its not good enough. For some seventy years the NKP has equipped the rail industry with a model for providing the fastest and most efficient means of delivering rail freight - yet in Australia it is a model consigned to the history books. Well, PN and Aurizon, its time to dust off those books. If the NKP could achieve the shareholder returns it did with a fraction of the technology now available, what should PN and Aurizon investors be expecting in return? If you want to know more, then call me...I actually own the book.

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Sunday, 16 December 2012

Terminal and Urban shortlines - the better way to share assets

In a rail market place dominated by two national operators with several large niche players specialising in specific corridors, what happens when they find themselves in the same urban environment? Well, it's competition, right, so any thoughts of market cooperation through interchange goes out the window in favour of undercutting each other for a few 'inland port' containers. Is fighting over scraps sustainable? Of course it isn't. And the fact a smaller operator could entwine its operations with those servicing multiple corridors appears to be lost in the current environment. Even in locations where shared rail assets literally beg for a common terminal rail-operator are completely ignored. A case in point is the Brisbane Multi-user terminal at Acacia Ridge. Here the two big players, PN and Aurizon compete for terminal space that is overseen by P&O - yet despite the latter being a significant rail operator in it's own right, it does not provide terminal shunting or servicing for it's tenant operators. Instead, Aurizon and PN must both provide crews and shunt locos, plus service their own equipment - adding considerably to their own costs and duplicating terminal operations. If P&O provided all terminal services, it could be argued the operation at Acacia Ridge would be significantly streamlined...and this is important. This 300,000 TEU yard is facing severe capacity constraints, preventing corridor growth between Brisbane and Sydney. A more effectively used yard could increase capacity without needing PN or Aurizon to slug it out over who ought to pay for expansions...or new yards.

Could a common terminal operator work elsewhere? There's no reason why it wouldn't. Dotted up and down Australia's rail corridors are towns and traffic originating regions that have been abandoned by larger operators who are largely disinterested in the expense of gathering shorter haul traffic? But what if someone else did it for them? In Queensland, traffic originating locations such as Gympie, Maryborough and Bundaberg have seen all their freight outputs converted to road in the last decade, even though most industries retain rail access or access to an unused terminal. A low cost shortline terminal operator could be the answer for all of these cities, and revitalise wagonload freight (or at least that which could fit in a container) without PN or Aurizon having to invest any of their own capital or time. All that's needed is a will to instigate the concept of interchange. And this really isn't a big step. Aurizon and PN already 'interchange' with rubber-tyred operators at each of their terminals, so why would a steel-wheeled interchange be such a giant leap? It's time for terminal connections to find space in this open-access world and realise that once something is on a truck there's a good chance it's going to stay there for the entire journey.

Sunday, 2 December 2012

Interchange - Australia's forgotten traffic potential

One of the unfortunate side-effects of National Rail's formation in the early-nineties was the abandonment of interchange traffic between Freightcorp, V/line, Westrail and AN. Prior to NR's arrival, the state systems and Australian National had cooperated together, sharing rollingstock and moving each others traffic from one side of Australia to the other. A single interstate operator ended this, and now it appears open access is perpetuating the situation. So what's so good about interchange? Well, think of it this way. These days if an operator finds a traffic flow from Point A to Point B, that traffic must be large enough to generate a profitable trainload. If it isn't it may not make its way onto rail. Why? Well, if the primary corridor operator at Point A doesn't run any trains to Point B it may not be interested in the task...the rail operator at Point B could well share the same view. But what if both operators met at Point C? On paper, this would appear to be a viable point for interchange - with the operators sharing the rollingstock and profits from a single traffic flow. The trouble is, the Australian tradition of mutual cooperation has been lost in the last twenty years. There's no environment for interchange, nor are there any hard and fast rules laid down for sharing freight tasks. This could be a lack of historical awareness at a corporate level, or genuine preference to avoid sharing a limited traffic flow simply out of corporate spite. Again what appears to be lost on operators is that volume is volume. Filling your trains on your primary corridor should be more important than running a half-empty train across the country just because you're the competitor in an open access environment.

Sunday, 25 November 2012

Slot Maximisation - picking all the low hanging fruit

This last decade has seen Australian rail operators retreat from all but the lowest hanging fruit when it comes to freight handling. If anything is just a little bit too hard or a little bit too marginal it's been abandoned and given over to other transport modes. This method of reducing cost to increase profit has been a perfectly logical path to head down, particularly during a decade of drought and mining expansion. The trouble is, this process eventually becomes a dead-end street - 'easy freight' is not infinite. Non-bulk freight that doesn't have to get there as fast as a truck, or because in a particular circumstance rail finds itself cheaper than a truck, is just freight that just hasn't gone to a truck yet. Rail has to start working to maintain non-bulk volumes, and more to the point, work even harder to grow these volumes.

So where should operators start? Well, they could do what they've got so good at doing, cut costs - except, this time, it could be for the customer.

For rail to keep up with road competition in corridors where it is not time competitive, it has to at least be cost competitive. This means running trains moving every last bit of volume their slot allows for. The trouble is a lot of trains on a lot of corridors do not achieve maximum slot utilisation for a myriad of reasons. Lack of paying customers is one, insufficient horsepower can be another. In the end, train-pairs can run unbalanced in one direction with lots of empty wagons, or worse run as short consists in both directions. This is not necessarily bad. A train-pair could still be making a profit running short or heavy in just one direction. Think about it, a daily train only has to make a net-profit of $2800 per run to achieve $1-million/annum mark.

So lets look at this. If a train can turn a profit hauling empty wagons, what about trying to fill them through discounting? Additional costs for fuel, perhaps locomotives and the slot agreement would need to be considered, but if the operator has a train they regularly find difficult to fill, perhaps they should cap the profit for that service at a workable level and give terminal and accounts managers the opportunity to heavily discount or even give away space to regular customers. This is not meant to be a long term strategy, but this is to push rail into the consciousness of freight shippers. Instead of being Option B, C or D on a corridor, this kind of discounting could make rail Option A. And as the slot fills to its maximum the discounting could be gradually decreased.

Alternatively, capping the profit for a train might make its slot a useful tool for returning to a previously marginal freight. If a bulk or non-bulk freight shares the same origin and destination as the 'profit-capped' train, then why not. This is the volume game. Grow a marginal freight enough and the tonnages make up for its low margin. Canadian National has headed down this path, turning every train-pair into a conveyor for every available commodity. The result? This company now has the lowest cost/profit operating ratio in North America and one of the most diverse traffic bases. And face it, price capping has worked for the Telstra and Optus, why couldn't it work for rail?

Food for thought...


Tuesday, 13 November 2012

Enough with the conspiracy

I'll be blunt, this blog isn't about dreaming about passenger trains, railmotors and branchline diesels heading out to tiny towns with government money in the fuel tank - public transport will definitely be taking a back step to the real world developments in the freight market...but that's not to say I will be completely ignoring the topic, and the December 2012 edition of TRAINS has spurred me to take aim at the naysayers opposing light rail developments on the Gold Coast and in downtown Sydney. Here's some facts from the United States - the home of the V8 SUV. There are currently 11 urban streetcar projects under way across the country - in the US streetcars are defined as light rail vehicles that run in streets, while light rail has its own separated corridor. Portland, Oregon - a similar sized city to the Gold Coast - will soon have an 11-km network serving its CBD. Since the first four kilometres opened in 2001 Portland's streetcars have added $3.5-billion in private investment to the city as developers rush to build their condos and office towers on streets with streetcar stops. Want to hear more? Here's a quote from the TRAINS news article to add some fuel to the pro-light rail fire.

"Many (US) cities view streetcars as a way of bringing people back to the central city without using personal automobiles, or as a way of getting around town without encountering parking problems. Streetcars are also viewed by property developers as a more permanent commitment to public transit, and have thus been credited with stimulating significant reinvestment in urban real estate. They are rarely considered part of a commuting system, and instead are intended to provide short trips in downtowns or historic sections of a city."

TRAINS December 2012

So spread the news, Pitt Street or Southport without light rail, these are just roads to a developer - add light rail and suddenly they're something special - something that's not on the other road - and something that makes a city money.

Sunday, 11 November 2012

Corridor Franchising - roughing out the picture

If Corridor Franchising were to occur within the government-controlled below-rail networks in Queensland, New South Wales and Victoria...what kind of picture would be looking at? For a start the question of buying or leasing would be one that would need to be answered early on. Corridors not needing major upgrading may be cheaper to purchase outright...those with growing potential and lacking suitable infrastructure might be better leased...allowing the new operator-provider room for funding capital improvements without having to wait for a cabinet decision. Obviously this would not be possible all at once, a gradual sell off or leasing of corridors to interested parties would be needed.

These corridors are only being roughly sketched here, but this could be a reasonable starting point, and many  of those in NSW and Victoria could provide active competition to neighbouring networks rather than relying on open access to fulfil competition policy requirements. Some branch lines or non-core sections within these corridors could also be sub-leased or sold to smaller operators with specific interests in the available commodities.

Corridor 1; Great Northern Railway (QLD) - Townsville-Mt Isa; high potential for growth; Mixed infrastructure. Potential operators - QRN, PN, Qube

Corridor 2; North Coast Railway (QLD) - Brisbane-Cairns; medium to high potential for growth; Mixed infrastructure. Potential operators - QRN, PN, Qube.

Corridor 3; Central line (QLD) - Emerald to Winton; high potential for growth as far west as Alpha and Jericho; low potential beyond. Very poor infrastructure.  Potential operators - QRN, Galilee Basin miner, shortline operator

Corridor 4; Western/South Western Line (QLD) - Brisbane to Charleville, Toowoomba to Thallon; high potential for coal, oil and gas industry as far west as Roma; low potential beyond and to Thallon. Very poor infrastructure. Potential operators - QRN, Qube, shortline operator

Corridor 5; Hunter/North West (NSW) - Newcastle-Moree/Muswellbrook-Gulgong; high potential to Narrabri and Gulgong; low potential beyond. Mixed infrastructure. Potential operators - PN, QRN, Freightliner, Qube, Hunter Basin coal miners

Corridor 6; North Coast Line (NSW) - Newcastle-Brisbane; medium potential for growth; Mixed infrastructrue. Potential operators - PN, QRN, Qube, SCT

Corridor 7; Western Line (NSW) - Penrith-Crystal Brook/Cootamundra-Werris Creek; medium potential for growth; Mixed infrastructure. Potential operators - PN, QRN, Qube, SCT

Corridor 8; Southern Line (NSW/VIC) - Campbelltown/Wollongong-Melbourne/Griffith-Junee; high potential for growth; Mixed infrastructure. Potential operators - PN, QRN, Qube, SCT

Corridor 8b; Latrobe Valley Line (VIC) - Melbourne-Bairnsdale/Long Island. Medium potential for growth. Mixed infrastructure. Potential operators - PN, QRN, Qube, SCT

Corridor 9; Murray lines (VIC) - Melbourne/Seymour-Tocumwal/Echuca; medium potential for growth; Mixed infrastructure. Potential operators - PN, El Zorro, Qube, shortline operator

Corridor 10; Bendigo lines (VIC) - Melbourne-Swan Hill/Robinvale/Deniliquin; low potential for growth. Mixed infrastructure. Potential operators - PN, El Zorro, Qube, shortline operator

Corridor 11; Mildura Line (VIC) - Melbourne/Geelong-Mildura; medium potential for growth. Poor infrastructure. Potential operators - PN, El Zorro, Qube, shortline operator

Corridor 11b; Warnambool Line (VIC) - Geelong-Warnambool; low potential for growth. Poor infrastructure. Potential operators; PN, El Zorro, Qube, shortline operator

Corridor 12; Western Line (VIC/SA) - Melbourne-Adelaide/Hopetoun & Dunolly-Portland; Medium to high potential for growth; Mixed infrastructure. Potential operators; PN, QRN, GWA, Qube, SCT

Saturday, 10 November 2012

Open Access - taking it out of the hands of the policy makers

Open access is a child of the nineties - born out of an era of deep recession, over-regulation and when most state governments were saddled with bloated rail bureaucracies. This was the decade when 'monopoly' became a dirty word in the New Age purity of competition policy. Since then the Australian economy has grown by more than fifty percent - in fact it now has the same cash value as that of the United States in 1970. Those state rail bureaucracies have become publicly listed behemoths that now sit in the ASX's top fifty companies. And yet non-coal rail freight tonnages and modal shares have remained stagnant or have even fallen. Clearly something isn't working, and the biggest problem is open access taking the rail freight pie and slicing it up into ever smaller pieces until individual market share becomes too small to be sustainable. The net result? Open access makes marginal freight-streams unprofitable...even in circumstances where free market forces would indicate an established provider would normally succeed. There are several issues at hand here, all working against rail operators retaining stakes in previous core traffic tasks. Poor corridor management, no sense of ownership and open access charges are certainly some of the biggest bug-bears. So what's the answer? Well, there's no point hoping open access will go away, without major policy changes it's here to stay. But that's not to say it couldn't be made to work better.

Step 1. Take the corridor ownership out of the hands of non-rail operators. Face it, just like toll road owners, government controlled rail providers have no interest in the individual needs or strategies of rail freight operators. They take a one size fits all approach and expect even the primary corridor user to build its growth and marketing around a 21st-century version of the bureaucracy private rail ownership was meant to replace.

Rather than a single government agency controlling the interstate or intrastate rail networks, individual corridors should be sold or leased as franchises to one of the primary corridor users. Yes, in this case I mean QRN, PN, GWA and perhaps SCT. And preferably, one should own the Brisbane to Sydney corridor and the other Sydney to Melbourne so that both have a reason to compete against the other to improve track standards and transit times. Now I know PN has a poor track record in this area and in the past has been all too ready to pass its rail ownership onto government bodies. Whether the current rail based PN management share this 'above rail or bust' mentality created by Toll, I'm not sure, but a lot has changed for PN in the last ten years. If they were obliged to meet the standards QRN has repeatedly shown it can achieve then I'm confident PN won't repeat the mistakes of it previous management in Victoria and Tasmania.

Step 2. Give up on slot pricing and adopt proven asset sharing models. Slots are a sham when it comes to rail being competitive with itself and with other modes. Forcing every train to make enough money to pay for its slot has been a boon for the trucking industry, not rail. Take a drive along Queensland's Bruce Highway and count the number of trucks carrying rail infrastructure that previously would have have been described as 'departmental traffic'. With no cost recovery for a rail 'slot' everything from concrete sleepers, wheelsets, to wagons and locomotives no longer ride the rails, they ride the road. A rail corridor owner-operator would find it easier to move this kind of zero-recovery freight by rail as an 'infrastructure cost' rather than an 'operating loss'.

But that's just one specific example. Taking a look at the bigger picture, open access slot pricing could be replaced with US style trackage rights agreements. Rail is all about volume rather than frequency, so instead of paying for fixed slots, a trackage rights operator could pay for gross tonnes per annum - ending the squeeze on marginal traffic making a fixed profit, and allowing every tonne hauled from intermodal, coal or grain to share the burden instead of one being chosen over the other.

Could it work? Well, traditional open access has had more than ten years to prove itself - and with poor to mixed results. Maybe it's time to try something different. Rail operators need self determination to grow, and the current model makes that impossible.


Thursday, 8 November 2012

The Ivory Tower

One of the greatest failings of open access regimes is the isolation it provides for senior above-rail executives from the infrastructure their trains rely on. Where as in years gone by regular corridor inspections may have been carried out by executives - just as they still do in North America - with below rail operations out of their hands senior staff can simply ignore the various corridors and fly to outlying depots for the occasional visit. I can't blame, train travel takes time...and PN and QRN have very little in the way of suitable inspection equipment anyway. But is this a good thing? Could the failings by providers on the Melbourne-Sydney corridor be put down to a lack active pressure from operating executives? Face it, a couple trips down that line in the cab of an NR and I'm sure any senior executive would be moved to investigate legal 'alternatives'. The bottom line for rail executives is knowing how to provide their product reliably and cost effectively - statistics are easy to read in an airconditioned office tower - but they mean nothing to a provider rail corridor that's years behind in maintenance and one weather event away from meltdown. Getting the big picture from a locomotive cab or crew car is the only way a rail operator will ever be able to understand the do-s and don't-s of their operations and how to better improve their trains' all important ability of getting from Point A to Point B. And as the US car industry proved this last decade, executives isolated from their factories and customers are those who will make the biggest mistakes. Taking off the tie and putting on high visibility clothing is lot more effective than sitting around wondering why the black numbers have turned red. And better yet, don't put senior decision makers in expensive CBD offices, give them low cost windows looking out at their business hubs - to remind them exactly what's paying those salaries.       

Tuesday, 6 November 2012

Mid-horsepower locomotives - is there a demand?

It might be all well and good there's over 500 second generation EMD locomotives out there that would be suitable for the new ECO rebuild program...but is there a demand for a low-emission fuel-efficient 2000-3000hp locomotive in the future? If Australian rail operators settle into a future of high speed intermodals and high tonnage bulk trains then it doesn't look good for lower horsepower locomotives, full stop. However, whether rail operators like it or not, there will always be some niche areas where 4300hp heavyweights will find it difficult to stack up. Axel load limitations or restrictive infrastructure will mean in some places, particularly South East Queensland and Tasmania, smaller locomotives will remain a standard for the foreseeable future. Without an alternative rail route or corridor modernisation between Brisbane and Toowoomba, QRN will need to maintain a fleet of forty or more 2000hp-2300hp locomotives for decades to come - and with the existing fleet likely to need to replacement within a decade, there are few cost competitive alternatives available for the operator other than an ECO-like program or to follow Tasrail's lead and purchase non-EMD low cost designs that have not yet been proven.

As for the 3000hp models, the biggest niche these locomotives will fulfil will be cost. Cheaper to run than a larger 4000hp alternative, they could well find their way into the lease fleets we see around Australia already or into the fleets of smaller players. No doubt primary roles in agricultural traffic will remain in Victoria while gauge remains an issue there - however the future for any line where existing 4000hp-4300hp models can already run is one where small locomotives may have no future at all - even in secondary roles. After all, further branchline retrenchments or renewals will allow 136-140-tonne locomotives to become the network standard eventually - and for an ECO 3000hp model to be needed in that environment it will have to be cheaper to use in an application than its larger alternative. What might that application be? Some yard work will still be needed in the future, as will lighter shuttle trains from ports to inland terminals. But I doubt we'll see many 3000hp rebuilds by the larger operators...unless they begin a return to basic 'railroading' and reintroduce car load deliveries to customers. If the latter did happen? Well, who knows. Maybe gensets would be the best option.      

Monday, 5 November 2012

What's next for EMD products in Australia?

The withdrawal of EDI-Downer from new locomotive construction in Australia means local operators are facing the imminent need to order new or modified EMD designs such as the GT38C-AC, GT42CU-AC and GT46C-ACe from Muncie, India or South Africa. It's probably too early to tell just what the new standard EMD model for narrow gauge and standard gauge will be post EDI-Downer, however this significant change in direction for Australia's local builder shouldn't mean they will be discounted from producing new locomotive models for the Australian rail-scape. From Perth to Burnie to Cairns, there are 531 second generation 645-engined locomotives with 12, 16 and 20 cylinders. All of these will reach or pass life expiry within the next decade and all are ripe for EMD's re-engining ECO program which could be undertaken by EMD's local guessed it - EDI-Downer. The ECO program is currently being rolled out in North America and has been adopted by some Class 1 railroads in a big way - Canadian Pacific has just signed up to have more than 500 locomotives rebuilt during the next eight years. Rebuilding involves fitting turbo-charged 8-cylinder 710 primemovers to roots-blown 12-645 and 16-645 models (such as the GP9u and GP38-2) and 12-710s to the ubiquitous turbo-charged 16-645 SD40-2. In Australia there are 206 GT26C/GT26C-2/JT26C-2/JT30C/JT36C-2 versions of the North American SD40/SD40-2/SD50 models currently being targeted by EMD for 3000hp 12-710 rebuilds, while another 325 roots-blown 12-645, 16-645 and turbo-charged 12-645s would be available for 2000hp 8-710 rebuilds. Yes, there is a cost, but the results could make up for it - a rebuilt locomotive will use 25-percent less fuel, 50-percent less lube oil and produce 70-percent less greenhouse gasses. So there's big gains for rail operators, not to mention local manufacturing...this could be one of those spaces worth watching. Don't count EDI-Downer out yet. 

Sunday, 4 November 2012

The New England Corridor - connectivity?

If the a standard gauge New England Corridor was ever to be revived, it may only be necessary to dual or standard gauge as far north as Warwick. The simple fact is the existing Toowoomba Range crossing could not be standard gauged in its current form, so if rail-to-truck transit was the only alternative between the New England corridor and Brisbane, then Warwick offers lower reinstatement costs and faster transit times than a train continuing to a road interchange at Toowoomba. But can the 1867 Toowoomba Range corridor be made standard gauge friendly? Presently the only solutions on the table are multi-billion dollar government-funded commuter-rail base-tunnels under the Toowoomba and Litte Liverpool Ranges - originally proposed for completion in 2026 but now well and truly fallen off the table simply because of their extreme cost. In fact cost is always the issue with the Toowoomba Range Corridor - finding the best way to upgrade this line will always be beyond the value of the upgrade, meaning high-cost corridor replacement has not been undertaken. However, the net result of waiting for the big money option to be funded has meant lower cost alternatives have never been properly investigated.

So if the best option is un-fundable for a freight solution, what else can be done? The current 1867 alignment has a ruling gradient of 2-percent, with curve radii as small as 100m and crossing loops of around 700m. Added to this, several heritage listed tunnels prevent day-lighting the most restrictive structures on the corridor, which additionally restrict container and rollingstock heights. Even so, increasing minimum curve radii to 200m within the existing corridor while removing some curves at the penalty of a slightly steeper grade could be undertaken, including bypasses of the heritage tunnels with parallel cuttings. The shallow ridge the highly restrictive 'Victoria Tunnel' passes under at Yarongmulu could be open to such treatment as well. Cost? Similar work undertaken in 1998 on the similarly curved Drummond Range in Central Queensland was less than $30-million. In March 2011, following unprecedented flooding which caused 260 washouts and landslides, the Toowoomba Range Corridor was reopened after three-months work for another $30-million (about $1-million/kilometre). Meanwhile a much more substantial highway realignment of the Cardwell Range in North Queensland is costing $28.75-million/kilometre. Based on this, a staged curve realignment project of this corridor should be somewhere between $10-million to $15-million/kilometre for the two range crossings indicating a total cost of around $500-million. Still a lot of money, but it will provide a potentially dual-gauged double-stack corridor with minimum speeds twice that of present...which might even be sufficient for commuter rail options as well (Helidon-Toowoomba passenger times would be less than 50-minutes). Not the best solution, but almost certainly the only one which has a chance of being funded.

Thursday, 1 November 2012

The New England Corridor - a new dynamic?

This is going to be one of those posts that will sit uncomfortably beyond the traditional industry field of interest. Yes, the New England corridor between Werris Creek, Wallangara and Toowoomba is beset with its own sets of restrictions - unfavourable gradients in both directions, some severe curvature in places not to mention a break of gauge, restrictive tunnels and several missing bridges in New South Wales. It is the lesser pick of the proposed inland rail routes. However it has one advantage that none of the other proposals have. It exists. As has been proven during the merger period of North American railroads during the seventies, the physical properties and long term advantages of a rail corridor get lost in decisions that dictate the cheapest choice at the time. The New England corridor fulfils the latter. Recovering it as the inland rail route between Brisbane and Melbourne is the cheapest immediate option. There are no missing links. It does have long tangents in places, and has far fewer height restricting structures than the existing North Coast Line. And in an era beset by the operating deficiencies of existing corridor owners, leasing or purchasing the New England Corridor could give QRN or PN the choice to move beyond the influence and costs of a non-operating corridor manager. But would it be worth it? In the end, it depends on what PN or QRN really want to do. At around 540km the Toowoomba-Werris Creek New England Corridor would cost around $700-million to upgrade to a standard for 1500-1800m standard gauge trains, double stack clearances would cost more. However once delivered this corridor would save all the time and costs encounted by trains from South East Queensland moving through Sydney to Melbourne, Adelaide and Perth. Long term it probably stacks up.

But there may even be a way PN or QRN could further maximise the corridor, and this is where I could well be speaking heresy. This is the age of the standard - if ever an interstate rail route will be built in the 21st-century it will be standard gauge, right? No arguments from me. But what if it were dual gauge? The biggest issue for the narrow gauge North Coast Line beyond Brisbane is the change of gauge at Acacia Ridge...any interstate freight originating south of Gladstone will almost certainly end up on road. And this at a time when similar irrigated horticultural regions such as Griffith can produce 1500m trains for Melbourne. On top of this there is nothing on the horizon for gauge converting the Queensland's North Coast Line so the problem will be continuing for decades to come. So what if the break of gauge could be moved further south? If it could be extended as far as Werris Creek, it would almost fall within the Sydney Basin - allowing narrow gauge freight from North and Central Queensland to reach Australia's largest consumer precinct without a change of train. Road hauling into Sydney from Werris Creek might be the best option, but since Sydney is the capital of shorter haul shuttle trains, perhaps rail-based shuttle services could work as well. In the end, the biggest operational issue for a project such as this will be how narrow gauge trains from Queensland's North Coast Line could reach Toowoomba...a complicated process beyond the scope of this current post...but not for the next.

Tuesday, 30 October 2012

Gold Plating versus Making Do

The power industry has come in for recent criticism as it spends billions - and passes that on to consumers - so forty hours of extreme annual peak load can be catered for. Likewise governments have time and time again gone looking for the 'best' solution to urban infrastructure projects rather than seeking the most affordable. Again, someone else has to pay for it - or, more usually, no shovels ever hit the ground. And, as infrastructure goes, we're seeing the same thing in the resource industry too...perhaps to the detriment of even getting that primary product out of the ground. Recent news reports out of India suggest the GVK/Hancock consortium planning a 30-million tonne thermal coal mine at Alpha and an associated 495km rail line to Abbot Point is having trouble raising the $6.4-billion for the project. A large part of that project cost is the heavy-haul rail line, which will exceed $2-billion to race low value thermal coal across several large river valleys via the most direct route awaiting ships at Abbot Point. This of course is the 'best' transport solution for the mine. However at $2-billion, and perhaps threatening the mine proceeding at all, is it the most affordable solution?

The answer is probably no. And here's why - an existing low volume narrow gauge rail route already exists in the vicinity of the mine. So far its current government ownership, low capacity and more circuitous route of about 650km (via Emerald and Blair Athol) has discounted this corridor from consideration...but let's have a look at it. Fifty-five percent of this existing open-access corridor is already available to 1450m 12,000-tonne coal trains, and the cost in upgrading the remaining 291-km to this standard is around $405-million (just twenty percent of the GVK/Hancock's estimated cost). There are few if any land resumptions required or environmental barriers and the most serious operational issue, the Drummond Range, was partly deviated in 1998, with remaining works at that time being valued at only $12-million. No doubt operations of this "Central Line" corridor would be higher, however compared to the absence of any profits if this greenfield project cannot reduce its establishment costs, maybe a few extra cents per tonne over the life of the mine would be better spent than those the consortium are currently trying to save.     

Monday, 29 October 2012

A new name should mean a new start

With QRN's impending name change to Aurizon, perhaps it's time for Australia's largest rail operator to consider changing more than just its letterhead. For too long the name QRN has been synonymous with coal - and in the last decade this has been at the expense of almost every other aspect of its operations...except perhaps its related iron ore task. So what should this new Aurizon be? For one it should develop a goal of diversification. Rail's greatest strength is its ability to move whatever the economy one sector falters, another can be there to bring black ink to the ledger - few other industries have this ability to change their stripes - and it is why investors are flocking to railroad holdings in North America. So where can Aurizon diversify? Almost anywhere. For example, opportunity abounds in the domestic container business, despite the global ructions impacting on the resource industry. In the Brisbane to Townsville corridor alone the Bruce Highway carries the equivalent of forty trainloads of freight every day. Much of this has appeared during the decade of growth QRN spent concentrating on Queensland coal - a time during which the size of the North Queensland economy has more than doubled, and could double yet again in another decade - by 2021 more than 1-million people will live between Mackay and Cairns. However, for their part, PN and QRN actually haul less rail freight on this corridor than the former QR hauled in the late nineties. So name changes are all well and good, but will shareholders see a change in attitude? Surely this isn't the time for just more of the same? 

Distributed Power - where it stands

So I've banged on about the advantages of DP to the likes of QRN and PN. Lets see what they've got on the ground now. QRN is the clear leader in DP outside of the North America. The company in its previous forms has been using the various incarnations of Locotrol for forty years and its current fleet includes 186 electric locomotives and 124 AC traction narrow gauge diesels fitted with DP. Seven narrow gauge DFZ are currently receiving DP equipment for Western Australian iron ore traffic. On standard gauge QRN has 36 DC and AC traction diesels in Western Austrlalia DP service. That's a total of 353 locomotives - more DPs than some US Class 1 roads. BHP-Billiton has nearly 100 AC and DC traction diesels with DP in the Pilbara and has just ordered 13 E40 AG-V1 AC traction electrics for narrow gauge coal service in Queensland. For its part PN has built up a fleet of 40 GT42CU-AC diesels and 32 E40 AG-V1electric locomotives in narrow gauge distributed power coal service in just four years. So it's pretty clear our major operators possess considerable experience in DP use and its advantages. Further to this many of the locomotives in standard gauge coal and intermodal service are the same models as those being used elsewhere in DP operations - meaning retrofitting is not out of the question.

So why the delay? Traditional operating practices on specific corridors? Cost? Radio signal loss? Loading and unloading issues? Whatever they are the savings DP offers can't be ignored simply because "it's never been tried here." This isn't reinventing the wheel, this is a new industry standard, and those who embrace it will become far more competitive than those who don't. The race should be who gets there first, not who waits to be last.

Saturday, 27 October 2012

Distributed Power - the no brainer

Distributed power is nothing new to Australia, QR introduced GE's Locotrol to the country in the early seventies and within 10 years had most of it's Bowen Basin coal trains running in 3+3 or 2+3 configurations. BHP followed suit in the Pilbara and in recent years we've seen PN adopt DP for its Queensland coal and magnetite operations, while QRN has extended modern DP operations to its standard and narrow gauge iron ore operations in Western Australia. Yet, despite the extensive experience the country's two largest rail operators now have with DP, they have not followed the recent rush by North American rail operators to convert additional corridors to DP (Union Pacific is now moving 70-percent of its gross tonne miles with DP), despite, in some cases severe capacity constraints.

Yes, DP can be inconvenient for crews dealing with distant remote locomotives, but the advantages are too many to be ignored. Most significantly DP reduces the lateral friction of a train, allowing the same number of locomotives to move more tonnes, use less fuel and increase velocity. Likewise rail wear is reduced as are braking distances. A case in point is the QR-owned capacity constrained crossing of the Toowoomba Range in South East Queensland. Here a rail route dating to 1867 - restricted by several heritage listed structures - forces rail operator QRN to run 41-wagon coal trains at axel loads of only 15.75-tonnes. Doubling train lengths would not only double capacity on this corridor, but using Canadian Pacific modelling, an 82-wagon train running in 2+1+1 configuration would produce only 10-percent more rail wear than an existing 41-wagon train. Double consists could be achieved by extending just five crossing loops and constructing a run-around road between Ipswich and Darra. Total cost would be less the $100-million while rail maintenance costs could be reduced by up to 40-percent while moving the same tonnage.

But it's not just coal and mountains that can use DP. PN and QRN experience considerable difficulty running 1500m intermodal trains on the east coast corridor where curves and grades are in constant supply. Converting these services to DP would produce fuel savings and increase velocity with the same horsepower by decreasing lateral friction on the ever present curvature. In the end, it doesn't matter how sharp a curve is...DP offers savings. This is literally the silver bullet for existing operations. An operator can increase the capacity of their existing locomotive fleet and reduce rollingstock maintenance simply by converting more operations to Distributed Power. It really is that easy.       

Wednesday, 24 October 2012

The Industry Disconnect

The race towards containerisation by those rail operators that eventually became today's PN and QRN was to bring efficiency and modality to the industry. Rather than serving customers individually - no matter how many daily carloads they produced - all of their freight could be collected by road and delivered to a container terminal somewhere in the nearest city. Suddenly those turnouts and sidings were no longer needed. Money was saved. It was a win win, right? This isn't going to be a post advocating putting sidings back into every shed and factory and having shunting locos and crews idling day and night to move a couple of carloads - that horse has long bolted. What I'm going to say is that containerisation has produced a grievous disconnect between operators and industry.

For one, trucking that container to and from a rail terminal is frequently the most expensive component of that container's journey. A few too many kilometres or too many truck moves and suddenly that container is cheaper to move the whole way by road. It's a simple rule; once something is on a truck, it's all too easy for it to stay there.

Domestic containers also meant industry no longer needed to have rail access - which means rail options quickly become some ephemeral nether world to the logistics managers trying to get their product from one place to another. The last thirty years has seen hundreds of road-only served industrial estates spring up around the country, all of which are one hundred percent reliant on road options. So this is where containers fail again; they reduce the visibility of rail to industry.

Meanwhile, that 20 or 40-foot container fixes the parameter of those who use them. Rail lost many industries to road during the containerisation process, simply because the container was not a one-size-fits-all. Those businesses that needed specialised rail equipment were simply left to the trucking industry if containers didn't suit them - which is hardly a positive way of generating business rapport. Rail operators became all too used to giving up profitable freight flows just because it didn't suit their transport model anymore - and this in turn feeds into the simple of factor of them-and-us. Containers mean industry and rail operators can cluster around their factories and terminals completely oblivious to the needs of the other. They become completely disconnected, physically and metaphorically. There is no longer any one-on-one contact between rail operators and industry, there is no longer a presence of either in each other's operating world.

So how do we get around this? The easiest would be for rail operators to increase their presence within their potential customer base by using the human factor. More proactive communication and face-to-face contact would be start. Determining better ways of handling and growing each other's business would be even better. In the future rail operators should look upon future terminal developments as including shared space with greenfield industries rather than relying on the current truck to terminal model. And then there's the alternative, where sidings remain, to move containers via rail to business rather than road. I realise those last few kilometres by rail could also be an expensive component of the overall task, but it is up to rail operators to find savings in using lower-cost higher-efficiency local rail service models where labour and motive power costs can be minimised. It might surprise large rail operators just how little more time and effort could go into moving that container from A to B by rail...and more importantly, just how much more traffic such a move might generate. The container is here to stay, so lets use it better.


Monday, 22 October 2012

Express freight - lost potential?

If you've ever bought something over the Internet and you live in the US, then there's a reasonable chance that product travelled by rail for some or most of its journey. That same package in Australia is almost certainly going to stay in a truck from the point of purchase all the way to your front door. For several reasons Australian rail operators have largely missed the boat when it comes to express freight delivery. And it's not as though this is some flash in the pan thing...Internet purchasing is likely to completely change the movement of domestic freight, with container loads to large chain stores giving way to more personalised freight delivery. So why are Australian rail operators allowing the likes of Australia Post, TNT and DHL to dominate a business they are making little attempt to enter? After all, this is the next big thing in Australian freight, and so far it's been almost completely missed.

Obviously the express nature of the package delivery business is a negative to rail. Overnight road delivery via road is possible between Adelaide and Melbourne, Melbourne and Sydney, Sydney to Brisbane. Rail simply can't offer this. Underlying factors include government-controlled rail-corridor owners more interested in saving money than offering reliable or road competitive rail structures. However rail operators have to take some of the blame too. They have made no attempt to improve service reliability or transit times by paying for corridor improvements, and they prefer to run their trains to maximum length and minimum horsepower to avoid having to buy more slots from the corridor owner. But then, maybe senior rail managers haven't taken a good look at just how long that package they ordered took to arrive.

Most Internet or phone purchases aren't completely time reliant...sure some have to absolutely be there overnight, but many can just be expected to arrive within a few days...and many do. Express parcel delivery between Sydney and Townsville is frequently five-working days. A rail delivered container could potentially travel that same route in four. Suddenly it looks like rail could compete, even in the capital city corridors, providing next day or second day delivery suited the express freight handler.

However train speed is one thing, what about the dislocation of the the express freight handler and the nearest rail terminal? Face it, rail has been out of this business for a long time, so with road dominating most of the big distribution centres are near highways rather than railways. How can rail woo express? This might be the time revisit the 'Roadrailer' concept. They've been successful both on narrow and standard gauge but have suffered from having no clear vision of their purpose. We know they provide less terminal dwell time and are able to move to multiple destinations from a single departure point. Roadrailer trailers are also cheaper to purchase than traditional rollingstock and require less horsepower per train to move. All in all these could tick enough boxes to offer rail a budget entry into the express business. But who should buy them? I can't see the likes of DHL or TNT rushing out to buy roadrailers just because an operator wants to haul them. Instead, interested rail operators will pretty much have to start buying a new generation of hi-cube dry trailers themselves. After that they can lease them to any express freight handler rather than being locked into some sort of exclusive contract. Money is money and trailers are trailers, whether they go on rail or not, they mean new business for a rail operator. Sure this is a tentative step, but it has to start somewhere - ignoring this freight type would be like QRN and PN ignoring the last coal boom - we all know they didn't do that, so why ignore express freight?

Where to now?

So here we are, the China boom that has defined the last decade is on the wane. All that fast tracked growth QRN and Pacific National have poured into the NSW and QLD coal industry is now mostly in place just in time to see export and domestic tonnages plateau or in some cases decline. It's a story no different to the hapless investor who buys into the top of the market. He might feel good he made it for a few days, but when the value of his assets starts going down he's got nowhere to run. In many ways and certainly more so than Pacific National, QRN is that hapless investor. While still under government control, it was caught flatfooted in 2004 by the China syndrome and came to the party late. It shouldn't have been a surprise, at the time the Beatie Government was more interested in watching their budget outlook than keeping an eye on infrastructure development, making QRN's government-owned form the fall-guy for the export bottlenecks of the mid-naughties.

For its part, QRN threw everything it had at the problem. Anything that wasn't nailed down and still had wheels went into the coal division. Grain hoppers went back to coal, locomotives hauling freight went to coal. Staff from regional depots went to coal. Billions were spent on new rollingstock. The trouble was, the exporters were already burnt by QRN's slow reaction - and it should have been fairly evident that the moment an alternative operator appeared on the horizon, they would jump ship. And that's exactly what has happened. After buying or rebuilidng 108 high horsepower and very expensive electric locomotives for the Goonyella system - the corridor worst hit by rail bottlenecks - the modern QRN has lost much of its market share to Pacific National. As a result many of those locomotives that were so desperately taken from freight in 2004 are now sitting idle with nothing to do.

Why have they nothing to do? Can't they go back into general freight? For the moment it's not so easy. You see, nothing happens in a vacuum - to prop up its struggling coal division, QRN had to give up on much of its less productive - or for a better definition - more complicated traffic. The shunt locos needed for the sidings around Townsville went to the coal division. The timber millers around Maryborough were encouraged to move to trucks. The graingrowers in the west didn't have grain wagons anymore. The Brisbane based fuel refiners were told QRN was closed for their business. The big winner was the trucking industry. Coal booms come and go but domestic freight keeps on moving. Now former staples of the Queensland rail industry a decade ago are firmly in the hands of the trucking industry. As a result this state's automotive products, timber and forestry, most fuel, agricultural products and priority freight are almost exclusively handled on its highways.

And this - rather oddly - makes the China boom's lasting legacy for QRN one of lost opportunity. Instead of finding lower cost methods to serve local industry and improve the productivity of its non-coal divisions QRN decided to become the hapless investor. It threw away everything it owned to win the coal business, and now, in many ways the chickens have come home to roost. Yes, hindsight is a wonderful thing, but destroying a diversified traffic base to haul a product infamous for its global trade volatility should have been given more thought. Is it all too late? Well, that will have to be another post.