The EU Directive 91/440 has the goal to facilitate the adjustment of the railways to the requirements of the market and to improve effectiveness of the railways. The EU-member states implement the measures agreed on at different points of time rates and partly in different ways. Sweden, Germany, Great Britain and The Netherlands were among the first countries that deregulated their rail freight markets in the mid of the 1990s, in 2007 the international rail freight market within the EU was deregulated. The rail passenger transport markets are deregulated according to another time table.
This project addresses rail freight. Given that all EU-member states have committed themselves to deregulate their rail markets both the Swedish and the European perspectives are covered. The Swedish market is analyzed by evaluating research and investigation reports, official transports statistics, the annual reports of the rail operators and interviews with operators, shippers, agencies etc. The more limited review for the three other countries is based solely on literature reviews and analysis of statistics.
Sweden
Deregulation takes time, 15 years after deregulation in Sweden there are 15 operators on the rail freight market. There have been about 20 entries into the market and about 20 exits from the market. One aspect that is specific to Sweden is that the state mining company LKAB formed the subsidiary MTAB in 1996 for transporting iron ore on the rail track in the north of the country.
From about 2004, the market has become more international. Two privately owned Norwegian operators (Hector Rail and Rail Peterson) and an operator now owned by the Italian State Railways (TX Logistics) have entered the Swedish market. Between 2005 and 2010 the Swedish incumbent Green Cargo and the Norwegian State Railways jointly owned CargoNet (operator for combined rail road transport). Green Cargo and the German State Railways jointly own DB Schenker Rail Scandinavia.
The market is still dominated by the incumbents who are successor to the Swedish State Railways (SJ) or linked to the successor: Green Cargo, TGOJ (Green Cargo’s daughter company), CargoNet and DB Schenker Rail Scandinavia. These traditional operators produced in 2010 72% of all rail tonne-km, MTAB 16%, the four other operators with more than 20 employees (Hector Rail, TX Logistik, Peterson Rail and Tågåkeriet i Bergslagen) had 11% and the five operators with fewer than 20 employees 1%.
The market has been affected positively, although there are not several equal players. Threatening competition has contributed to improved efficiency and innovations. We do not share the assessment made by the Swedish Transport Agency that there is no effective competition on the Swedish rail freight market.
It is necessary to analyze trends in various submarkets. The newly established operators run exclusively combined (rail road) transports and system transports, which means that they run separated flows with a relatively low risk level. In 2010, the other operators had nearly one third of the traditional operators' volume in the submarket for combined and system transports excl. iron ore transports.
Green Cargo is the only wagon load operator. Green Cargo’s monopoly can be explained by the fact that the wagon load market requires a large cohesive network. Wagonload has decreased its share of the total Swedish rail freight market from 44% (1997) to 28% (2010).
Cost efficiency has increased; the rail freight operators produce more tonne-km with fewer employees and fewer wagons. Innovations have been realised both when it comes to transport solutions (i.e. cross-border trains operated by one operator) and rolling stock (more effective locomotives).
The fact that rail freight has become more competitive cannot solely be explained by the deregulation of the market, but deregulation has likely contributed to the largely positive development.
The profitability of the rail industry has been low; which may prevent new operators from entering the market. Solidity was lower for the newly established operators than for the incumbents and MTAB; which may indicate that the newly established operators are more vulnerable.
There are no major barriers to competition on the Swedish rail freight market. One problem that arises when a monopoly is terminated is the role of the state as owner of facilities. This is particularly true for the access to common functions and facilities in the terminals and marshaling yards. There is a need for further research and investigations in this field, also in relation to infrastructure planning.
Several obstacles are related to cross-border transports, such as interoperability, additional costs for locomotives that can be used in countries with different electricity- and signal systems, the approval of certificates outside the home country and driving and rest times for train drivers.
Questions related to track user charges, track capacity etc. are related to the internalization of the external costs and infrastructure policy. These are no specific barriers to the competition between rail freight operators.
Europe
The general analysis at the European level shows that rail tonne-km have increased more in Germany, Great Britain and The Netherlands than in the EU15 between 1995 and 2008. The relative growth in Sweden was lower than in the EU15; this might be explained by the fact that Sweden has high rail share, about twice the share for EU15 in 1995.
Despite the different conditions in terms of geographic location and size of the country, industrial structure, importance of the competing modes etc. there are similarities between the four countries. The market share of largest operator lies between 56% in Great Britain and 78% in Germany. The largest operator has 75% in The Netherlands and the “Green Cargo concern” comprising Green Cargo, TGOJ, CargoNet and DB Schenker Rail Scandinavia 76% has in Sweden.
Also in the other three countries the newly established operators compete in the sub-markets for combined transports and system transports that are easiest to implement and have the highest profitability.
In Great Britain there is no wagon load system anymore. In Sweden and Germany, where the sub-market for wagon load makes up about 30% resp. 40% of the market, the incumbents are the only wagon load operators.
More than a wagonload system does not seem to be profitable; this is the case on the Swedish market, the five times larger German market and possibly also on the European market.
In addition to the above mentioned barriers for international rail transports there are problems related to permits and rolling stock for some commodities in Germany. Most barriers on the German market are linked to the availability and pricing of the rail infrastructure and electricity. There is a potential for discrimination as infrastructure holder and operator belong to the same holding company. Many of the competition barriers in Germany do not exist in the other three countries that have legally, organizationally and institutionally independent infrastructure holders. In these countries issues related to the access to facilities in terminals and the connecting infrastructure and marshaling services etc. remain.
Development in other parts of the EU influences the development in Sweden. Within the rail freight sector an extensive consolidation has taken place and takes place. Private and state owned rail operators are active in several countries. This is also true for Sweden.
It is necessary to follow up the development on the rail freight market and in Sweden and Europe and, if necessary, implement to measures to avoid jeopardizing the hitherto positive development that has led to more cost effective and innovative rail freight transports.
Follow-up studies should not be limited to competition between rail operators but also include conditions on the market