Despite this, the privately-owned rail freight operator SCT Logistics will introduce its first services on the corridor next year, competing not only with these external competitors, but also the two major players already operating on the corridor, Pacific National and Aurizon.
“For SCT, our next significant challenge occurs in January 2017 when we commence our Melbourne to Brisbane service, bringing a third rail operator to that market for the first time and providing another option over road,” says Mr Geoff Smith, SCT’s managing director.
“Significant volumes of freight move up and down our eastern seaboard, but with much of the existing rail infrastructure outdated, especially with steam-era alignments in many places, the majority of freight is carried by road. Despite a major investment programme over the last decade, rail operators have been ineffective in attracting freight away from road.”
SCT already serves the Brisbane market via another operator’s services, but Smith says the introduction of its own dedicated services will provide customers with greater flexibility to grow their businesses by utilising SCT’s integrated rail network and expanded national footprint.
“Whilst the North South corridor continues to be dominated by the road industry, we’re confident that our approach combined with our unique rail operations and new terminal facilities, will allow us to expand our business in key regional areas,” he says.
SCT was founded in 1974 as one of a number of rail freight forwarders in Australia which relied on government infrastructure. In 1995 new national competition policy guidelines and the separation of above and below rail functions provided the opportunity for private sector rail operators, including SCT, to compete on major rail corridors.
“Our business has expanded considerably from those early days as we have methodically built and developed an independent rail terminal network throughout Australia. In addition to our daily services into Perth from Melbourne, Adelaide and Parkes in New South Wales, the business operates a number of bulk and agricultural trains as well as daily shuttles to ports in Melbourne, Adelaide and Perth.”
In order to enter the north-south corridor SCT has constructed two new strategically-located rail terminals and warehousing hubs adjacent to the ARTC network, the first 65km south of Brisbane at Bromelton, Queensland, where access to the main Brisbane terminal is not available to SCT.
The second is close to the major regional hub of Albury-Wodonga on the New South Wales-Victoria border which will attract traffic from a number of major local processing plants and producers.
“Both of these will play a significant role in developing SCT’s Queensland rail services, complementing our established hub at Altona near Melbourne,” Smith says.
“We are confident that our business approach combined with our unique rail operations and these new facilities will allow us to expand our business in key regional areas whilst enhancing our capabilities on the Melbourne to Brisbane and Adelaide to Brisbane rail corridors.
“There is no doubt in my mind that rail is continuing to improve its performance and reputation in meeting the increasing challenges and performance levels that businesses demand. Likewise, rail’s more direct competition in road and sea is aggressive and innovative in achieving their objectives.
“Strong messages continue to emanate out of our federal and state governments for an expanded role for rail in meeting the increasing freight demands of our country, and there are a number of areas where their policies will have a profound influence on rail in the future.
“The uneven playing field, that rail generally operates under, continues unabated. Rail pricing in Australia generally requires rail operators to pay access and usage charges that provide a commercial return for the track owners on that asset. However, in the case of the east coast freight market in Australia, road usage charges through truck registration and fuel excise are around five-times less than rail as a percentage of total operating costs.
“We are often asked why rail struggles to compete with road over such a significant 3600km round trip journey. The relative access charges are a significant factor as to why road remains the dominant player on this corridor.
“Recent announcements suggest that the Australian government appears to be becoming more serious in considering the introduction of a more equitable road user pricing system, though has yet to commit to this in detail. Were this to proceed, it would be a significant development for the rail sector and will enhance our ability to compete on a comparable pricing basis. We look forward to seeing how those comments are turned into action.”
On the east-west corridor between the eastern states and Perth, rail’s market share is estimated at around 70%. Unlike the east coast network, rail’s major competitor here is sea where domestic freight travels on foreign ships using a permit system for coastal freight.
Smith argues that this type of open-access is not consistent with other western nations such as the United States.
“It is difficult, if not impossible in some circumstances, for any landside operator governed by the laws, taxes and wage structures of that jurisdiction, to compete against international ships with foreign crews and marginally-costed vessels using our waterways free of charge,” Smith says. “The federal government’s future policies in this area will have a profound influence for rail on this corridor.”
The east-west corridor has been a successful route in the past, but over the last 10 years performance has been affected by the introduction of more competitors resulting in less efficient trains, and the slowing of the mining development boom in Western Australia.
“The demise of Australia’s manufacturing base is no doubt resulting in more freight and consumables being imported and received directly through our ports, and with the tyranny of distance for Western Australia, and its proximity to Asia, this trend will no doubt continue,” Smith says. “I can see in the future that diminishing volumes will lead to a reduction of operators, probably two, with a prospect of it becoming a single operator market over the longer term.”
In addition, Smith says that “without doubt” the government’s proposed $A 10bn ($US 7.48bn) investment in a better-aligned Inland Rail route between Melbourne and Brisbane will provide additional and necessary capacity on the network, reduce transit times and allow operators to run larger more efficient trains. All of which will result in a more competitive rail network and increased market share for rail on this corridor.
“Australia will no doubt see a continued increase in imported volumes through our capital city ports. Road congestion in our cities is a significant problem and growing for which there is a long-held view in politics that short-haul rail will play a role in decongesting our roads.
“As an industry rail is well positioned to play an increasing role in moving containers through our ports. A large number of inland rail terminals are already established in our cities and regional centres. However, in most cases it is still difficult for rail operators and intermodal terminal owners to compete against trucks servicing our ports, and critical infrastructure deficiencies linking our ports to the rail network remain.
“It is essential that these are addressed in order to assist in alleviating serious road congestion problems in our major cities, but the current lack of action makes it unlikely that we will see the kind of modal shift that governments are contemplating.”