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NEW ZEALAND RAIL CONFERENCE 2015

Rail as the driving force behind N.Z. growth

2-5 June 2015

Intercontinental Hotel, Wellington

Optimised Integration of Intermodal Services

Presentation by:

Ken Shirley, CEO, Road Transport Forum NZ

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Road Transport Advocate Presenting at a

Rail Conference

Fly in the Ointment

Damp Squib

Pork Chop at a Bar mitzvah

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Slide 3

Conference Theme

“Rail as THE primary force behind

N.Z. growth

I don’t think so

An unrealistic and fanciful

expectation or goal

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Slide 4

Universal Rule of ThumbThe more advanced the economy

the lower the dependency on Rail

2009 - Stratford - Okahura mothballed

2012 - Napier - Gisborne mothballed

Threat of Closure - Northland

- Northern Wairarapa

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1953 1980 2015

Km of Track 5689 4,000

Percentage of Freight

(Tonnes)

- 30% 7%

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0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%

90.0%

100.0%

ROAD RAIL INLAND

WATERWAY

TRANSPORT SERVICE

% O

F F

RE

IGH

T M

AR

KE

T

tonnes-lifted

tonne-km

FREIGHT MODAL SPLIT IN THE EU27:

MEASURED BY TONNES-LIFTED AND TONNE-KM

Source: Eurostat-2009

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Futility of modal competition debate:

– Political Posturing v Economic

Reasoning

All transport modes need to expand to

meet the projected freight task

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Why most freight is moved by truck

1. Geographic flexibility:

– country wide point to point pick-up and delivery

– 93,000 km roads v 4,000 km railway

2. Time flexibility:– responsive to “just in time” requirements of customers

– not constrained by railway timetable or shipping schedule

3. Responsive to unforeseen changes in:

– volume, type, origin and destination

4. Avoidance of transhipping:– quicker, safer, cheaper

5. Readily adaptable to specialist and unusual consignments

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Some tasks work best with modal integration e.g. fuel from refinery to customer

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Rail most efficient

for some tasks

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Many tasks only achievable with trucks

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Trucks are the only way to reach most factories, stores, restaurants or homes.

“Only 3-7% of the road freight task is contestable by rail”

Conversely:

“Most of the freight currently travelling by rail is contestable by road – with the notable exception of coal transport over the

Southern Alps.”

Source: Mackie, Baas and MANZ (2006)

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MARKET LED MODE CHOICE

Complex logistics require a market led

response

Rigid prescriptive planning and misguided

political intervention will result in:

– Massive mis-investment

– An inefficient transport sector

– Bad economic outcomes

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Markets need information:

– Transparency of true and full costs

Choice based on efficient pricing

– No distorting subsidies

– Removal of stifling regulation

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Lessons from the past:

– Trucking once highly regulated with price and distance control to protect Government owned railways

Before 1961 - 50km limit

1961 – 1977 - 67km limit

1977 – 1986 - 150km limit

Post 1986 - unlimited

NB. Road and rail freight rates fell 25% in the first year of deregulation

(Bollard and Pickford)

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KEY QUESTIONS COVERING THE EFICIENCY

OF A NATIONAL TRANSPORT SYSTEM

1. What is the best way to encourage the optimum use of existing

infrastructure?

2. What is the optimum rate of investment in new infrastructure?

3. Are the projected increases in freight volumes valid?

4. Can the capacity of NZ’s transport network keep pace with

demand?

5. What are the options:

(i) modal substitution?

(ii) Expanded capacity?

(iii) both (i) and (ii)

Note: These are good problems to have. Problems of growth and

expanding opportunity.

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The Challenges for Rail

To concentrate on that part of the logistics chain

where competitive advantage exists and a

commercially viable model can be sustained.

Rail has a clear competitive advantage in:

• Longer haulage of commodity products that

are less time sensitive.

• Dedicated routes between ports and transport

hubs to circumvent urban traffic congestion.

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The challenges for Rail cont’d

Ports of Auckland – Wiri

Ports of Tauranga – Metro Port

Ports of Lyttleton – Rolleston

Ports of Tauranga (Timaru – Rolleston)

Hamilton

Palmerston North

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The challenges for Rail cont’d

To operate efficiently in freight and logistics

trains are dependent on trucks.

Logistics companies with large truck fleets want

to use rail.

The task is the logistics of moving goods.

The train and the truck are mere tools.

This optimum mix will only be achieved with

transparent pricing free of distorting subsidies.

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