SNCB restructures its freight operations

In an interview for Global Railway Review, Mr. Geert Pauwels, Coordinator of SNCB’s Freight Group, discusses how operations are being split from commercial responsibilities.

During the course of 2009, SNCB/NMBS (Belgian State Railways) is to introduce a new structure in its freight division. The structure divides responsibility between B-Cargo, which acts as the production company running trains from  A to B, and a series of daughter companies that will be responsible for commercial relations with customers. Parts of the new structure already exist; there will be fine-tuning of  the responsibilities of each part over the  coming months.

There will be three commercial  daughter companies:

• IFB/TRW for intermodal transport
• Rail Force for the transport of chemical products and cars
• Xpedys for the transport of dry bulk and products for the metal industry

This reorganisation is part of the last phase of the strategy that was developed by the former Chief Executive Officer of the Freight Group, Marc Descheemaecker, in 2003. Mr. Descheemaecker is now CEO of SNCB.

“The split between the commercial and logistic activities permits us to offer clients a better and more adapted service and complete logistic solutions”, says Mr. Pauwels. “B-Cargo, the operational heart of the Freight Group, will continue to guarantee the production of the trains for the commercial daughter companies”, adds Mr. Pauwels.

International traffic

There are two more daughter companies which will deliver traction for the most important international corridors.
SIBELIT will cover the route between Antwerp and Basel. The other daughter company is due to start in early 2009. To be known as Cobra, this will be a collaboration with DB Schenker on the corridor for traffic in the direction of Germany.
“Within this changed context, the  SNCB Freight Group has the ambition to continually improve the quality of its services and its productivity within the group”, says  Mr. Pauwels.

Economic problems

The economic background in 2009 is not promising; with difficulties in obtaining credit affecting many of SNCB’s freight customers. Steel is one of the railway’s most important commodities and this has been hard hit. Steel for building sites has been affected by a slowdown in the property sector. Demand from car makers has decreased as it is more difficult for consumers to get loans to purchase new cars. This hits not only the steel going into the car plants, but the transport of finished cars too.

“We see a general fall back in our activities, but most importantly in steel, chemicals and automotive”, confesses Mr. Pauwels. “We will do our utmost to reduce the setback to 10% for this year and therefore we have prepared a thorough action plan with commercial actions and initiatives.”

Competition

The European Commission’s policy of introducing competition in the rail freight sector has resulted in new operators entering the market in Belgium. One of the earliest entrants following liberalisation of the market was Dillen & Le Jeune Cargo (DLC). DLC now has some financial muscle behind it as in October 2007 the company merged with the Swiss company Crossrail AG, a subsidiary of the Australian investment group Babcock & Brown.  The merged company trades under the  Crossrail AG name and is co-owned by  the founders of DLC and Babcock & Brown.

Another formidable entrant is European Rail Shuttle B.V., a subsidiary of the Maersk shipping line. This company is targeting the intermodal sector, a key market segment for SNCB, and operates container trains between Zeebrugge and Rotterdam.

“We foresee actions on different levels to counter the competitive threat”, says Mr. Pauwels. “First of all, we are sure that we have now created a strong commercial organisation, with specialists in the different segments, in order to be able to offer complete logistic solutions. The three commercial daughter companies have their own commercial  strategy and will develop their specific markets and continue to improve their service and service offer.”

Mr. Pauwels continues, “Secondly on the operational level, the focus for this year lays in improvement of quality and an increase of productivity. We have developed several projects of process improvement in order to achieve these goals.”

“On an international level, we continue to look for partnerships and collaborations to offer traction on long distances, for example SBB (Swiss Federal Railways) and DB (German Rail)”, says Mr. Pauwels.

The Commission’s liberalisation policy opens up opportunities for SNCB in other European countries. “In France, we are developing our own offer in open access and recently we have been working with Euro Cargo Rail in order to guarantee a better quality in France”, reports Mr. Pauwels. Euro Cargo Rail is the French arm of the former English, Welsh & Scottish Railway in the UK (now part of the DB Schenker group of Germany). It has redeployed part of the EWS fleet of Class 66 diesel locomotives from the UK to France to take advantage of opportunities in the market there.

SNCB is also developing its own resources. “In order to be able to deliver the best quality in France and Germany and to be able to offer open access in France, we have ordered a number of different locomotives”, reports Mr. Pauwels. The company will be using Bombardier’s TRAXX locomotive, and also Vossloh’s G2000 design.”

At present, the company has no wagons on order, and the difficult economic background means this is unlikely to change in the immediate future. “We will evaluate the evolution closely, especially in steel and intermodal, and invest in more material whenever we need to”, says Mr. Pauwels.

Improved infrastructure

Intermodal traffic is one of the most important sectors for SNCB, and Belgium, as a country, is concerned to ensure that its main container port at Antwerp maintains its competitive position against other ports in neighbouring countries, such as Rotterdam in the Netherlands. This requires investing in good rail connections to the ports.

One of the most important projects currently under way is a direct line linking the left and right banks of the port in Antwerp, the so-called Liefkenshoek rail connection. Construction of this started in mid-November 2008 after the Belgian rail infrastructure company Infrabel concluded the formation of a Public Private Partnership for the link and the award of the construction contract.

Three consortia tendered for the PPP. The winning consortium was LOCORAIL NV, which has won a DBFM (Design, Building, Finance, and Maintain) contract that will permit Infrabel to use the infrastructure for 38 years for an annual availability fee of approximately €50 million (payable quarterly), becoming the full owner of the works at the end of that period free from any further obligations.

The PPP for the construction works is worth approximately €690 million, and the Flemish Region will provide co-financing to the extent of €107 million.

The building of €75million of rail infrastructure associated with the new link will be financed by Infrabel; this is not part of the DBFM assignment.

To safeguard the competitiveness both of the port of Antwerp and of rail container transport, users of the Liefkenshoek rail connection will not pay any user tax. The new line will be available for use in mid-2014.

LOCORAIL NV is made up of the construction companies CFE NV, VINCI Concessions SA, and BAM PPP Investments Belgium. The construction consortium is THV LOCOBOUW, which includes MBG, VINCI Construction Grands Projets, CEI-De Meyer, and Wayss & Freytag.

Ghent curve

While the Liefkenshoek rail connection will mark a major improvement in the rail infrastructure at Antwerp, Infrabel has been making other smaller but still significant improvements at the port. The so-called ‘Gentboog’ (‘Ghent curve’) in Melsele is a 1.3km new curve which connects Line 10, from Antwerp Left Bank to the Kennedy Tunnel, with Line 59 (from Antwerp to Ghent). This  €10 million project allows through running from Antwerp Left Bank to Ghent, Zeebrugge, and the north-west of France. The new line  saves freight trains between 30 and 90 minutes and allows better use of capacity.

When the Liefkenshoek connection is complete in 2014, trains from Antwerp Right Bank will also be able to use this curve to run direct to Ghent and beyond.

Antwerp: further developments

Infrabel is investing some €100 million in the railway infrastructure of Antwerp Left Bank, amounting to 153km of additional track.  A main focus is access to the Deurganckdock, which handles a large amount of container traffic.
The Schijn junction and the Krijgsbaan junction (Mortsel) at Antwerp Right Bank will increase capacity on the route between Antwerp and Germany by 30% by 2012 at a cost of approximately €160 million. These new junctions will form the first phase of a second railway entry to the port of Antwerp by means of a 28km new freight line between Antwerp-Noord and the Lier-Aarschot line, currently being investigated in detail by Infrabel.

Zeebrugge

At Zeebrugge, there is to be a major modernisation and expansion  of the freight yards and provision of a new line, the Ter Doest line,  to provide direct communication between the eastern and western port zones. This €20 million line, due to open in 2011, will give increased flexibility and capacity on the Zeebrugge-Brugge main  line. A third track will be provided on that main line at a cost of  €130 million, with work due to start in 2011 and finish in 2016.

Onwards from Brugge to Ghent, Line 50a is being quadrupled under a programme that began in 1994 and will last until 2018.  This major project includes the elimination of all level crossings  along the route.

These improved infrastructure projects will put Belgium’s  ports on a better competitive footing. “There are ongoing discussions on the Iron Rhine (revival of an old rail route to Germany), and we are waiting for a second access to the port of Antwerp”, reports Mr. Pauwels.