VR Cargo: new projects in the new reality
Until recently Finland has been the only EU member state with a direct and operational rail link to Russia. With the new EU enlargement it will have to face new challenges to compete with new routes and players. VR Cargo, the freight traffic division of Finnish Railway Company, however has managed to find its market niche by offering high quality professional service to its customers. Already today Finland shows a good example of railway interoperability providing for European interoperable solutions and sustaining successful traffic development with Russia on the same network. Timo Mantyla, Key Accountant Manager, VR Cargo European Traffic, tells more about the company latest activities and new projects.
Growing volume figures
In 2003 VR recorded a considerable growth in passenger and freight volumes. The number of passenger journeys rose in both long-distance and domestic traffic. Freight volumes increased, particularly between Russia and Finland. VR Cargo carried altogether 43.5 million tonnes of freight by rail during 2003, which is up by more than four per cent on the previous year's total of 41.7 million tonnes. Domestic volumes increased by about one per cent to 25 million tonnes. Eastbound freight traffic rose nine per cent to 17.6 million tonnes. Of this total, freight leaving or remaining in Finland amounted to 14.4 million tonnes as against 12.6 million tonnes the year before. The volume of transit freight traffic via Finland to other countries was 3.2 million tones as compared with 3.5 million tonnes in 2002. The TransSiberian traffic nearly doubled from 52 thousand TEU to about 1.003 thousand TEU in 2003 accounting to a good reputation of the route and steady development of the Russian market giving rise to all traffic to Russia. The amount of freight transported west by rail-ferry at the Tornio station in northern Finland showed a seven per cent increase to 1.0 million tonnes.
The traffic volume going from the Far East to Moscow and other destinations in Russia is growing very fast, and I believe that Finland's position as one of the key gateways to the Russian market will remain very important in this delivery chain. VR Cargo offers a very competitive transit time from China to Finland – 14 days including border crossings – along with the high quality service. Speaking in terms of recorded statistics, the beginning of 2004 already shows further development in this trade for VR Cargo and with the current development trend we can anticipate a 20-30% growth by the end of the year in this traffic, perhaps even more. The key to the success of VR Cargo in the Russian market is in a long term fruitful cooperation experience with Russia. Promotion of the VR interests in Russia is also being carried out by the company representation office in Moscow which has been in operation for 12 years by now. Currently the main task of the Moscow office is to keep contacts with the Russian railway authorities, to provide assistance in terms of market information or in case of arising problems in Russia. We follow the processes that are currently taking place in Russia very closely and tailor our activities to meet the changing situation in the market. The way these processes reflect on VR Cargo activities will be tangible in the longer run. Today the Russian market is growing faster than Russia itself and provides a lot of opportunities for growth of transportation capacities. There surely are some factors that can affect transportation volumes of certain types of cargo, like raw oil. The VR cargo structure is a mix of many types, however, and we do not expect any serious fluctuations in our traffic. The development of the Russian economy will give impulse to further growth of consumption in the near future and will bring correspondent changes in the transportation structure. We therefore will have to adapt our services to a new situation which will come in the future. As far as the Russian railway tariff policy goes I think we are in the same boat with the Baltic states and other countries. The major problem concerning, let us say, Russian exports is in the variety of tariffs applied in respect to transportation to Russian own ports and to foreign ones. Equal tariff rates would create a fair ground for competition, and operators will compete on the level of service quality. That would actually make VR Cargo even more competitive than today.
Containers and wagons
We follow the tendencies in the market very closely and see the increasing demand for containerization. This also reflects on the volume of containerized cargo in our traffic which is constantly growing. In trade with Russia the majority of the containers delivered there come back empty because of the nature of the goods transported – most of the freight transported from Russia is bulk cargo which is not suitable for containers unlike consumer goods going the other direction. Currently it is rather hard to find a balance in the container traffic on this route. A possible solution is to have containers stored in Russia until there is a load to fill it with for a return delivery. Another good alternative to an empty return leg is to use containers owned by the Russian Railways which do not need to be transported back. Currently there are about 40% of private Russian railway wagons used in the VR Cargo traffic. Russian wagons do their job, however they are not on the same quality level as some of our new wagons. The situation is quite understandable – Russia is a big country, and the railway reform has just started there. The state economy is growing, and sooner or later the Russian rolling stock will undergo technical modernization and the wagon fleets will be renewed. As a matter of fact we already see it in practice – there are more privately owned wagons in the traffic between Russia and Finland. The number of the Russian state owned wagons depends on the type of cargo transported however. Most of the special purpose wagons – for wood transportation, tanks, etc. – are private and new, while common covered wagons are mainly those owned by the Russian Railways.
Secured information chain
With the VR Internet based system RailTrace we offer our customers a possibility to follow their cargo movements in real time. This system is currently operational in Finland and some European locations and we are putting very much efforts to make this system operable in Russia with the RailCom project on which we work in close cooperation with our Russian colleagues. Russian Railways have a quite good tracking system and now we need to connect our two systems to be able to provide our customers with the relevant information. The objective is to give the customers access to international wagon and consignment tracking in Europe and Russia which in the end will improve railway's competitiveness.
Interoperability: a demanding challenge
Railway comprises about 25% of the entire Finnish transportation market which is some three times more than on the average in Europe. This share would have been even bigger if we took just the international traffic. Today all the European railways, privately and state owned, face the same major issue – they have to be efficient enough to compete with the road traffic. Every year VR puts much effort in further development of its efficiency. However, provided that railway companies in other countries are less or more efficient there is no way how railways could compete with other transport systems. Technical interoperability issues are very demanding and require lot of time, investments and a great deal of cooperation between the industry players on pan-European level. If we consider a train consisting of one locomotive and a group of wagons going without stops all the way on an intra-European route, say from Sweden to Italy. This would require at least a common language for security which I believe has to be English, just like in aviation. Then we would need compatible kinds of electric systems with unified demands to passing locomotives in all the countries en route, as well as some other interoperable solutions. In the current situation there is no other way for different national railways but to cooperate and think about the customer. We all have to adapt our service to be able to offer our customers a high quality scheduled transportation with the right price acceptable for the customer. Railway operators in different countries have to cooperate in terms of offering a competent market price for transportation on intra-European route and to adapt their services to right sufficient quality. Interoperability is of course a very challenging issue however requires a lot of contributions.
Slow down to make it quick
We have new developments on some of our European routes. Thus, considerable changes have been done on the north-eastern route Tornio – Haaparanta which traditionally was used for transportation of great volumes of paper. Currently there are more chemical goods transported there both in containers and tanks. One of the most challenging projects is our new track gauge changing system which will be applied on the European routes of VR Cargo, Sweden to begin with. The gauge of Sweden and so that of Germany differs from the gauge of the Finnish railway network. The new system does not require the change of bogies on the border and tracks can adapt themselves to different gauges. We have done all the necessary technical provisions to start the operation of the new system and now are negotiating the launch of the pilot commercial operations with all the parties concerned - rail authorities, customers, etc. The first operations are anticipated at the beginning of 2005. This project is a very important breakthrough for the rail industry as there are no major systems of this kind working in Europe for freight traffic so far. A long time ago a similar system, however applied to passenger traffic, was used for traffic between France and Spain. We will be the first to start a project of the kind for freight operations. This system is a good example of interoperability in railway industry and we work in close cooperation with Finnish Rail Administration, our partners in Sweden and customers. The pilot operations will be also supported by the EU financing. This new system is insured by a very interesting technical solution of special wagons equipped with a kind of bogie able to adapt to different gauge patterns. Trains do not have to be fully stopped when changing the gauge, and slowing down on the track transition section will be sufficient. This system provides for a smooth and fast crossing, while cargo and transport operators will save a lot of delivery time and is an ideal system for block trains traffic. Once proved to be successful this system can be also easily applied to train ferries operating in trade between Finland, Sweden and Germany, and train ferry companies closely follow the progress of this project.