Market & Competition - Deutsche Bahn AG

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Increases of previous years are reversed (per cent; basis: traffic performance; figures rounded) Crash affects all transport modes in Germany 2009 saw a sharp increase in both inter- and intramodal competition in the freight transport market. Traffic performance was significantly down year-on-year. The German freight transport market (rail, road, inland shipping, long-distance pipelines) suffered an unprecedented slump of almost 12 per cent in traffic performance across all transport modes in 2009. The crash hit inland shipping, and above all rail, much harder than road. It was not until the last four months of the year that the overall market began to pick up again, albeit at a low level. Although all the transport modes withdrew large volumes of freight space from the market, the drastic drop in demand led to high surplus capacities, which in turn triggered aggressive intra- and intermodal price competition and corresponding modal shifts. While road haulage succeeded in raising its market share, rail lost market shares for the first time since 2002. The drop of one percentage point cancelled out the increases that had been made since 2005. Decline is determined by the freight structure In the road haulage segment (German and foreign trucks – inclusive of cabotage transports in Germany), the decrease in tonne-kilometres amounted to approx. 10 per cent, which was lower than in the other transport modes. Following the strong growth in traffic performance by foreign road haulage companies in preceding years, who had fared better than their German competitors, the situation in 2009 was reversed as a result of the poor foreign trade trends. This is confirmed by the toll statistics published by the Federal Office for Freight Transport. Truck-kilometres by foreign transport companies on the toll road network fell by 12.8 per cent, compared with 11.2 per cent for German companies. The far less severe decline for road transport compared with rail is due primarily to the different freight structure. The comparatively low dependence of road on the coal and steel industry, stable performance by the food industry – one of the main customer groups for road haulage – as well as the positive effects of economic stimulus programmes in the construction sector all helped to mitigate the downturn. Until autumn, freight rates dropped drastically owing to the surplus freight space available. Renegotiations and new tenders that ended in high discounts were not uncommon. This was particularly evident from the growing importance of the spot market, in which transport orders are placed at short notice for the freight rates applicable at the time, and which in some cases change on a day-by-day basis. In many cases, freight rates were down 30 per cent or more year-on-year. In 2009 traffic volumes for inland shipping were down by a good 16 per cent year-on-year to 53.7 billion tonne-kilometres, the lowest level for around twenty years. The severe winter weather at the start of the year and the low water levels in autumn 2009 exacer bated the crisis-induced downturn. With regard to overall performance by this segment, it must be borne in mind that in 2009 the Federal Sta tistical Office re vised the calculation methods for establishing transport distances in inland shipping. The decline would presumably have been even worse without that special effect. As for the whole market, the slump in demand led to excessively high surplus cargo capacities, which caused a drastic drop in prices. On some routes, the daily freight rates at times amounted to only half the level of the previous year. This also affected contract freight, where high discounts were granted in new invitations to tender and contract renewals. Although the railways had achieved the strongest average growth rates of all transport modes in the preceding years, in 2009 they suffered the worst yearon-year drop in traffic performance. At 95.8 billion tonne-kilometres, traffic performance was down by a good 17 per cent and almost as low as the 2005 figure. Following decreases of up to approx. 30 per cent lasting until late summer, the decline tailed off towards the end of the year as the economy began to recover and owing to the already poor performance in the last quarter of 2008. The situation did not begin to improve until December. The downturn was particularly noticeable in the crisis-ridden coal and steel, automotive and chemicals industries and also in container traffic, which had enjoyed strong growth in the preceding years. This sharper drop compared with road can be attributed primarily to the different freight structure, but also to a modal shift resulting from increasingly fierce price competition. Surplus truck capacities from Germany and abroad were offered on the market with huge two-figure discounts, leading to the corresponding distortions. Railways affected to different extents Whilst DB Schenker Rail suffered a downturn of almost 21 per cent in traffic performance in Germany, non-DB railways fared better with a substantially lower decrease of just 3.7 per cent. There are various reasons for this. On the one hand, there are pronounced differences in freight structure. While the segments of coal/coke, ore, iron and steel, all of which were hit hard by the crisis, make up more than 30 per cent of DB Schenker Rail’s total performance, they account for a share of only around 7 per cent for its competitors. On the other hand, roughly two thirds of traffic performance by non-DB railways refers to the segments of combined transport and mineral oil products, both of which enjoyed above-average growth. The share of these transports at DB is “only” around 35 per cent. Moreover, single wagonload traffic was affected more severely than block train transports by the economic crisis and the fierce competition with road haulage. Single wagonload traffic in Germany is provided almost exclusively by DB Schenker Rail, so that the losses in this segment were insignificant for non-DB railways. International transports, which suffered a stronger decline than domestic transports owing to the downturn in exports and imports, also contributed to this trend. These transports make up more than half of DB Schenker Rail’s traffic performance, compared with a share of only around one third for non-DB railways. The poorer trend for international transports Traffic performance by rail freight fell by 17 per cent in 2009, leading to the lowest traffic performance since 2005. 10 11 Photo: Daniel Schärer/www.trainpassion.ch Market & Competition
therefore did not have such a significant effect on the overall results. Intramodal shifts as a result of the noticeably higher pressure on prices were a further factor. These shifts were also caused by foreign railways and their subsidiaries, some of which launched aggressive price campaigns in the German market. On the whole, non-DB railways achieved a noticeable increase in their share of rail freight in Germany to 24.6 per cent in 2009. Severe decline also affects European rail freight market The trend for the European rail freight market shows similarities to the situation in Germany. According to DB’s calculations, traffic performance was down by 20 per cent, which was more than double the drop sustained by road. Again, this was due to the different freight structures of rail and road, and to modal shifts resulting from increasingly aggressive competition The drop in traffic performance by rail in Europe was more than twice as high as for road. and surplus freight space. As in Germany, the traffic performance trend was significantly weaker for the incumbents than for their intramodal competitors, who actually achieved growth in some countries. Here, too, the focus on different sectors and business areas played a central role. In 2009, crude steel production in the EU27 was down by a total of almost 30 per cent year-on-year. Drastic decreases in production were sustained by all the important steel-producing countries, such as Germany (almost 29 per cent), Poland (approx. 26 per cent), France (approx. 35 per cent), Italy (approx. 28 per cent) and the Czech Republic (approx. 28 per cent), all of which also rank amongst the largest rail freight markets in Europe, and the situation was directly reflected in performance by the incumbents. The liberalisation progress in the individual Member States also affected overall performance by the railways. In Germany and Poland, for instance, where brisk competition on fair terms has evolved in the last few years and where railways which compete with the incumbents have already acquired a comparatively strong market position, the positive performance by these operators alleviated the overall downturn for rail. The situation in France, however, is different. Owing to the continuing market access barriers, there are still only relatively few competitors for Fret SNCF, the state-owned rail freight operator. As a result, the positive trend for the DB subsidiary Euro Cargo Rail, which actually achieved a significant increase in traffic performance despite the difficult environment, hardly impacted at all on overall performance by rail freight in France. Railways continue to expand their international market activities In 2009, the rail freight operators again expanded their market activities in Europe. Customers increasingly demand holistic international products with a high standard of quality provided by one single source. The market as a whole is also becoming increasingly international, so that an international network is consequently indispensable for rail to improve its compe- The toll statistics published by the Federal Office for Freight Transport showed a more severe drop for foreign trucks than for their German competitors (far left). Despite the crisis, there were no mass redundancies in 2009 (left). The coal/coke, ore, iron and steel industries were all hit hard by the crisis. A large proportion of their products are transported on rail (right). titiveness and continue to grow. For some years now, there has been a clear trend towards cooperation agreements between rail freight operators, the formation of joint ventures and production companies, mergers and takeovers. The challenges facing the railways, such as capacity utilisation, cost-effective operations and more aggressive competition – which were even more apparent during the economic crisis – are likely to strengthen rather than impede this trend. In summer 2009, for instance, Fret SNCF took over the foreign business activities of Veolia Cargo in the Netherlands, Belgium, Germany, Italy and Switzerland, thus consolidating its position in Europe. Following the takeover of the Polish private railway undertaking PCC Logistics, DB Schenker Rail has underpinned its presence on the important East-West corridor and expanded its international network to include the second-largest rail freight market in Europe. It is the major players who are forcing market consolidation. The activities of DB Schenker Rail, Fret SNCF, Trenitalia, Rail Cargo Austria and SBB Cargo outside their home markets are changing the face of the European competitive environment. This is evident from the graphic on page 15 which shows the trends in the German rail freight market. Crisis necessitates comprehensive restructuring In order to operate transports profitably despite the high overheads, the railways launched comprehensive savings and restructuring programmes in the course of 2009. In an attempt to counteract the economic crisis, the major players in the European rail freight market cut back their rolling stock and human resources. A large proportion of rail freight vehicles stood idle in 2009. By the end of the year, around 25,000 DB Schenker Rail wagons in Germany – roughly a quarter Market & Competition 12 13 Photos: Langrock/Zenit/laif; Pablo Castagnola; Hartmut Reiche Competitors increase market share by more than three per cent Traffic performance in the rail freight market has dropped substantially Traffic performance by rail freight (billion tonne-kilometres, figures in brackets show year-on-year change in per cent) Market share of DB and its competitors (per cent)
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