New market research in the United States highlighting the deterioration of rail’s price compared with road does not mean South Africa should remain dependent on trucks to haul freight. In its latest global business information, operational services index company IHS Markit found that US domestic intermodal shippers did not save as much by converting loads from road to rail as in recent years. In addition, they found that trucking services had been more competitive on lanes under 3 000km. “The dwindling pricing advantage means that there is less financial incentive for shippers to transport cargo intermodal – that is via rail, where it is onloaded and offloaded by trucks – rather than just utilising trucking for the entire length of the trip. “Shippers compare transit times, on-time performance, and total cost between intermodal (truck and rail) and just trucks, when deciding how to move their freight,” reads an index statement. According to Professor Jan Havenga, a logistics expert from the University of Stellenbosch, much effort went into the development of domestic intermodal systems in the US. Intermodality, he explained, involved “last-mile deliveries – and where applicable, first-mile too – by truck and thereafter using rail for long-distance freight within the borders of a country or region and where the containers do not cross the quays of ports, in other words land-based transport only”. Emphasising his point, he added that in North America from 2000 to 2017 the number of domestic containers transported tripled and international container traffic grew by 60% – a 50% faster growth than the US economy. Havenga also mentioned that today, in the US, there were just as many domestic intermodal containers as international containers, whilst South Africa had more or less none. It meant, he said, that South Africa had no other choice but to move more freight to rail. “Like everything, for all freight flows, the price advantage diminishes as more and more freight uses rail. We know that it will be impossible for road to move iron ore from Sishen to Saldanha at the same cost as the railway as it will be five times more expensive. “There is also short-haul low-density freight on road that will never be cost effective on rail. Rail and domestic intermodal flows should be identified first as there are quite a few instances where it will be cheaper.” Elaborating on the US price deterioration, Havenga said they had already exhausted opportunities for a very large portion of domestic, mostly palletised cargo that was more economical with intermodal movements, and that freight had already moved to intermodal. “We are talking about freight in the ‘middle’,” he said. “Small changes in some competitive factors can influence where the freight should go. Something such as lower driver wages, low capital cost for equipment and cheap fuel prices can easily influence this."
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Like everything, for all freight flows, the price advantage diminishes as more and more freight uses rail. – Jan Havenga