Setting up a Rail Baltic business network in Finland, Estonia, Latvia, Lithuania and Poland, conducting a study on the needs of the business sector

Transcription

1 Supported by Setting up a Rail Baltic business network in Finland, Estonia, Latvia, Lithuania and Poland, conducting a study on the needs of the business sector MOVE/B1/

2 Fast facts about the project MOVE/B1/ Awareness Spreading the knowledge about Rail Baltica within the business community Network Building the network of business entities interested in exploring Rail Baltica business opportunities Expectations Developing the study that reflects business sector expectations towards the new rail network and its business and operational plan

3 Network events along the Rail Baltica route - event locations Sources: railbaltica.org; photos from RBBN events

4 Network events along the Rail Baltica route Tallinn Bialystok Riga Vilnius Parnu Helsinki - event locations Sources: railbaltica.org; photos from RBBN events

5 Never too early to talk about infrastructure projects Illustration Sources: team analysis, railbaltica.org

6 Never too early to talk about infrastructure projects Illustration Business plan Sources: team analysis, railbaltica.org

7 Never too early to talk about infrastructure projects Illustration Business plan Construction phase begins Sources: team analysis, railbaltica.org

8 Never too early to talk about infrastructure projects Illustration Business plan Construction phase begins Service concept and value proposition communicated Sources: team analysis, railbaltica.org

9 Never too early to talk about infrastructure projects Illustration Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

10 Never too early to talk about infrastructure projects Illustration First cargoes on full RB Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

11 Never too early to talk about infrastructure projects Illustration Contracts negotiated First cargoes on full RB Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

12 Never too early to talk about infrastructure projects Illustration Customer specific investment decisions Contracts negotiated First cargoes on full RB Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

13 Never too early to talk about infrastructure projects Illustration Start discussions with value chain partners Customer specific investment decisions Contracts negotiated First cargoes on full RB Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

14 Never too early to talk about infrastructure projects Illustration Start discussions with value chain partners Customer specific investment decisions Contracts negotiated First cargoes on full RB Business plan Construction phase begins Service concept and value proposition communicated Line operational Sources: team analysis, railbaltica.org

15 Cargo will not flow automatically and any misalignment with the market will be expensive Example: English channel cargo flow (million tonnes) Recession First 10 years Last 10 years Sources: College of Management of Technology Lausanne, Getlink group

16 Cargo will not flow automatically and any misalignment with the market will be expensive Example: English channel cargo flow (million tonnes) Recession 10 M tonnes difference First 10 years Last 10 years Sources: College of Management of Technology Lausanne, Getlink group

17 Cargo will not flow automatically and any misalignment with the market will be expensive Example: English channel cargo flow (million tonnes) Recession 10 M tonnes difference First 10 years Last 10 years Sources: College of Management of Technology Lausanne, Getlink group

18 What s the starting point?

19 What s the starting point? Road Road is highly competitive and commercially aggressive. Quote: we receive 10+ sales calls per week from truck companies Rail For SME s little to no interest from railway operators.

20 What s the starting point? Road Road is highly competitive and commercially aggressive. Quote: we receive 10+ sales calls per week from truck companies Rail For SME s little to no interest from railway operators. Road service level relatively high: easy order and document processing, operational flexibility, and proven working relationships. Inefficient infrastructure, charges unclear, high surcharges for additional services, costly loading, lack of the first/ last mile services, complex and inefficient documentation.

21 What s the starting point? Road Road is highly competitive and commercially aggressive. Quote: we receive 10+ sales calls per week from truck companies Rail For SME s little to no interest from railway operators. Road service level relatively high: easy order and document processing, operational flexibility, and proven working relationships. Inefficient infrastructure, charges unclear, high surcharges for additional services, costly loading, lack of the first/ last mile services, complex and inefficient documentation. Road does not necessarily fulfil logistics needs: truck shortages during the peak seasons, traffic congestion is becoming an increasing issue. General lack of know-how, existing experience mostly based on domestic rather than international shipments.

22 What s the starting point? Road Road is highly competitive and commercially aggressive. Quote: we receive 10+ sales calls per week from truck companies Rail For SME s little to no interest from railway operators. Road service level relatively high: easy order and document processing, operational flexibility, and proven working relationships. Inefficient infrastructure, charges unclear, high surcharges for additional services, costly loading, lack of the first/ last mile services, complex and inefficient documentation. Road does not necessarily fulfil logistics needs: truck shortages during the peak seasons, traffic congestion is becoming an increasing issue. General lack of know-how, existing experience mostly based on domestic rather than international shipments. Cargo safety important in selecting transport mode. Road is a preferred means of transport for fragile freight types. No major prejudice towards rail. Companies simply seek for competitively priced, reliable and quality services.

23 What potential direction could we take?

24 What potential direction could we take? Attract new type of customers In addition to traditional key accounts, to be successful Rail Baltica will have to attract customers that usually transport lower density and higher value goods. Higher product value also means lower volume freight large shipments freeze large amounts of cash. These companies mostly use road as their main transport more, they are located near major road arteries.

25 What potential direction could we take? Attract new type of customers In addition to traditional key accounts, to be successful Rail Baltica will have to attract customers that usually transport lower density and higher value goods. Higher product value also means lower volume freight large shipments freeze large amounts of cash. These companies mostly use road as their main transport more, they are located near major road arteries. who have their own needs Point-to-point distribution becoming a market standard. Companies are increasingly interested in fully integrated solutions. Regular or shuttle services would attract high interest in the market. High value adding freight customers typically require specialised services, e.g. 24h deliveries, specialized rolling stock, or controlled thermal conditions. In the Baltic States, international customers sometimes define logistics choices of local manufacturers.

26 What potential direction could we take? Attract new type of customers In addition to traditional key accounts, to be successful Rail Baltica will have to attract customers that usually transport lower density and higher value goods. Higher product value also means lower volume freight large shipments freeze large amounts of cash. These companies mostly use road as their main transport more, they are located near major road arteries. who have their own needs Point-to-point distribution becoming a market standard. Companies are increasingly interested in fully integrated solutions. Regular or shuttle services would attract high interest in the market. High value adding freight customers typically require specialised services, e.g. 24h deliveries, specialized rolling stock, or controlled thermal conditions. In the Baltic States, international customers sometimes define logistics choices of local manufacturers. and expect highest standards Rail prices should be similar to road. Rail convenience should be similar to road. Revised rail value prop. (targeting value adding freight) is expected to match road s offering, customers would like to reduce the hassle: Avoiding or eliminating double loading impact on cost and quality Integrated solutions appreciated: collection of the freight, loading/ unloading, door to door delivery in limited timeframe, shipment tracking

27 All in all, we observed willingness to develop business with Rail Baltica

28 All in all, we observed willingness to develop business with Rail Baltica Finland Market participants are well aware of Rail Baltica. Theoretically much potential (including paper and pulp). Together with cost, businesses prioritize lead-times followed by environmental factors. Would like to see proof of concept before committing any cargo. Businesses need operational concept and clear value proposition to engage into constructive discussion.

29 All in all, we observed willingness to develop business with Rail Baltica Finland Market participants are well aware of Rail Baltica. Theoretically much potential (including paper and pulp). Together with cost, businesses prioritize lead-times followed by environmental factors. Would like to see proof of concept before committing any cargo. Estonia, Latvia, Lithuania Awareness is high nearly all contacted companies have heard about Rail Baltica. Businesses prioritize cost followed by convenience. Businesses need operational concept and clear value proposition to engage into constructive discussion. Businesses need operational concept and clear value proposition to engage into constructive discussion.

30 All in all, we observed willingness to develop business with Rail Baltica Finland Market participants are well aware of Rail Baltica. Theoretically much potential (including paper and pulp). Together with cost, businesses prioritize lead-times followed by environmental factors. Would like to see proof of concept before committing any cargo. Businesses need operational concept and clear value proposition to engage into constructive discussion. Estonia, Latvia, Lithuania Awareness is high nearly all contacted companies have heard about Rail Baltica. Businesses prioritize cost followed by convenience. Businesses need operational concept and clear value proposition to engage into constructive discussion. Poland Awareness is limited but aspirations are high Rail Baltica will be an important element for business development (in relevant regions) North-Eastern Polish regions could access Klaipėda and Riga ports. There is some fear that reloading of broad gauge trains will happen either in Lithuania or Belarus rather than Poland. During RBBN events there was a lot of discussion how to increase competitiveness of local intermodal solutions.

31 Backup material

32 Zooming in on smaller business needs Furniture producer 1 Furniture producer 2 Food producer Coatings manufacturer Delivers directly to the retail stores Road is highly competitive and commercially aggressive. Company receives 10+ sales calls per week from truck companies vs. no interest from rail carriers Attempted to use railways 10 years ago and products arrived damaged. Railway lacks flexibility Fear that intermodal terminals would mean double loading (meaning double fares) and potentially damaged products. Major furniture and plywood manufacturers invest in building capacities (PL, LT). New production units / plants are expected to be commissioned in Major buyer controls transportation. Hard to speculate, but rail could be a next evolution stage as furniture volumes continue to grow In general, furniture is a higher value product which can absorb higher transportation costs compared to traditional rail prone industries Delivery time, reliability and convenience are mostly appreciated Cost is a factor, yet food is able to absorb higher transportation costs if reliability is ensured Needs to ensure effective and reliable distribution to the customers (in many cases directly) Even with competitive transport prices, would be very cautious to test rail as potential delays would mean lost goods Uses road transport to connect to Europe, sea transport for everywhere else Sends products directly to customers or their central hubs, so no bulk shipments We don't decide by ourselves our transport solution so don't know all the details, but what we do know is that infrastructure should allow transport of dangerous chemicals

33 The line will need to attract new customers that do not use rail now, and many of these will be relatively smaller Rail share (2015, %) vs. average yearly growth ( , CAGR, %) in Baltic states Large growth Secondary raw materials Wood products Metals and fabricated metal products Emerging Railway Goods Traditional Railway Goods 1 bn EUR Machinery and equipment Furniture Non metalic minerals Agriculture and Forestry Textile products Transport equipment Coke and refined petroleum products Chemicals Food, beverages and tabacco Coal and lignite No growth Non-rail Almost all rail Sources: Statistics databases, Euromonitor