photo: RAILTARGET/Central European cargo bosses: The energy crisis and rising prices are having a strong impact on the rail sector
Extreme energy prices and rising costs associated with rail transport operations will inevitably have an impact on the performance of rail carriers across Europe. This message was clearly heard at the meeting of the heads of Czech and Slovak Cargo. It will also be crucial what conditions individual countries create for rail freight transport.
During Europe's largest trade fair InnoTrans 2022 (20-23 September 2022), ČD Cargo boss Tomáš Tóth and his Slovak counterpart Roman Gon from ZSSK CARGO held talks together. They addressed the current challenges for the rail freight transport sector. The biggest risk facing the railways now is the rocketing prices of all operating costs. These include in particular the rise in the price of electricity, the price of diesel and the price of all materials for fleet maintenance.
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"It is very important that the price of electricity for the railway has been capped in the Czech Republic. It has fundamentally calmed our internal market. The resulting electricity price will almost double next year, but the forecast was much more dramatic. We are, of course, also facing further substantial price rises in almost all cost inputs. Rising prices for metallurgical products, timber and other inputs for our repair business, traction diesel, and debt servicing costs with financing banks. Due to general inflation, we will also have to negotiate wage increases for employees. This is something that all freight carriers in Europe are now facing," said ČD Cargo chief Tomáš Tóth at today's meeting.
Perhaps even more difficult is the situation in Slovakia. Here, there has been no clear decision on price capping, and another segment faces uncertainty about the cost of rail operations. In an earlier statement to RAILTARGET, the head of ZSSK CARGO said that a €100 increase in the price of one MWh would translate into total costs of €17 million.
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"The price of electricity is extremely volatile. It changes from day to day. It makes it extremely difficult to set the price of transport in such a way that it covers costs and is at the same time affordable for our clients. The price of diesel and repairs is going up by leaps and bounds. We also have to negotiate with trade unions on wages," said Roman Gono, head of ZSSK CARGO, at the fair.
The topic of the impact of the energy crisis and inflation on the railway sector is probably the most frequent topic of the management meetings of companies taking place at InnoTrans 2022. Virtually all the conferences organised at the Berlin fair relate to this topic. The most affected segment, in general, is considered by most of the professionals involved to be the SGE (single carload). It is this type of transport that has the lowest margins for carriers and is the most complex in terms of organisation and costs. At the same time, this type of transport is the most likely to be moved on the road. Unfortunately, the long-established strategy of shifting the maximum amount of freight transport to rail is thus crumbling. The question will be whether the JVZ segment is feasible in the current conditions. It will now be primarily up to the governments of the individual countries to stick to their strategies and continue to favour the much greener and safer transport by rail.
There is a difference in the speed of response to this unfavourable situation between countries. Czech Transport Minister Martin Kupka (ODS), for example, announced two weeks ago the capping of power electricity prices for railways. According to our information, they are currently discussing what exactly the price ceiling will technically look like. The situation in Slovakia is fundamentally different. Here, for the time being, the price of electricity is clearly set only until the end of the year. The key question will, therefore, be what pricing system will be in place in Slovakia in 2023.
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