15 years deregulated rail freight market - lessons from Sweden

Sweden was one of the first countries to implement the current EU policy for rail freight. Rail infrastructure and running services were separated in 1988. The rail freight market was deregulated in 1996 (the market for not tendered passenger services was opened recently). The national Swedish rail company was commercialised and split into companies for passenger transport (SJ AB), freight transport (Green Cargo AB), real estate and maintenance etc. in 2001. A regulatory body has been established in 2004. The EU rail freight market was completely opened in 2007. An extensive follow-up of the intramodal competition in the Swedish rail freight market since 1996 has been carried out with help of literature, agencies' statistics, operators' annual reports and interviews with operators, shippers and authorities. As far as possible developments in the market sectors for kombi trains, system trains, wagonload trains resp. national versus international services are analysed. It is shown which operators started freight transport services, which got bankrupt and which are still in business. Today fifteen operators offer freight transport services. They are owned public and/or private bodies from Sweden and other countries. The market share of new entrants is limited. In 2009 the Green Cargo concern, Green Cargo AB and three daughter companies, stood for about 84 per cent of the total turnover. The incumbents' revenues decreased during the recession while new operators could increase their incomes. It is shown that efficiency in terms of tonne-km per employee, turnover per employee, tone-km per wagon etc. has increased since 1996. New types of services have been developed, especially for kombi and system trains. The prices for rail and road transports have followed each other quite well. The rail share in the freight market has been relatively constant, in contrast to the EU-level where rail has lost market share since 1996. However, the profitability of the rail freight companies is relatively poor. Return on capital is in most cases below ten per cent. Companies' solidity and their ability to withstand losses are generally low. Potentials and remaining obstacles for competition are analysed. Operators see problems regarding access to common facilities and services such as appropriate access to the infrastructure that is shared with passenger services, access to tracks and transhipment services in kombi-terminals. Other barriers are the limited competition in the markets for shunting/marshalling and maintenance of the rolling stock. Access to rolling stock and staff seems to be a minor problem. The existence of economies of scale and sunk costs can also be barriers for new entrants. In this context the limited size of the Swedish market is important. For the time being the development of the rail freight markets in other European countries (Germany, Netherlands, UK) are studied and comparisons with the outcomes form the follow up of the deregulation of the Swedish rail freight market are planned. The experience from Sweden may have some lessons for other countries.