Friday , 27 May 2016
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DB Schenker concerned about UK intermodal competitiveness

Rail operator DB Schenker Rail UK still has worries over the competitiveness of the UK’s deep sea container (DSC) rail transport markets regardless of commitments from rival Freightliner to tackle anti-competitive arrangements in its favour.

Freightliner will have to work to reduce barriers to competition in the markets for DSC rail transport between the ports of Felixstowe, Southampton and Tilbury and inland destinations in Yorkshire and the North West of the UK.

However, the commitments do not go far enough according to Geoff Spencer, CEO at DB Schenker Rail UK, who highlighted capacity constraints in two of the afore-mentioned ports and the absence of London Gateway.

In December 2015, the Office of Rail & Road (ORR) published its decision to accept certain commitments offered by Freightliner Ltd and Freightliner Group following a formal complaint from DB Schenker Rail UK in 2013.

Spencer said: “We made the formal complaint because we want to see the relevant markets opened up and operating efficiently for the benefit of the industry. We welcome the ORR’s intervention and believe the commitments offered will go some way towards addressing certain inefficiencies within the market.”

However, he added: “We continue to have concerns regarding future competitiveness of the market, particularly in light of the capacity constraints at Felixstowe and Southampton as well as the fact that the commitments do not extend to Freightliner’s operations out of London Gateway.”

Currently, measured by tonnage, Felixstowe, Southampton and Tilbury combined account for approximately 95% of the total rail DSC volumes routed through ports in the South of the UK.

Freightliner’s share of DSC rail transport services on routes between the Southern Ports and inland terminals in Yorkshire is approximately 60% and on rail routes between the Southern Ports and inland terminals in the North West is approximately 90%.

The ORR estimates that the cumulative effect of the exclusionary arrangements is that 30-40% of the total demand for DSC rail transport services on routes between each of the Southern Ports and inland terminals in Yorkshire is potentially foreclosed.

In relation to routes between each of the Southern Ports and inland terminals in the North West, the ORR estimates that 50- 60% of the total demand is potentially foreclosed.

Amongst Freightliner’s commitments includes an agreement not to enter into any contracts which require customers to purchase exclusively from Freightliner, or require customers to purchase any given proportion of their total demand from Freightliner

Additionally, Freightliner cannot enter into any contracts for a duration of more than five years and must remove all clauses in its contracts which provide for automatic rollover.

Regarding discounts and rebates, the operator cannot enter into any arrangements by which the price, rebate or discount in one period depends upon the volume purchased from Freightliner in an earlier period.

The ORR stated in its December report that commitments on London Gateway would not be included since, in its view, “there is excess DSC rail transport capacity available for utilisation by alternative freight operating companies (FOCs)”.

It added that Freightliner’s current arrangements at London Gateway are “materially different to those in place” at Felixstowe, Southampton and Tilbury, making them unlikely to “to result in the foreclosure of competitor FOCs”.

The report also noted that the forthcoming opening of Liverpool II container terminal has the potential to particularly affect competition on the routes between inland terminals in the North West and the Southern Ports.