THE European rail freight market is undergoing a profound crisis, according to a new report from German consultancy SCI Verkehr.
Although overall freight traffic is increasing, rail has lost nearly 2.5 percentage points of market share in recent years, having only 16.4% of the total freight market in 2023. Even under favourable economic conditions, SCI Verkehr forecasts average annual growth of just 1.3% until 2030.
SCI says that recent events, including disruption caused by US foreign policy and shifts in global trade, are compounding structural weaknesses such as declining demand for commodities traditionally moved by rail, such as coal, steel and chemicals, insufficient digital infrastructure, and increasing pressure from EU competition policy.
European rail freight is using infrastructure which SCI Verkehr describes as “chronically underfunded,” and although much-needed upgrades are now underway or planned in many countries, the resulting disruption, including lengthy and costly diversions, is adding an additional burden on operators and weakening rail’s competitiveness with more flexible road transport.
Intermodal growth
There are some bright spots, however, notably in intermodal traffic. For 2024, SCI Verkehr expects growth in this sector of 4.7%, following a decline of 7.3% the year before. This is being driven mainly by container traffic from eastern Europe and an increase in military movements. While this growth helps to stabilise the overall market, SCI says that it will not result in the growth rates of around 2% per year that were common before 2023.
SCI Verkehr believes that traditional industries such as steel, chemicals, and automotive will continue to come under significant regulatory and energy cost pressures. However, with the recovery of intermodal transport, shipping companies and retailers are increasingly using rail independently to make their supply chains more resilient.
Looking forward, SCI Verkehr says that major European projects such as the Digital Automatic Coupler (DAC) and the deployment of ERTMS will benefit rail freight in the long-term, and that short-term digital solutions, such as automation of rail freight terminals and more efficient personnel deployment, can offer tangible efficiency gains. They can also increase capacity, conserve resources, and improve rail’s competitiveness.
