tim kelsey - aurizon - future rail capacity requirements and developments at intermodal terminals
DESCRIPTION
Australia’s premier conference for the freight industry took place in Melbourne from 9-10 September. The expansive program covered issues critical to the continued sustainability of the industry. For more information about the event, please visit http://bit.ly/1uZWJSzTRANSCRIPT
AusIntermodal 2014 Future Rail Capacity Requirements & Developments at Intermodal Terminals
9 -10 September 2014
2
Aurizon overview
• Australia’s largest rail freight hauler
• Top 50 ASX-listed company
• Market capitalisation more than AU $10 billion*
• More than 100 sites across Australia
• Employing approximately 7500 people in hundreds of communities across Australia
• We move more than 250 million tonnes of Australian commodities each year
* at August 2014
The volume of rail freight on the east coast of Australia is expected to double to 2030
23
7 4
16 8
East-West Corridor North Coast Line (QLD) North-South Corridor
2.3x
1.4x
2.0x
2013 2030
(Projected) Total Intermodal Rail Market Growth: 2013 – 2020 (NTK Billions)
Source: Company reports; Broker reports; AZJ Engineering Services division (Operations Statistics Book & Master tonnage file); BITRE, ARA and ARTC data; & AZJ analysis
Based on current infrastructure, growth on the eastern seaboard will likely exceed supply prior to 2030
Corridor Rail Share of Land Transport Train Running
Current Number of Services Operated
Estimated Demand for
Services by 2030
East - West 82% 43-63 Hrs ~30 ~42
North South 24% 32-34 Hrs ~15 ~35
North Coast Line 40% 36-42 Hrs ~72 ~90
4 Source: E-W / N-S Services 2014 – ARTC; Aurizon Analysis 2014
5
….however capacity can and is being expanded
Melbourne to Brisbane – Infrastructure development on coastal route – Inland rail project
Melbourne to Perth – Longer trains to Adelaide – Double stacking to Perth – Development of alternative, off-peak paths
Brisbane to Cairns – Longer trains being considered – Updating equipment leads to better utilisation
OPTIMUM ROUTE
Melbourne
Wagga Wagga
Parkes
Moree
Brisbane
Albury
North Star
Narromine
Narrabri
Toowoomba
7
A bigger challenge for rail remains credibility -‐ which is largely premised on historical issues
Reputation Despite freight availability at terminals being near 100%
Reliability Recent investment in rolling stock, technology, track & infrastructure development assure on time running
Relevance Connecting with freight owners’ supply chains
Scale On the east coast in particular, have yet to achieve the scale that delivers competitive economics over distance
Reform Apples and apples comparison of investment shows rail more productive over long distances over time…with scale
At an Enterprise-‐level US Class 1 Railroad performance metrics are the product of a 15 year transformaNonal journey
8
Period of greatest returns
2.4 2.3
1.3
Ph 1: Industry raDonalisaDon and consolidaDon
Ph 3: Reaping the commercial benefits
Data not applicable
1995 2004 2011 1965
• ConsolidaDon from 75 Class 1s in 1965 to 7 in 1995
• Divestment of branch-‐lines, focus on trunk corridors and building strong regional networks
NTK (trillions)
Rev ($AUD) / '000 NTK: 22 -‐2% p.a. 19 +4% p.a. 26
Cost ($AUD) / '000 NTK: 18 -‐1% p.a. 16 +2% p.a. 19
IC ($AUD bn): 49 +9% p.a. 103 +4% p.a. 138
• M&A to solidify regional posiDons
• Major investment in signalling and track infrastructure
• Increased velocity, improved reliability and ran scheduled services
• Underpinned by performance culture
• Shi` from cost-‐plus to more sophisDcated value-‐based pricing
• Premium service provision, including non-‐rail logisDcs services
5.8%
10.5%
82%
15
5
90
85
80
75
70
65
60
10
0
OperaDng raDo
ROIC
Ph 2: Investment in infrastructure to support precision railroading
Op. RaDo (%)
ROIC (%)
Early targeted investments in producDvity set the stage for a step-‐change in the customer value proposiDon
Notes: Figures shown are an aggregaDon of UP, CSX, BNSF, NS and KCS (does not include Canadian NaDonal or CP as only USA operaDons reported to AAR). All dollar figures expressed in terms of 2011 AUD Source: Spreadsheet: Analysis of Class 1 Railroads 1995 to 2011 (AssociaDon of American Railroads (AAR)); & AZJ Strategy analysis
Despite the structural differences, there are fundamental building blocks from the Class 1 journey that are readily applicable to our own emerging Intermodal story
Target footprint Performance upli` Customer engagement i ii iii
11 07 03 99 95 0
3
6
9
161 165 169
186 1999 2002 % improvement
Velocity (miles per hour)
18.1 22.5 24
System dwell Dme (hours)
33.1 23.2 30
Fluidity (‘000 cars on line)
270 230 15
On-‐Dme departure (%)
43% 77% 77
On-‐Dme arrival (%)
68% 76% 13
+10%
+54%
+20%
+31%
+58%
+43%
+38%
Intermodal
Industrial
Forestry
Chemicals
Coal
AutomoDve
Agricultural
2011 $ per tonne
2004 $ per tonne
Miles of track owned and operated (‘000s)
Capital investment profile (AUD Billions)
AR BR
More capital on less track implies footprint focus and opLmisaLon
Top-‐line yield maximisaLon
• Developed detailed knowledge (intelligence) of customer needs
• Segmented market • Offered tailored soluDons and value-‐
add services • Developed differenDated pricing
models
• Simplified interface with customer
Notes: ‘Performance upli`’ table based on CSX case study Source: Susquehana Equity Research December 7 2010; Memphis Chamber of Commerce; CSX 2002 Annual Report’; Spreadsheet: Analysis of Class 1 Railroads 1995 to 2011 (AssociaDon of American Railroads (AAR)); & AZJ Strategy analysis
iv
v
Key area of reform that have the potenNal to liU the producNvity of freight and ensure there are no distorNons affecNng modal choice
10
Area Issue Policy change required
Pricing of road access and use for major freight roads
Fuel and registration based charges do not provide effective price signals and do not fully reflect the costs of actual road use by heavy vehicles
Introduce pricing reform based on mass, distance and locaDon (MDL) charging, only on major freight routes (naDonal highways and state government owned arterial roads)
Linking Infrastructure Pricing and investment
Infrastructure planning and service delivery are not directly linked to infrastructure pricing
All revenue from MDL charging should go directly to road agencies which must develop and deliver infrastructure service standards that meet the requirements of freight operators
Efficient Development and Use of Intermodal Terminals
There is a need for effective planning and consistent regulation of intermodal terminals in aligned with supply chain demands of freight networks
All major road and rail projects should include an assessment of relevance to immediate and long term supply chain productivity needs
Reforms identified by the Productivity Commission as offering potentially ‘major’ prospective economic benefits.
Ports of Melbourne, Sydney and Brisbane together handle 80% of Australia’s containerised freight volumes.
3.6
Adelaide 0.3 0.2
0.2
Fremantle 0.7 0.3
0.3
Brisbane 1.1 0.5
0.5
Sydney 2.1 1.1 1.1
Melbourne 2.5 1.2 1.3
7.2 3.5 Australia
Container throughput by port, 2012-‐13 Millions TEUs
% full outbound
% full inbound
70% 90%
42% 99%
64% 88%
53% 96%
83% 75%
• Share of total throughput by Port broadly aligns to the distribuDon of Australia’s populaDon.
• AggregaDng full and empty containers, split of inbound and outbound is 50:50 naDonally and across each port, which is natural given the circular flow of containers into global shipping market.
• Full/empty split reveals Australia cannot fill over one-‐third of empty outbound containers.
• Melbourne fills the highest share of outbound containers – consistent with Victoria’s relaDvely large manufacturing industry.
60% 90%
Inbound/outbound split is
approximately 50:50 in each port
Exports Imports
Note: Total volumes include import and export TEUs (full and empty containers) Source: Booz and Co (intermodal supply chain study 2009). BITRE (Australian mariDme acDvity to 2029–30, 2010)
1,526
2015
8,697
772
2,023
2010
6,500
582
11,594
1,013
2020
+5%
2,656
2030
17,950
969
1,601
4,196
2025
15,036
771 1,274
3,338
ADE PER BNE SYD MEL
Container throughput expected to grow at 5% to 2030 with Melbourne and Sydney remaining key Australian ports, Brisbane to grow strongly
CAGR 2010-‐30
5.2%
Australian IMEX container volumes (TEU 000’s)
5.2%
5.2%
5.2%
5.2%
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NSW
NSW Master Transport Plan – Interstate Rail:
• South Sydney freight loop has relieved some of the burden through grade separation, passing loops etc.
• Curfew in favour of passenger services still limits flow of interstate rail traffic during peak periods
• New Enfield terminal due later in 2014
• Moorebank and Western Sydney Intermodal Terminal still in planning stages
• Growth will significantly challenge infrastructure capacity
Source: NSW Master Transport Plan December 2012
14
Victoria
VFLP Long-Term Metropolitan Freight Vision – Interstate Rail:
• Dynon / Tottenham freight precinct to mid/late 2020’s
• WIFT land & freight corridor business case being completed
• Additional road capacity limited
• Rail expected to shoulder much of the burden of “new” freight task
Source: Victorian Freight & Logistics Plan August 2013
15
SE Queensland
Connecting SEQ 2031 – Interstate Rail:
• Upgrade Acacia Ridge Intermodal Terminal
• Upgrade Brisbane multi-modal terminal
• New intermodal terminals at Bromelton, Ebenezer, Charlton Wellcamp, & North of Brisbane River before 2031
• Freight task to more than double to 2031
Source: Queensland Dept Main Roads & Transport Connecting SEQ 2031
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Summary Messages ! Ongoing development of rail and terminal infrastructure is required to ensure
capacity to meet growth demands
! Rail has inadequately met the needs of our customers and so needs to work to be more relevant to our customers and their supply chains
! Rail connectivity between regions, ports and major centres is crucial – Currently in planning but only partially in practice
! A 1% increase in efficiency of the logistics industry will boost the economy by $2 billion……..and rail has the potential to increase efficiency several percent (ALC report Economic Significance of the Logistics Industry)
Questions?