Media Statement 22/07/02
Major Rail Freight Users Call For Urgent Review Of Future Viability
Some of New Zealand’s largest exporters have formed an action group to participate in the major public policy debate
that has developed on the future of rail services in New Zealand.
The Rail Freight Action Group, which includes Fonterra, Carter Holt Harvey, Solid Energy and Fletcher Challenge Forests
as well as several of the larger freight forwarders and liner shipping companies, warns that the international
competitiveness of New Zealand’s key export industries is at stake.
Serious concerns have been expressed by many users about the performance and pricing of rail services. These costs may
make up to a third of total transport costs involved in exporting New Zealand produced goods to distant international
markets, yet international benchmarking suggests rail costs should be much lower.
“While various options have recently been publicly discussed the Rail Freight Action Group believes that unless a number
of key criteria are met New Zealand’s export competitiveness will be threatened,” says a statement by the group, issued
today.
“The cost of supplying a product to a distant market may well be more important than production costs, when it comes to
New Zealand competing with other countries, so this is a vital issue for New Zealand.”
The companies also warn that if rail freight services are allowed to collapse major users would have to fall back on
road and coastal shipping, resulting in many thousands of extra trucks on the roads each day.
The Rail Freight Action Group believes a way must be found urgently to ensure that New Zealand business is well served
by a mix of rail, road, and shipping services which are competitive, sustainable and economically efficient.
“There has been no opportunity for competition in rail freight as Tranz Rail has the exclusive right to operate rail
freight services throughout the entire network and this issue would need to be addressed should the government be
involved in the future ownership of the rail network.”
The group says its comments at the deteriorating situation do not mean it is anti Tranz Rail, although it is concerned
about the company’s financial situation and operating performance.
“Our focus is to work with the various parties to see if an efficient and competitive rail freight service can be
achieved, in the interests of New Zealand.”
MAJOR CONCERNS
Among the Rail Freight Action Group’s major concerns: -
- Provision of an efficient, competitive, sustainable rail network is critical to meet exporters’ requirements.
- Prices such as track access charges must be based on realistic asset values. Supply chain costs, in particular land
transport costs, can determine whether or not an exporter able to compete in a particular market, and are therefore
extremely important.
- The current government draft land transport strategy does not refer to economic efficiency which is critical to
ensuring the best value decisions are made in respect to transport infrastructure.
- Tranz Rail appears unable to fund proper maintenance of tracks and rolling stock from its own resources. Some
exporters say they have been asked to front up with cash for routine maintenance of wagons. The sustainability of rail
has therefore been jeopardised by a demonstrable lack of commitment to maintaining national infrastructure assets.
- If the Government is considering reacquiring the national rail network the Action Group would be endeavouring to seek
assurances that;
- A competitive track access regime would be introduced. The existing model has clearly not worked and the group is
concerned that one monopoly would be replaced by another monopoly. A regime which allows a competitive provision of rail
freight services is essential.
- Any price paid for the rail network must reflect the actual value of the network not a value inflated by accounting
activities.
“We are extremely concerned that the company appears to be unable to fund the appropriate maintenance of the system,”
says a spokesperson for the Action Group. “It appears too much money may have been stripped out of the company, and its
low credit rating will now make further borrowings difficult and expensive.”
The companies involved in the Rail Freight Action Group represent a significant percentage of Tranz Rail’s freight
revenues and they are keen to see a sensible and prompt resolution to the issue.
ACTION NEEDED NOW
“If a viable national rail network is to be maintained in New Zealand, the time for action is now,” says the Rail
Freight Action Group.
“There are no doubt several options which the government could pursue in their discussions with Tranz Rail from
subsidising track maintenance via Transfund, through specific operating subsidies to full purchase of the network.
However it is imperative that the chosen option must focus on economic efficiency and that implies the price paid will
be extremely important and a competitive access regime must be the outcome”.
“If the system is allowed to really disintegrate, major freight users will desert rail for other transport systems,
wherever they can, and it will then be very difficult to build up viable rail freight services and tempt customers
back.”
“Exporters in many western countries, including Australia, enjoy the benefit of efficient rail freight services with
competition keeping prices realistic,” says the Rail Freight Action Group.
“In New Zealand we have a monopoly, no competition, variable service, concern about investment in maintenance of the
infrastructure and Tranz Rail’s lease on the tracks still has 60 years to run.”
ends
Issued Monday July 22 on behalf of the Rail Freight Action Group by Porter Novelli