France Freight Transport Report 2009

Abstract

France is preparing to restructure its freight transport sector, with an emphasis on increasing the
percentage carried by rail by transferring freight typically carried by road onto rail. The switch will be
helped by the fact that France' s rail freight sector has become more competitive since its liberalisation in
2003, as new operators have entered the market, and the fact that France' s rail freight links to major
trading partners have improved and are continuing to do so. On the back of the Grenelle Environment
Forum in November 2007, the French government has proposed legislation to increase the percentage of
freight not carried by road from 14% to 25% by 2012. BMI notes that road freight currently makes up the
largest percentage of freight carried in France, at 68%. Rail freight, on the other hand, accounts for just
14%. France has been preparing its strategy to move freight off the roads and onto rail. The French rail
sector has been liberalised, with independent operators able to operate in France since 2003. This has lead
to heightened competition, which has led to more competitive freight rates. Some of Europe' s main rail
freight companies have entered the sector through subsidiary units and, according to the Invest in France
Agency (IFA), these include Germany' s DB Schenker and Rail 4 Chem, the UK' s Euro Cargo Rail,
Switzerland' s BLS Cargo and CFF Cargo, France' s SNCF subsidiary VFLI and Veolia Transport' s
unit Veolia Cargo, as well as a company jointly run by Luxembourg Railways and Arcelor Mital, CFL
Cargo, and a subsidiary operated by Eurotunnel, Europorte 2. France' s plans to shift road freight onto
rail have been helped by investment not only into the country' s rail infrastructure but also in rail links to
its neighbours. BMI notes that France' s main trading partners are based in Europe, with Germany, Spain,
Italy, Belgium, and the UK topping the list.
Rail transport between France, Italy, and Germany is to be improved with the Lötschberg Base Tunnel,
which opened in December 2007, and the Gotthard Base Tunnel, which is due to open in 2018. The
tunnels go under the Swiss Alps and will cut rail freight journey times. This will make it more
economically viable for freight to go by rail to Italy and Germany. We note that a similar situation arose
when the Channel Tunnel opened in 1994. Freight that had been carried by trucks via ferry across the
Channel could now reach the UK more quickly by rail. France' s decision to reduce its road freight
percentage and increase rail’s share can be attributed to a number of factors. The country' s roads and
motorways are congested, and this would be alleviated if more freight were carried by rail. The strategy
would also align France with the EU' s aim of switching half of cargo currently transported by road onto
the European rail network. This is related to plans to reduce the EU' s carbon emissions. France' s plans to
reduce road transport are to be viewed as part of the country' s plan to reduce its emissions by 20% by
2020. In BMI’s newly released France Freight Transport Report, we forecast that rail freight traffic,
measured in million-tonne kilometres (mntkm), will rise by an annual average of 1.4% over the next five
years (2009-2013). Overall freight traffic, across all modes, will also grow by 1.4% per annum over the
next five years. This is slower than the 1.8% registered in the preceding five-year period. By 2013, we
calculate that the value of the transport and communications sector will have reached US$205.2bn, or
7.2% of GDP.
Successive French governments have favoured public investment in big infrastructure projects,
particularly in airports, railways, and highways. While arguably the emerging global slowdown means
this will not be sustainable, some of the benefits, in terms of increased capacity, will make themselves felt
within our forecast period. The emphasis on building key private sector companies up into ‘national
champions’, while heavily criticised for its anti-competitive overtones, may also deliver some advantages.
Air France-KLM is a good example. Supported by the government, the merged airline is now one of the
largest European carriers, and well placed to benefit from the expected shakeout and consolidation
process in European aviation over the next few years. The other side of the coin, however, is that France
has been slow to welcome (and indeed, in some cases seems to actively block) the advent of the budget
airlines, which have swept across much of Europe.
Our forecasts for the French industry are informed by the pan-European economic slowdown we are now
expecting over 2009 and 2010. We see airfreight leading the way with average annual growth of 1.6%,
followed by pipeline throughput (1.5%), road and rail (both at 1.4%), sea cargo (1.2%) and inland
waterways (1.1%). BMI’s freight industry business environment rating gives France a score of 59.9 (out
of a theoretical maximum of 100), placing at the higher end of the European ranking.
On the downside, and putting Air France-KLM to one side for a moment, the French freight industry has
not yet developed its full international potential. BMI’s conclusion is that the industry as a whole has
solid foundations in the domestic market and, when international economic conditions become more
supportive, may yet be able to build on these to support a bigger global role.