The national motto of Luxembourg, ‘Mir wëlle bleiwe wat mir sin’ (We want to remain what we are), could perfectly well be CFL cargo’s motto too. After all, the young rail freight carrier, founded only four years ago, is now proudly able to deliver a complete range of customer-oriented, door-to-door, pan-European services. Together with its subsidiaries in Germany, Denmark and France, CFL cargo is determined to take its place in the liberalised European market. Not as the biggest but certainly as the most specialised player in European transport services for steel products.
“That’s where our roots are – in steel transport”, explains CFL cargo CEO Fernand Rippinger, “and that’s why we want to remain what we are. With our eyes wide open and always on the look-out for good business opportunities, of course!” He can say that today with a barely suppressed smile given that ArcelorMittal’s Luxembourg steel plants are once again churning out considerable quantities of products, including rolled wire, coils, beams and sheet piles. Trains once again depart regularly from Luxembourg and at the Bettembourg marshalling yard, where over 1000 wagons are dispatched to 21 countries every day, it is all hands on deck once again. That does not make the slump of 2009 a good experience, but 2010 can clearly be called promising.
A severe blow
Fernand Rippinger: “In one way or another, the worldwide crisis hit everyone hard. Since a large share of our transport activity is steel transports – 60 to 70% of our volumes – we were without doubt even more affected by the crisis than our colleagues. The first half of 2009 was just plain weak, but the turnaround came in the second half and ever since recovery has been slow but steady.
In fact, we saw our volumes drop by a good 22% in 2009. This means that production fell from 9 to 7 million tonnes. The good news is, however, that we experienced a strong resurgence in Q1 and Q2 of 2010, with a total production of 408 million tkm (tonnes-kilometres), as opposed to 593 million tkm for all of 2009.”
A measured response
Fernand Rippinger: “We obviously took countermeasures when the crisis hit, such as reducing the workforce as well as our fleet of locomotives and wagons. That wasn’t easy because our fleet consists of only 30% leased wagons, as opposed to 70% company-owned vehicles. These high fixed costs give us limited flexibility and leave little room for manoeuvre because we cannot simply reduce our fleet for a short period time.
In addition, we still had to finish transforming the legacy passenger-orientated structure into a flexible, customer-orientated organisation. Operating rail transports according to a tight, forward-looking plan, based on collaborative scheduling of the strongly fluctuating volumes of the customer, is a very different way of working than a classic passenger production model. Steering that sort of transformation process takes a lot of time because the challenge is how to organise it all.
In terms of competitiveness, all European rail freight operators were, of course, in the same boat during the crisis and the other rail freight carriers were probably the least of our competitors. We all suffered a lot from the fierce competition by road transport operators and one of the unpleasant results was, amongst other things, that the price per ton dropped sharply.”
540 new flat wagons
Fernand Rippinger: “However, the impact of the crisis on our investments and expansion plans was not really substantial. Let me explain: about 3 years ago, we started to invest in our fleet of flat wagons with the acquisition of 540 new 25m Rbnpss-type wagons (designed especially for the transport of long steel products such as beams and sheet piles) by 2011. Should you suddenly pull the handbrake on this in hard times? In my opinion that doesn’t make much sense because you always have to look at that sort of investment from a long term perspective. You cannot put a stop to your investments every time there’s a crisis. Staying on track is the best strategy!”
Made of steel
The 56 year old man from Luxembourg is not only an extremely amiable man, Fernand Rippinger is also a man of steel. Quite literally because, after the early years of his career at the University of Karlsruhe, he joined the Luxembourg steel company Arbed in 1986 to lead various automation projects – both in Luxembourg and in other branches of the group. In 1996, he was put in charge of international ‘Purchasing Coordination’ for the Arbed group, a job he continued to do on a larger scale at Arcelor until his appointment, in October 2006, as CEO of the newly created CFL cargo.
On the major European axes
CFL cargo was set up on 17 October 2006 as a joint venture between CFL (Société Nationale des Chemins de Fer Luxembourgeois) and the steel concern ArcelorMittal. 2/3 of the capital input came from CFL and 1/3 from ArcelorMittal Luxembourg. The new company took over the commercial activities of EuroLuxCargo (CFL subsidiary) and the freight department of CFL, in addition to the internal transportation department of ArcelorMittal Luxembourg.
Fernand Rippinger adds “We also took over the rail freight activities of NEG Uetersen (Germany) and Dansk Jernbane (Denmark) in the form of two subsidiaries: CFL cargo Deutschland and CFL cargo Danmark. Our strategic position at the heart of Europe allows us to have a prominent presence on the major European North-South and East-West axes. This means that we can use our full range of services to the maximum advantage not only in the SaarLorLux region, but also in Northern Germany (CFL cargo Deutschland), Southern Denmark (CFL cargo Danmark) and beyond.
In fact, just a few months ago, together with our sister-company CFL Multimodal, we created a new subsidiary CFL Fret Services France, offering various ground services in the area of freight throughout France. CFL cargo also uses the Hagondange marshalling yard as a consolidation point for flows whose origin or destination is in the region.
To complete our portfolio of rail freight services, our subsidiary Ateliers de Pétange – a freight wagon workshop – will become the official ECM (Entity in Charge of Maintenance) for CFL cargo.”
Growing beyond our borders
Fernand Rippinger: “CFL cargo has no choice but to go beyond Luxembourg’s borders because, with an area of barely 2,500 km², the Grand Duchy of Luxembourg simply cannot offer much room for development. Our country does not have a wide range of commercial activities either - mainly construction and consumer goods, plus some chemicals (petroleum) and of course steel. Therefore it’s not hard to understand why, historically, we have focused on steel transports and the single wagon business. Transports of long steel products are indeed mostly single wagon load because scrap comes from many different European destinations and the finished long steel products are sold to many small distributors all over Europe. Hence the single wagon business is crucial to the supply chain in Europe.
If we want growth, then we have to look for it outside our borders. In a modest way, of course, if I may say so. And most importantly, in the case of certain traffics, via productive partnerships with local operators like DB Schenker, SNCB Logistics or SNCF, as well as via alliances. I’m thinking, for example, of our Sibelit partnership on the Antwerp-Switzerland corridor and the Xrail alliance for single wagon load. Such initiatives lead to more transparent transport models, much improved efficiency, greatly reduced administrative overhead and noticeably increased reliability. This helps us put a strong foot in the door of our competitors in road transport.”
A new approach to rail freight
Fernand Rippinger: “Everyone from the rail freight sector will agree if I say that it was high time to adapt our production structures to safeguard our competitiveness in the medium and long term. In fact, the ‘single point of contact’ models we now work with were applied to the trucking business back in the eighties, meaning we had some catching up to do. Thanks to the current more advanced configurations, a complete rail transport route can be organised and followed up via a ‘single point of contact’. The improved rail operator efficiency leads to time and cost savings for the customers.”
Big guys, little guys
Fernand Rippinger: “Where does CFL cargo stand in the Europe of today and tomorrow? My answer is as short as it is simple: CFL cargo is realistic enough to not dream of becoming a big player, but it does intend to play an important role as a specialised rail freight company with very specific niche expertise. I think I can say with justifiable pride that we have achieved that status with our international service offering for the transport of steel. Moreover, we have done so with a small and very versatile organisation, based on a great respect for safety, quality and the environment. Those values are high on our list of priorities partly because of CFL cargo’s origins: the two parent companies consider environmental awareness, quality and safety to be extremely important.
In a liberalised rail freight market, such values carry a certain weight but I would be the first to say that the current free market is no easy matter for small CFL cargo. Obviously liberalisation offers opportunities for rail freight carriers, but it also represents a major challenge: different safety certificates, homologations, safety systems, access agreements, language requirements, driving licences in each country mean that we are faced with multiple requirements as soon as we cross the border. The lack of European standardisation puts the rail freight industry at a disadvantage when faced with the unbridled flexibility of international road transport. This much is clear: the European rail freight market offers much potential for well prepared and organised rail operators. This is true for the big guys offering large scale, pan-European services to the customer, as well as for the little guys offering customized, dedicated services for niche customers. A real European network for rail freight transport might not be for tomorrow, but the optimist in me says that we are on the right track!”