A Report-back From IHHA 2011 Dave van der Meulen / Managing Member / Railway Corporate Strategy CC

14:28 in Magazine - article by stationmaster

A heavy-haul conference in the Rocky Mountains

Your author recently returned from the 2011 International Heavy-Haul Association (IIHA) conference in Calgary, Canada – a vibrant experience that relegates an eight-hour jet lag in a week-long round trip to the background. Regular readers may think that all I do is attend conferences. However, it is only coincidental that two top railway conferences, WCRR and IHHA, followed in quick succession this year.

Canadian Pacific Railway is headquartered in Calgary, so post-conference technical tours provided exposure to some of its key facilities, such as its network operations centre in downtown Calgary, Alyth hump yard that handles both east-west and north-south traffic, and the Calgary Intermodal Terminal that handles double-stack container trains.

The piece de resistance was a post-conference 220km technical tour on the Laggan subdivision of Canadian Pacific’s transcontinental route, from Calgary in Alberta via Banff to Field in British Columbia. It included Kicking Horse Pass across the Continental Divide in the magnificent Rocky Mountains. East of the divide, water flows to the Atlantic Ocean; west of the divide it flows to the Pacific Ocean. The descent from the divide to Field includes two spiral tunnels, completed in 1909 to reduce the original scary 4.5% gradient (1:22) to a tolerable 2.2% (1:45). For perspective, today’s Trans-Canada Highway closely follows the original steep railway alignment.

Stoney Creek Bridge on the Canadian Pacific (90 metres high). Photo: D R Spencer.

Motive power was the Empress 4-6-4 steam locomotive. Canadian Pacific does not do things by halves: Behind the locomotive and its tender were an auxiliary water tender, three diesel cab units, then some twenty passenger coaches. The oil-fired locomotive ran white feather all the way, with only a stop for passenger service at Banff. Compare this to Kimberley-De Aar, but without stopping for water and fire cleaning at Orange River. There was neither smell nor soot in the tunnels. Admittedly the diesels were not idling as we approached the divide.

Interestingly, the transcon, as such routes are known in North American speak, features predominantly single track, with some doubling. It is actually not quite transcontinental, stretching 4,800km from Montreal to Vancouver. In total CP conveys a creditable 300+ billion tonne kilometres on its 24,000 route-km network—more output than on South Africa’s comparably sized network.

Reflections on the conference

The conference theme was Railroading in extreme conditions. Canada was an appropriate host, propane tanks for points heaters being a conspicuous difference noticed by those from warmer climates. Looking closer to see RADIANT THAW HEAT ONLY stenciled on aluminium coal wagons confirms that one is away from home.

The conference was more representative than the WCRR reported on last month. All nine IHHA member countries/regions (Australia, Brazil, Canada, China, India, Russia, South Africa, Sweden-Norway, and United States of America) were present, as well as delegates from fifteen other countries. Interestingly, the Saudi Arabian presence was substantial. Trial operations recently commenced on the heavy-haul portion of its North-South Railway: Expect the IHHA to gain another member once full commercial operations get under way on Saudi Arabia’s 1,400km phosphate haul, from Al Jalamid near the Jordan-Iraq border, to the port of Ras Az Zawr on the Persian Gulf. A few hot topics follow, from IHHA country directors’ presentations at the opening plenary session:

Canadian Pacific 4-6-4 Empress loco. Photo: D R Spencer

One of two platinum conference sponsors was Shuo Huang Railway, China’s second heavy-haul coal line. How many readers have heard of it? The original Datong-Qinhuangdao, or DaQin as it is commonly known, heavy-haul coal line recently reached saturation at 400 million tonnes per annum (Mtpa), so a second line was needed to continue growing capacity to serve coal mines in China’s Shanxi Province. The Shuo Huang Railway already conveys over 100Mtpa, with substantial expansion in prospect.

In Australia’s Pilbara, long-established BHP and Rio Tinto are presently exporting over 200Mtpa, and planning to grow beyond 300Mtpa. Then new-kid-on-the-block Fortescue Metals Group (FMG) built a 305km line in 18 months. Three-and-a-half years after pressing the “go” button, it currently conveys 55Mtpa, en route to a planned 95 Mtpa, with an ultimate vision of 300+ Mtpa by 2015. It ramped up from 26 to 40 tonnes/axle in 24 months, at which axle load it has operated since January 2010. Structures are built for 49 tonnes/axle, and it is looking at 42 tonnes/axle as a next step. There are thus now three independent railways in the Pilbara. Along the way, there was inconclusive wrangling over shared access, but at 300Mtpa or more a railway has insignificant capacity to share, so access has become a non-issue.

During the parallel sessions, your author’s own contribution to the conference was co-authorship, with an academic from Russia’s Far Eastern State Transport University in Khabarovsk, of a paper: Differences and similarities: learning from heavy haul in cold and heat. It compared the eastern portion of the Trans-Siberian Railway, and the Baikal-Amur Magistral, with Sishen-Saldanha. The Trans-Siberian, which conveys coal, oil and ores extracted in Siberia, to domestic- and overseas consumers, has approached saturation of current assets at 100Mtpa, and capacity has become a major constraint on further development of regional industry and increased export volumes. Unsurprisingly, growing coal exports from other countries have stepped into the shortage left by Russia in the Pacific region. To avoid foregoing expansion opportunities, it needs to leverage heavy-haul competence to a higher level.

Other reference sites

Beyond information from the IHHA conference, the following references from Internet searches fill out a heavy-haul capacity picture …

In the United States, nameplate capacity of the BNSF-Union Pacific Joint Line in the Powder River Basin is 400Mtpa. Australia is exporting 320Mtpa of coal and growing. Brazil is exporting 310Mtpa of iron ore and growing. Indonesia has moved into second place after Australia in global coal exports with around 250Mtpa. Its national railway has 1.067mm track gauge like South Africa, a legacy from Japanese occupation during World War II. During that fateful course of events, Indonesia’s former standard gauge railways were narrow-gauged to align with those of Japan. Indonesia encourages mines to build their own new heavy-haul railways as an adjunct to their mining investment, a strategy that promotes economic growth in general. It is noteworthy that while Indonesia entered the coal export market after South Africa, it has far overtaken the latter, and is gaining new standard gauge railway development to boot.

One common thread is clear—the countries mentioned see potential market opportunities, and then boldly get on with building mines, railways, and ports to grasp them.

Application to South Africa
The capacity numbers mentioned above bear thought. They roll in hundreds of Mtpa. Not too long ago, they rolled in tens of Mtpa. De facto, heavy-haul entry level is now in excess of 100Mtpa. Even capacity seems to expand in 100Mtpa increments. What has happened? The game has shifted by a good part of an order of magnitude in just a few years. Coal and iron ore uptake by China and India has boosted demand substantially. The days of measuring capacity in low multiples of 10Mtpa, with 10Mtpa expansion increments, have passed, possibly forever.

Is this a bubble of some sort? Perhaps it is. However, the economic life of a locomotive in intense heavy-haul operation is only about 12 years: Having literally moved mountains, it is then totally worn out. At 300Mtpa, rails will wear out in 3-5 years. There is an upside to this – such short life expectancies reduce the risk of mismatch between market projections and capacity provision, because the payback period of most assets is necessarily very short. Unsurprisingly, the opportunity cost of not participating in coal and iron ore export is high – the global markets for those commodities simply pass by a country that does not come to the party.

Xavier Prevost’s paper at the recent Railways and Harbours Conference 2011 was salutary for South Africa – serious intentions have emerged to develop alternative routes to export coal from Botswana eastwards through Zimbabwe and Mozambique, and westwards through Namibia. While one should not deny South Africa’s neighbouring countries their aspiration to also share in the global coal market, one must also question whether such initiatives were triggered by inability to move product through South Africa. Source competition among countries, something that used to be “out there,” seems to be moving closer to home. Speed has become the name of the game. Appreciate that in three-and-a -half years FMG established from scratch a capacity that currently exceeds that of Sishen-Saldanha.

The heavy-haul business model is a balancing act among market opportunities and factors of production. There are global prices for coal and iron ore, as there are for mining equipment, locomotives, wagons, rails, diesel fuel, port handling equipment, and so on. Countries that have some particular natural advantage that can enhance their competitiveness should of course exploit it. Failing such advantage, the business model defaults to global supply/demand as mentioned above. In this context, electrification increases risk. This is not another round in the old diesel versus electric debate – the peak oil question has put that in perspective. However, notwithstanding peak oil considerations, many new heavy-haul railways still go for diesel traction. The author has been exposed to projects where commitment to electrification infrastructure increases project risk, and capacity scalability risk, to the extent that they outweigh possibly lower energy costs.

The global commodities market has not waited, and will not wait, for South Africa. Real investment and real jobs in mining, heavy-haul, and port operations have gone elsewhere. We could have participated, but have not. South Africa can long debate its participation in this market, and come up with an ideologically well-rounded solution, only to find that it, literally, has missed the boat.

This was the final article in this instructive and thought-provoking series. We look forward to the possibility of further valuable contributions from Dave van der Meulen, at some time in the future. – Editor Railways Africa.