Railroad’s investment package makes way for expansion of borders

On the last June 9th the Federal Government announced a package of concessions and investments in infrastructure which the total amount estimated was R$ 198.4 billion, to be implemented between 2015 and 2018. The largest share of this second stage of so-called Investment Program Logistics was allocated to railroad: R$ 86.4 billion. Such investments signal the possibility of expansion of rail transport to areas till then dominated by highways, integrating new agricultural borders to important outflow points. The good news came in a promising stage for railroad, marked by consolidation movements such as the merger between the carriers Rumo and ALL, approved by the Administrative Council for Economic Defense (Cade) in last February. This type of operation moves the sector, generating demand for new equipment and boosting the modernization of fleets and rail network. It is estimated that over the next four years, the new company is expected to contribute between R$ 8 billion and R$ 11 billion in the expansion and duplication of stretches and resolving bottlenecks.

Together, the forces of public and private investors put Brazil in a unique moment, marked by concrete perspectives to connect the country through railroads, counting on, not only with the expansion of the network, but also the modernization of fleets and tools that promote efficient management. We live in a great opportunity time, where private investments signal the competitive viability of railroads, says Rogério Mendonça, president and CEO of GE Transportation. The consumer market, represented by the main clients of freight carriers (companies), agrees with that. A survey of Logistics and Supply Chain Institute (ILOS), installed in the Technological Park of the Federal University of Rio de Janeiro (UFRJ), which heard 126 Brazilian companies about what would be the most effective measures to reduce logistics costs, pointed his first priority: 70.7% of respondents said that it is necessary to improve the management of railroads with multimodal integration.

After a decline period during the 1970s and the modernization of old assets in the 1990s, national railroads lived a fleet replacement movement, started in 2008, aiming to achieve greater operational efficiency and reduce fuel consumption (responsible for half operating costs). At this last event comes on top the current that, observed the main challenges, should help minimize what until then was one of the main problems of the railroad sector: the lack of regular investments. Vicente Abate, president of the Brazilian Railroad Industry Association (Abifer) affirms that the current situation points in the opposite direction, mainly due to the distance of a vertically integrated operating model, in which the infrastructure and carrier activities were attended separately. Today, the convergence between models promotes a greater efficiency and will allow building up capacity and more effective conditions, said Abate.

A great challenge is the project implementation speed. Its absence in a timely manner was a major factor for the application of the amounts provided for the first phase of the investment program in Logistics, launched in 2012, has not been realized. In this second phase, targeting investments in three blocks, the barrier timing and the ability to attract interested in running the projects seem to have been directed. How it was designed, the program allocates resources for both current concessionaires – there are R$ 16 billion estimated for equipment purchase, improvements in the system and any network extensions – and for new railroads.

An interesting aspect regarding the potential attractiveness of stakeholders in implementation of projects is part of the second block of investment, which amounts to R$ 30 billion: the ability to generate income in the short to medium-term. The four new railroads to which they refer will connect new agricultural borders to new outflow points and expand the scope of railroads, allowing typically railroad freights (whether high-volume, high weight or needed to travel long distances), until then carried entirely by other modes can benefit from the efficiency provided by this means of transport.

Another important challenge is the so-called standardizing. Brazil is working with two railroad line standards, best known for their gauges – metrics and wide. With one meter distance between their axes, the meter gauge occupies about 80% of the national rail network. Also call Irish, the large gauge, with a distance of 1.6 meters between their axes, should predominate in the new freight transportation stretches, significantly increasing its proportion in the total Brazilian network and reaching, according to estimates from Abifer, 50 % of the total. Standardizing is a direct result of efficient operating models, says Rogério Mendonça, president and CEO of GE Transportation.

The efficiency of operational models passes inevitably through continuous investment in new technologies. As such, GE applies extensive research and development efforts to industry advancements. A shining example is the locomotive Evolution ESB43BBI developed in exchange for the engineering team at GE Transportation in Brazil and the USA. Considering the predominant characteristics of Brazilian railroads, Evolution ESB43BBI was the first locomotive produced in the country with eight axes, two more than the standard used today for this modal, and with alternating current, another innovation for the sector. The Evolution ES43BBi reduces operating costs by doubling the load capacity and allows 80% less emission of pollutants. For its high capacity, it provides reduced investment in the fleet, as two ES43BBi can replace three to five machines of six axes.

Another interesting initiative is the Trip Optmizer, an “automatic pilot” that provides more efficient compositions operation. From the analysis of factors such as the freight train own characteristics and the route to be followed, the software program which would be the ideal trip, taking into account the optimization of fuel consumption and the reduction of stops or maintenance needs . Used widely in North American railroads, this digital brain also contributes to the timely and to avoid delays, even though itinerary changes are necessary.

For all segment players, the priority is to work effectively for the technological gains that the Brazilian rail park has achieved in recent years to consolidate and allow each mode can act within its typical load profile, contributing to the efficiency of logistics infrastructure of the country. In seeking to understand continuously the sector needs, the industry pulls the process of innovation in order to ensure that the best technologies are available at the precise moment of maturity of the market, concludes President and CEO of GE Transportation Rogério Mendonça.

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