Salient Economic Features of the Modes of Freight Transport for Consideration in the Formulation of National Transport Policy
W J Pienaar, Stellenbosch University
In the interest of the national economy and in the commercial interest of freight carriers, national policy on freight transport should take cognisance of the salient economic features of the freight transport market that should be considered in the formulation of transport policy.
In the interest of the national economy and in the commercial interest of freight carriers, national policy on freight transport should take cognisance of the salient economic features of the freight transport market that should be considered in the formulation of transport policy. The goal of the research was to identify these economic features, with special reference to transport conditions in South Africa. The following five modes of freight transport are discussed: air, road, rail, pipeline and sea. Each mode of transport is analysed in terms of (1) modal cost structure, (2) efficiency (which is dealt with in terms of (a) cost level, (b) economies of fleet size, (c) economies of vehicle size, (d) economies of infrastructure extension, and (e) economies of distance), and (3) modal competition (which is separated into intramodal competition and intermodal competition).
The research approach and methodology combined (1) a literature survey; (2) an analysis of the cost structures of freight transport modes; and (3) interviews conducted with specialists in the South African freight transport industry.
The results of the study show that the cost to transport a unit of freight by air is the highest of all modes of transport, and by road the second highest on long trips and third highest on short trips, where road is cheaper than rail transport. In view of the fact that rail transport achieves considerably more economies of distance than road transport, road transport becomes progressively more expensive than rail transport for all classes of freight as trip distances increase above approximately 500 kilometres. For trips shorter than roughly 150 kilometres, road transport is virtually always cheaper than rail transport. For all types of goods that can possibly be carried either by road or rail transport between the same trip origins and destinations, the equal cost distance of the two modes lies between approximately 150 and 500 kilometres. Overland pipeline transport is the cheapest mode for those types of commodities that can be transported by pipeline. Either rail or road transport is the cheapest mode of transport for all those commodities that cannot be carried by pipeline. The total unit cost to carry freight by sea is the lowest of all modes of transport. Over equal distances the unit cost in ton-km to carry freight by sea is substantially lower than any of the three modes of land transport. However, these three modes can be cheaper than inter-port sea carriage when, firstly, the sailing distance between the ports is too short for vessels to gain sufficient economies of distance; secondly, the trip origins and destinations of freight shipments are accessible by road, rail or pipeline, but are significantly remote from the ports, and vice versa when the inter-port distance is substantially long and/or the origins and destinations are close to the ports; and, thirdly, where sea transport is subject to exceptional charges, such as heavy canal dues.
In addition to the relative modal cost levels outlined above, the paper provides a comparative summary of the most salient economic features of the five modes of freight transport. These additional features include modal cost structure, predominant intramodal market type, predominant intermodal competition, economies of fleet size, economies of vehicle size and economies of distance.
Keywords: cost level, cost structure, economies of distance, economies of fleet size, economies of vehicle, intermodal competition, intramodal competition, modes of freight transport
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