The industry is burdened by a lack of rails and high prices

Frankfurt Commuters in Frankfurt had hoped everything would return to normal by May. Since the beginning of the year, the S-Bahn from the direction of Oberursel or Bad Homburg has only been running on a single track and not at the usual frequency. A truck had damaged a steel bridge.

But now it will remain so until September. Only then can Deutsche Bahn reinstall the steel superstructure, the company announced last Friday. A larger amount of steel is required to repair the damage. “This is not available in the short term to the extent required,” said a group spokeswoman.

The federal government, the federal states and the railways want to invest almost 14 billion euros this year in the renovation of 1800 kilometers of rails, 2000 points, 140 bridges and 800 train stations. As a result, the trains are less reliable. Just under 70 percent of long-distance trains arrived on time in April, the worst figure since July 2015.

Now a lack of material and rising prices could further aggravate the situation. Because rails were not delivered on time, the opening of the new regional express stop in Düsseldorf-Bilk was delayed in November last year. In Siegsdorf im Chiemgau, the renovation of three level crossings was postponed to 2023 due to uncertain delivery dates.

A Bahn spokeswoman says: “The clear goal is to avoid project delays. Through great effort, we have succeeded in this so far, with the exception of a few individual cases, the construction sites are running stably”. But the price increases are “clearly recognizable” based on the offers of the construction companies, explains the spokeswoman: “Even the issue of material shortages does not pass us by.” Flexible planning of the construction sites should remedy the situation.

Netherlands stop a first rail project

But the longer the shortage lasts, the more difficult it is likely to be. The Netherlands offers a foretaste of what is to come. There, the infrastructure operator Prorail stopped the tender for the electrification of the route between Nijmegen, Venlo and Roermond for the time being a few days ago: Reason: delivery bottlenecks and rising costs.

The partners of Deutsche Bahn are already sounding the alarm. “The situation is sometimes life-threatening, especially for smaller companies. But certainly no one wants to experience the precedent of insolvency in medium-sized companies,” warns Tim-Oliver Müller, General Manager of the HDB construction association.

In the meantime, the question arises as to how companies should still make serious calculations at all. While new orders can account for increased costs, orders placed before the start of the war in Ukraine cannot. Corresponding agreements, so-called price escalation clauses, only exist for large and long-term contracts.

Müller therefore demands such rules for smaller orders as well. Because it is hardly possible to recover the additional costs afterwards. That takes far too long. And the railway could not handle this flood, says Müller.

The material bottlenecks meanwhile also burden the construction of new trains or the construction of signaling technology. “Electronic components are missing, the logistics routes to and from Asia are partially interrupted or restricted,” complains Andreas Becker, Vice President for SMEs of the VDB railway industry association. Becker is also the managing director of Ephy Mess, a medium-sized specialist for sensor technology: The bottleneck affects urgently needed components. “Without a temperature sensor, no high-speed train will start moving.”

The situation is getting worse every day, confirms VDB President Andre Rodenbeck: “The price increases are in the double digits, but sometimes in the range of several thousand percent.” In the pandemic, the supply chains would have held up by and large. “Currently, however, they are exposed to considerable strain and great stress. We have significant cost increases and material shortages.”

Failure of the special suppliers would have massive consequences

“We need an adequate discussion about the distribution of burdens,” demands Rodenbeck. Because in this business too, the contracts so far do not provide for higher material costs to be passed on to the customer. This is problematic, in the railway industry the orders are often large and run for a very long time.

The danger that the material will become significantly more expensive during this time is therefore high: “We are fighting to keep the rail system running. If there are no countermeasures, penalties can also be imposed in this situation in the event of delays that are not our fault,” says Rodenbeck. Such penalties would then add to the cost increases.

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Finding alternative suppliers is not easy. The railway industry companies are highly specialized, and there are some significant safety requirements, says Rodenbeck: “If failures occur here, this can have massive consequences for the operation and the planned expansion of the rails.”

The railway industry is still able to deliver, emphasizes Becker from Ephy Mess. During the pandemic, we learned how important warehousing is: “But what is happening now has never happened before. There is no model kit with sample solutions.” Depending on the order, delivery times could increase by three to seven months. “At some point – if the bottlenecks persist – we will no longer be able to deliver. Concern grows with every day of war and with every new lockdown in China,” says Becker.

Postponing entire projects because of the tense situation is the wrong way, says VDB President Rodenbeck: “We call on politicians not to cut investments now because material is missing or prices are rising.” Investments must now be made immediately to prevent a recession, Becker adds: “Unnecessary bureaucracy should be avoided.”

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