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Cost and Freight Rates

This is Chapter 10 from 'The Canal System of England'

Its growth and present condition, with particular reference to the cheap carriage of goods - 1904 - by H. Gordon Thompson

Railway transport costs

The cost of transport by Railway differs considerably from that by Canal. It has often been argued that the actual charge imposed by the Railway Companies is a likely criterion of the cost of the service, but this is distinctly a fallacy.

In the United Kingdom the Railway Companies have openly proclaimed that the amount of traffic that a particular route will bear, and not the cost of the services rendered, is their basis of charge.* (* Report of Conference of Society of Arts on Inland Navigation.)

Water transport costs

In water transport the question of cost as in railway transport is affected by many elements, such as the size of the canal and of the vessels employed, the number of locks with their mechanical appliances, the rate of speed, the system of traction, and other obvious factors previously mentioned. But if the cost depends upon these items, the freightage charged also depends in its turn upon the cost, and this subject of cost and freightage we now propose to consider.

Railways and the waterways between Chicago and New York grain traffic

In the annals of transportation there is no more interesting chapter than that which deals with the contest that has been waged for about fifty years between the railways and the waterways for the grain traffic between Chicago and New York.

Freight rates between Chicago and New York

The following extract on the subject is from an address by Mr. E. E. Johnson, Instructor in Political and Social Science, Haverford College, U.S.A.

"The cheapest freight rates by rail to be found in the world are those for grain between Chicago and New York. And why? Because the cheapest inland water transportation rates in the world are between the same points. The following table showing the wheat rates per bushel from Chicago to New York for the years 1868, 1870, 1880, and 1891 by water, by water and rail combined, and by rail, indicates very plainly how Freight Rates have fallen, and how this movement has been led by the waterways."

	By Lake and By Canal	By Lake and Rail	By Rail
	Cents	Cents	Cents
1868	22.79	29.00	42.60
1870	17.10	22.00	33.30
1880	12.27	15.70	19.90
1891	05.96	08.53	15.00

The distances traversed by the two routes are as follows:

By Rail From 912 to 990 miles, say 950 miles.

By Water (Lakes) 985 miles

By Water ( River & Canal) 420 miles

Average total 1405 miles.

Thus, although the water route is 50 per cent, longer than the railway, the water route rules the rate, because the cost of the water transport is 0'125d. per ton per mile, while that of the railway transport is 0'2d. per ton per mile, resulting in the total rate by water between Chicago and New York being two-thirds of the rate by rail. So far there appears to be o, prima facie case in favour of canals, but it is well to notice that if the cost of this transport by water be taken separately for the lakes and the Erie Canal it appears that the cost on the lakes is 0'083d. per ton per mile, and the cost on the Erie Canal is 0'167d. per ton per mile, so that the cost of transport on the Canal is double that on the Lakes, and more nearly approaches the transport by railway.* (* Report of the Conference of the Society of Arts on Canal Navigation, 1888.)

Cost of transport on English waterways

On English waterways the actual cost of transport waterways, was stated to be seldom more than 0'3d. per ton per mile. In the case of steam colliers it was given at 0'15d. and for steam barges on the River Lea it was 0'33d.* (* Appendix to Report of Select Committee on Canals.)

German freight rates

In Germany* (* Journal of Statistical Society, t Bulletin du Ministere de travaux publics, Nov. 1887) the rate varies from 0.18d. to 0.14d. per ton per mile, thus :

Per ton per mile.

Goods in bulk loaded in boats and towed in trains 0.18d. to 0.29d.

Goods in bales, towed in trains 0.24d. to 0.38d.

Goods in bales carried by steam carriers... 0.39d. to 1.0d.

Hence it is not surprising that in Germany "for valuable goods a preference is shown for water over railway transport."

"There," we are told, "artificial waterways carry the mass of cheap goods for two-thirds of the regular railway tariff, and valuable goods for from one-third to two-thirds of this tariff.

This competition by water transport has not only been successful, but it has also effected a reduction of Railway Freights.

Decrease of continental freight rates

The average German ton-mileage has undergone remarkable modifications. About the year 1885 the average ton-mile rate in the German Railroad Union was nearly 1d., whereas in 1893 it had fallen to 0.67d.

In both France and Belgium also the railway rates have been considerably lowered during recent years.

The great secret of cheap transportation is to handle and carry large quantities ; for example, in the United States in 1850, the capacity of trains carrying grain from Chicago to New York was only 25 cars or wagons of 8 tons each a total trainload of 200 tons. At the present day train loads of from 1000 to 1200 tons, between Buffalo and New York, are not uncommon. In 1850 the largest craft employed for transporting traffic on the lakes and rivers between Chicago and New York did not exceed 600 tons, whereas now the maximum is not less than 3,000 tons.* (* Proceedings of the American Society of Civil Engineers, Vol. XIV., p. 55)

These facts show the result of competition between Railways and Waterways abroad and the way in which this competition has brought about an improvement of structure and a reduction of rates on both systems.

English freight rates

Turning to our own Railway rates we find a marked difference. The late Sir James Allport, for many years Manager of the Midland Railway Company, stated in 1883 that the cost of transporting mineral traffic on that system, assuming 42 trucks or 336 tons of minerals to a train, was 2s. 6d. per train mile.* (* Select Committee on Canals, 1883, p. 83.)

Freight rates 1885 -1889 no decrease

Now it is a remarkable thing that on three of the principal English Railways, as far back as 1865, the ascertained cost of working mineral traffic varied from 2s/6'6d. to 2s/10'7d. per train mile,* (*Report of the Duke of Devonshire's Commission on Railway Working.) the cost per ton mile varying with the paying load, while in the year 1889 the same figure was accepted by the late Sir George Findlay and other railway experts in giving evidence before the Board of Trade Commission on Railway Rates and Classification. Thus from 1865 to 1889 there has been practically no reduction made in English railway rates, in spite of the greater economy that more scientific and intelligent methods have enabled railway managers to exercise.

Thus it is evident that where there has been competition between waterways and railways, as in the case of America and the Continent, the result has been to reduce the rates on both Railways and Canals, but where, as in our own country, there has been practically no competition, the rates have remained abnormally high.

Manchester Ship canal - Canal and Railway Freights

There is, however, one important English waterway which has been able to successfully compete with the railway, with the inevitable result that the freightage by rail has been very considerably reduced. The MANCHESTER SHIP CANAL was constructed to enable ocean-going vessels to discharge their cargoes at Manchester instead of unloading at Liverpool and thence by railway.

The economic effects of the Canal on freights are Liverpool to Manchester by Canal shown by the following table. In every case the cost is given per ton delivered in Manchester.

Cost via Liverpool. - Cost via Canal.

Cotton ............... 13s. 8d. - 7s. 0d.

Wool ............... 16s. 5d. - 7s. 9d.

Sugar (loaves) ......... 17s. 11d. - 6s. 8d.

Sugar (raw) ............ 12s. 2d. - 4s. 11d.

Wheat ............... 9s. 11d. - 4s. 10d.

Petroleum ............ 14s. 5d. - 5s. 11d.

Tallow ............... 13s. 6d. - 5s. 10d.

Timber ......... ... 9s. 5d. - 4s. 9d.

Result on Railway rates of the competition between Liverpool and Manchester

The greater part of this difference in freights may be explained by the fact that goods passing through Liverpool must be unloaded at a dock, transferred to train, unloaded from train and so to the warehouse of the purchaser whereas goods going direct by canal require only one unloading at the docks at Manchester, and thus both labour and expense are saved. The result of the competition, however, has been that the Railway Companies have been forced, as before mentioned, to considerably reduce their freight rates. The Ship-Canal is slowly but surely gaining the confidence of the trader and the last half-yearly report is of an encouraging nature. The total receipts were £20,095 in excess of the corresponding period of 1901, and the directors were thus enabled to pay the interest on the first and second mortgage debentures, amounting to £44,742, the interest due on the mortgage of surplus bonds, amounting to £1,000, and the rent of new transit sheds amounting to £3,179, leaving a balance of £24,955 to pay over as interest on debentures to the Manchester Corporation.

Average Traffic ton-mile rates

Attempts have frequently been made to draw up an average traffic ton-mile rate for the different countries of the world, but it should not be forgotten that for England there is no record of the average distance over which mineral traffic is carried on either railways or canals, nor yet are there any available English Railway Statistics as to the ton mile rates (the railways themselves professing that they had not the information) and thus the English average can only be roughly estimated.

Interstate Commerce Commission report

The report of the Interstate Commerce Commission of the United States shows that whereas the average ton report - mile rate in the United States is under .5d. per ton per mile for all descriptions of traffic, the average rate for the United Kingdom is not less than 1.25d. per ton per mile.

With the growth of close competition both home and foreign it is natural that traders and merchants should, by every means in their power, endeavour to reduce the cost of transit, and yet there is still great difficulty experienced in reaching some of the principal markets.

English coal freights

How was it that in 1895 the railway rates for coal from the Midlands to London were higher than the value of the coal at the pit?

How is it that at the present time the average cost of coal and coke at iron-works on the west coast is nearly twice as much as the cost at pits and ovens in South Durham? It is for want of adequate means of transport.

Freight rates salt

How was it that brine shafts in the centre of Germany having water communication with Holland, Belgium and Hamburg, have to a great extent cut out English salt from Holland and Belgium, and actually send salt to Newcastle upon-Tyne ? The reason is, that though the cost at the place of production is within a fraction of what it is in Cheshire, the expense of transit by inland navigations to Hamburg, and by sea from Hamburg to Newcastle-upon Tyne, is actually less than that from the Cheshire brine-shafts.

How was it that in the year 1888 our traders could submit several lists of rates and charges to the Committee of the Board of Trade showing that sometimes the rates for a short distance traffic rose to 1.5d. per ton per mile, and that even the London coal traffic was seldom carried for less than .5d. per ton per mile, although the cost of the service, excluding interest on capital was considerably less than one-half that amount? * (* Jeans on Transport by Railway and Canal. Conference of Federated Mining Engineers, 1895.)

French Canal Traffic

How is it on the other hand that six million tons of goods are annually carried into Paris by water, this traffic being 41% of the total entering the city by railway and water, one million tons being carried from Rouen in direct competition with a railway?

German Canal Traffic

How is it that Berlin is supplied to the extent of one half of its imports by canal ?

USA Canal Traffic

How is it that over 27 9t of the traffic of the United States is water borne, in spite of the cheap railway rates of that country?

How is it that in France water borne traffic forms 30%, and in Germany 23%, while in the United Kingdom it is less than 11% of the total traffic?

It is because inland navigation has been improved and kept up to date in these countries whereas in our own case our waterways have stagnated in most and retrograded in many instances.

Sir John T. Brunner, M.P., writing to the Secretary of the Conference on Inland Navigation of 1895 gave it as his opinion that one could not study the figures relating to our waterways without coming to the conclusion that " the making of canals, the improvement of existing canals, the amalgamation of existing Canal Companies and the acquisition by independent companies of canals now owned or controlled by Railway Companies, was of infinitely greater and more urgent importance to agriculturists and other traders than the making of light railways."

Economy of water transport

The question now arises as to whether Canal is cheaper than Railway Transport in this country. The late Mr. E. B. Conder had no doubt as to the small cost with which traffic could be carried by the canal as compared with the railway. In a calculation which he submitted to the Select Committee on Canals,* (* "Select Committee on Canals," 1883, p. 83.) he contended that the cost of railway traffic in the United Kingdom was not less than 0'53d. per ton per mile, and this together with 0.78d. per ton per mile in respect of interest on invested capital, made a total of 1.31d. per ton per mile for both items, and a total cost of £587 per 100,000 units. In the case of canals he contended that with a similar volume of traffic, the cost of transport in England would only be 0'37d., including 0.11d. for interest on investment, or 154 per 100,000 units. In other words, he estimated that the cost of railway transport would be at least three and a quarter times as much as the cost of transport by canal,*(* Jeans, Transport by Railway and Canal.)

Freight rates of various countries

A list drawn up by the Journal des Economistes showing the freight charges on the railways of different countries is given below:

Per ton per rail mile.

United States 0.40d.
Holland 0.78d.
Belgium 0.80d.
Germany 0.82d.
France 1.10d.
Russia 1.20d.
Italy 1.25d.
Great Britain 1.40d.
This table gives an average of 0.97d. per ton per mile.

Railway receipts of various countries

The net railway receipts are given as:

The world average 3.2d.
France 3.8d.
Egypt 4.1d.
Great Britain 4.1d.
Belgium 4.6d.
Germany 5.1d.

Net receipts and volume of traffic & income from railways & canals

Thus our net railway receipts are among the highest and as the volume of traffic is greater than in any other country, the income ought to be proportionately large, but the want of system in laying out the lines, the great cost of land and preliminary expenses, and the large sums spent in railway construction, have so acted on the capital accounts that no considerable cheapening of the cost of transportation can be expected from the Railway Companies. In fact, in order to pay a 5% dividend on the capital of the English Railways, a sum of £2,600 would have to be earned per mile per annum, whereas a sum of less than £500 per mile would suffice to pay a like dividend on canal expenditure.

Maintenance

There are other features of primary importance in which the economy of transport by canal differs from that by railway, and perhaps the most evident is the "expense of maintenance. As soon as anything like an adequate amount of traffic is brought on a line, the cost of maintenance of a railway is remarkably steady, rising and falling with the increase or diminution in the volume of the transports.

Economy of maintenance of canals with increase of traffic

On canals, on the other hand, the fixed expenses demand in any case a certain cost, but this cost is very little increased by a large increase of traffic. The annual cost of maintenance of the Suez Canal was actually less from 1876 to 1881 than it had been from 1871 to 1876, although the traffic had considerably more than doubled, and thus the cost of maintenance per ton per mile fell from 0'35d. to 0'134d. *(* Report of the Conference on Canals, 1888 Society of Arts,) Again, the last half-yearly report of the Manchester Ship Canal shows that the weight of toll paying merchandise which passed over the waterway was nearly 200,000 tons in excess of that of the corresponding period of 1901 when the tonnage was 1,.391,149. This has been accomplished with an increased expenditure of only £1,658, while the increase in the receipts amounted to £20,095.

Economy of increase of haulage on canals

Not only does an increase of traffic diminish the proportionate cost of maintenance, but the cost of haulage is also proportionately less: thus on the Weaver Navigation, a single horse hauls a cargo of 100 tons whereas a load of 250 to 300 tons only requires two horses.

But the economy does not stop at haulage it is also assisted by the lesser cost of plant. A railway train loaded with 220 tons costs for the locomotive and trucks £3,360. A steam barge to carry the same quantity will cost £1,600, and this barge is frequently used to tow three other barges of 260 tons capacity, costing £1000 each.

Thus it can readily be seen that the economy of transport by water is assisted by the increase of traffic and the lesser cost of plant.

The inland transport of England is rapidly increasing, and already it is over six times what it was fifty years ago; the goal to be attempted is the moving of this enormous traffic with greater economy than is at present practiced, and this would inevitably tend to the increased prosperity of the nation. In the commercial world there is no question of greater importance than the cost of transit. Other things being equal, the nation possessing the cheapest means of conveyance must gain the day in the struggle for industrial supremacy.

The rapid increase in commerce of the Nineteenth, and the still more rapid increase already experienced in the Twentieth Century, must be met, in this country, by a corresponding increase in facility of transport, in order that England may retain her position of commercial preeminence; a position which can only be maintained by the constant and careful investigation of the economy of each contributory factor.

In the briefest possible manner, the growth of our Canal System has thus been traced, the important features of its present condition have been outlined, and the great possibilities which lie before this method of transit have been pointed out.

Conclusion

In conclusion, to quote the oft-repeated words of Alderman Bailey, of Manchester, addressed to the Manchester Association of Engineers:

"Make England to the world what London is to England make every part of the verge, fringe, shore, creek, bay, river and inlet of our map as equal as possible in relation to distance from the shores of foreign countries, double the coast line resuscitate the ancient ports, extend some more inland, make Britain narrower shorten the distance from coast to coast from sea to sea, and increase the setting of Shakespeare's lines: 'Fortress built by nature for herself -This little world - This precious stone set in a silver sea.''