As oil prices rise, operators will charge fuel surcharges, which will aid in revenue growth.
Los Angeles, CA (PRWEB) April 14, 2013
The Rail Transportation industry has managed to emerge from the past five years with overall growth. Prior to the recession, the industry performed well due to thriving freight volumes and strong demand from downstream markets. However, as the recession hit in 2009 and fuel prices fell, revenue dropped 12.5% as a result of slowing demand for transporting goods. Luckily for the industry, revenue has picked up since 2010. Total tonnage carried by Canadian railways has since grown, allowing the industry to recover. Because the industry is strongly connected to trade volumes (two-thirds of Canada's rail traffic moves transborder and overseas trade, and 70.0% of Canada's exports rely on rail transportation), the recovery in the total trade value boosted industry revenue, says IBISWorld industry analyst Lauren Setar. As a result, revenue is expected to grow 5.9% in 2013. Despite this recovery, the dramatic decline in 2009 has hampered overall growth over the past five years, raising revenue an average annual 1.9% to reach $13.0 billion by 2013.
Although revenue for the industry has fluctuated in the past five years, industry operators have consistently invested in their rail networks, continues Setar. In both the freight and passenger segments of the industry, companies invested in equipment, stations and infrastructure. This capital investment has allowed profit margins for the industry to grow over the period. The Rail Transportation industry has a high level of concentration. Canadian National Railway (CN) and Canadian Pacific Railway (CPR) are the two dominant freight rail operators in Canada and are both Class I railways (i.e. revenue exceeding $250.0 million). According to the Railway Association of Canada, Canadian rail is the third-largest rail network in the world. According to Transport Canada, CN and CPR together represent more than 95.0% of Canada's annual rail tonne-kilometres, more than 75.0% of the industry's tracks, and three-quarters of overall tonnage carried by the rail sector. IBISWorld does not expect industry concentration to change significantly over the next five years.
With the recovering economy, manufacturing will pick up as consumers begin to spend more, driving demand for industry transportation services. Additionally, rail transportation is more cost effective and fuel efficient than road, air or sea transportation, giving the industry an edge in times of higher fuel prices. As oil prices rise, industry operators will charge fuel surcharges, which will aid in revenue growth. The industry may also benefit from potential projects like Rail 2030 and high-speed rail initiatives. However, nothing has been determined for these ventures. For more information, visit IBISWorld’s Rail Transportation in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry primarily operates railways, including long-haul or mainline railways, short-haul railways and passenger railways. Companies do not operate street railways and urban rapid transit, tourist and scenic trains, or switching and terminal railways.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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