The global rail freight market hit $188.7 billion in 2016, representing a marginal 0.5% in growth along with a return to positive performance following a 0.4% decline in 2015, according to research firm MarketLine.
The company’s latest report states that the market’s fortunes have differed from region to region in recent years, with Asia-Pacific (APAC) and Europe providing much of the growth impetus. The United States, however, which accounts for a vast 30% of the global market, continues to struggle. The country recorded two consecutive years of steep decline in 2016, which is suppressing growth on a global scale.
Nicholas Wyatt, Project Leader for MarketLine, explains: “2015 and 2016 were exceptionally hard years for rail freight in the United States. This is attributable to falling demand for commodities such as oil and coal, which have traditionally relied heavily on rail freight transportation. The country has built more pipelines, an increasingly attractive means through which to transport oil and gas, thereby reducing reliance and demand for rail freight. This really hit in 2016, when the market’s value decreased by over 8%.”
The situation is much more positive in Asia, where demand is growing and the market is being propelled by the powerhouse that is China.
Wyatt continues: “The Chinese government is currently supporting the One Belt One Road (OBOR) project, which seeks to increase connectivity between the Eurasian region and China. Earlier this year, the first Chinese freight train reached the UK after crossing eight countries in 18 days, bringing with it huge market implications.
“DB Cargo has estimated that because of Chinese investments, the volume of goods transported between China and Germany will grow to 100,000 twenty-foot equivalent (TEU) by 2020, up from 40,000 TEU in 2016. This will give a boost to the rail freight sector in both countries as well as the wider region, and explains why volume figures are expected to increase more robustly in the coming years.”
This positive performance in China and the wider Asian region was sufficient to offset the decline of the American market, but for its long-term health the United States must return to growth sooner rather than later.
MarketLine expects that this growth will indeed materialize, as Wyatt explains: “The Obama administration introduced a series of measures that made coal increasingly unattractive. However, incumbent President Donald Trump has already undone many of these regulations, including the Office of Surface Mining’s Stream Protection Rule. This is likely to reinvigorate coal demand in the United States, thereby boosting the rail freight market due to an increased need for the commodity to be transported. Consequently, we expect the market to bounce back and to achieve growth in the coming years.”