North America leads the global rail freight market and Asia-Pacific is expected to overtake North America during the forecast period. Moreover, the rise in global trade and various trade agreements are boosting the global trade flows.
New York, Sept. 07, 2020 (GLOBE NEWSWIRE) — Reportlinker.com announces the release of the report “RAIL FREIGHT TRANSPORT MARKET- GROWTH, TRENDS, AND FORECAST (2020 – 2025)” – https://www.reportlinker.com/p05962024/?utm_source=GNW
The non-containerized cargo and liquid bulk dominate the type of cargo transported by rail while the growth of Intermodal transport is boosting the transport of containerized cargo. Intermodal cargo is estimated to witness high growth over the forecast period. Similarly, with the rise in international trade and the countries recognizing the benefits of rail freight transport, cross-border rail freight transport is gaining huge momentum across different parts of the world. In some regions of Central Asia, Eastern Europe, South Asia, Southeast Asia, and Sub-Saharan Africa characterized by groupings of many small countries, rail freight can increase economic integration by providing access to international and regional markets and connecting landlocked countries.
COVID-19 had a mixed impact on the global rail freight market as regions line North and South America saw a decline in the rail freight market while Asia and Europe saw a rise in the rail freight traffic. In the long term regional share of rail freight is expected to see a prominent increase. With this there is expected to be higher investment, further infrastructure development and technology implementation to digitize rail freight.
Key Market Trends
Low cost of transportation and modal shift drive the market
Rail freight companies continue to invest and reduce costs for customers. For instance, they have increased the payloads they can carry, with tonnage per train up by 80% in the last decade. When shipping by rail, the lower interest costs for the tied-up capital partly cover the higher transportation costs, making rail freight a very cost-efficient shipping alternative. Let me exemplify:
If a company ships 750 containers per year, with an average cargo value of 250 000 EUR per container, and a financial cost of 5% PA, the daily interest cost is 37.52 EUR per container. Shipping goods door-to-door from China to Europe by rail typically takes about 25 days, compared to the sea, which typically takes about 42 days. This means a saving in interest cost of 708 EUR per container or 531,165 EUR per year for all 750 containers. This is money that can be used to cover extra costs and create a more agile supply chain, which can also have an additional positive impact on cost parameters and capital binding.
Rail freight companies continue to invest and reduce costs for customers. For instance, they have increased the payloads they can carry, with tonnage per train up by 80% in the last decade. Railway transportation costs are lower. The cost of railway transportation is only one-tenth of the cost of automobile transportation; transportation fuel consumption is about one-twentieth of automobile transportation.
The COVID-19 crisis has resulted in the shortage of truck drivers, restriction on sea and air transport in many countries and regions. As a result, the cost of transportation through truck sea or air has sharply risen as compared to rail freight costs. This has made the shift to rail fright a supply chain advantage.
Asia-Pacific Leads the Global Rail Freight Transport Market
As per the industry sources, the Asia-pacific region leads the current market studied and is also expected to grow significantly above Europe and North America. China is the largest market followed by India. India’s rail network is the world’s third-largest.
Southeast Asia is the major driver for rail freight movement across the region comes from a significant improvement in the business climate in most of the ASEAN countries over the last decade. The China-Laos railway, the launch of Laos’ first satellite, hydropower development, and other projects funded by China have helped to promote connectivity between the two nations. Agriculture is seen as an important sector to bolster Lao exports to China, especially bananas, rubber, fertilizer, cassava, and corn. A major driver for rail freight movement across the region is the significant improvement in the business climate in most of the ASEAN countries over the last decade. Vietnam, the Philippines, and Indonesia are among the fastest-growing countries in the region.
India’s rail network is the world’s 3rd largest rail network with approximately 13,000 passenger trains and 9000 freight trains operating daily. Freight traffic of Indian Railways increased to 1,221.39 million tonnes in FY19. As of January 2020, Freight traffic in FY20 (Up to Jan 2020) stood at to 999.51 million tonnes. Growing industrialization across the entire country had further increased freight traffic over the last decade. Freight traffic is also set to increase significantly, due to the rising investments and the increased participation by the private sector. The Indian Government is also providing huge impetus to the PPP model in the industry by the redevelopment of stations, building private freight terminals, and private container train operations. It has also allowed 100% FDI in the railway sector.
The rail freight transport market is moderately consolidated in nature, with a mix of global and local players. According to industry sources, the rail industry is facing huge competition from its similar service providers road and air transporters since last decade. Many countries are heavily investing in the railroad infrastructural developments, especially investments are huge in the Americas and Europe regions. International companies are holding a large amount of market share by acquiring or joining hands with local companies in many regions. In-country level, most of the markets seems to be concentrated with the presence of one or two major players. Additionally, in some countries, state-run companies own a major share of the market. During the COVID-19 pandemic, rail freight is playing a key role during this critical time in connecting European economies and keeping freight moving.
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