Global Rail Freight Transportation Industry

Global Rail Freight Transportation Industry

  • July 2020 •
  • 139 pages •
  • Report ID: 5820088 •
  • Format: PDF
As COVID-19 Outbreak Escalates, Logistics & Freight Transportation Bites the Dust

Except for the transport and delivery of much-needed food essentials and drugs, medical equipment, and personal protective equipment like masks, gowns, gloves, logistics and cargo transportation industry is bearing the brunt of the pandemic`s wrath. COVID-19 has metamorphosed into the most severe public health and economic crisis of the 21stcentury. Trade bans, import/export restrictions, travel restrictions, supply chain disruptions, and sealing up of regional as well as international borders have severely restricted movement of people and all non-essential goods and services. Global trade in the month of April 2020 declined by -2.9% as compared to the -2.2% in March and -0.5% in February of the same year. The closure of manufacturing plants as part of the lockdown restrictions imposed worldwide has interrupted inland logistics. With first and last-mile connectivity impacted, the industry stands significantly crippled. Although the pandemic has brought online e-commerce platforms into the spotlight, movement restrictions have impacted urban logistics. The magnitude of the crisis can be put into perspective by the fact that global capacity in the logistics sector has declined by 65% to 75%. The massive drop in capacity is pushing up freight rates by over 6% to 9%. Manpower shortages at airports, seaports, warehousing and trucking sites are additionally aggravating the already existing pain points. The economic recession which is expected to be more devastating than the great recession of 2009 will wield an additional blow to the industry which is already reeling under the aftermath of the lockdowns. Transportation and logistics will bleed the highest Gross Value Added (GVA), dealing the biggest blow to overall GDP.

An Economic Barometer, Rail Freight Declines as Recession Sets In

Like the rest of the transportation industry, Rail Freight Transportation is also feeling the heat and pain of the deteriorating economic climate. Against the backdrop of a hurting drop in rail cargo amid transport route restrictions, the global market for Rail Freight Transportation is downward revised to a projected US$213.9 billion for the year 2027 trailing a CAGR of 4.3%. The market in the year 2020 will slump by -7.7%. Economic conditions have a direct correlation to movement of goods and the rail freight sector has long been the barometer of economic conditions. Diminished rail traffic numbers is a common thread cutting across countries worldwide. While lockdowns and interstate restrictions have interrupted rail movement, the virus led recession and its induced decline in manufacturing output is triggering huge traffic losses in terms of cargo loading. Shrinking of demand for bulk commodities is the biggest challenge faced by the market. Loading of coal to steel plants and thermal power plants has declined significantly as construction and energy industries collapse under the weight of plummeting energy consumption and halted economic activity. With new construction projects put on hold or postponed cement and clinker loading has also taken a hit.

What Will It Take for the Market to Recover Growth Post COVID-19?

Across countries, railroads are downsizing and closing yards as idle locomotives push up revenue losses. In India, the country which imposed the strictest lockdown in the world, freight trains are plying at less than 55% capacity. Dealing the biggest blow was the 30% reduction in coal-based power generation in the country. In the United States, the over 45% decline in intermodal transport and disruptions in the busiest leading container ports including California`s Long Beach and Los Angeles ports have taken their toll on rail freight. In Europe, the worst hit by the pandemic, a possible investment crisis can likely disrupt the regular rhythm of rail traffic even in the long-term. Ongoing EU?funded rail investments have already been hit and construction works under existing contractors have either stopped or are delayed due to lack of timely delivery of railway equipment and rolling stock. European rail freight companies are heavily dependent on the development and management of rail infrastructure. Boosting international rail links, especially extending major trans-European transport routes to neighboring countries will remain crucial for long-term growth in rail freight in the region. In the post COVID-19 period, rail freight transportation will require more than a return to economic normalcy to regain growth. Technology will remain in the spotlight and stakeholders in the rail supply industry will need to adopt digital solutions and innovative technologies that offer seamless connectivity to operate safely and with efficiency.