The Growth of the Rail Freight Industry

rail freight train with blurred motion

Like many industries, the rail freight market has fluctuated throughout history. During the great recession in 2008, rail freight transportation had negative year-over-year growth for the first time. The growing need for crude oil, coal, and natural gas and the booming energy industry have improved rail freight’s profitability since then: In 2017, Class I freight volume in carloads increased by 4.5% year over year, and regional railroad volume grew by 4.9% according to the Railway Tie Association. Learn more about the biggest contributors to today’s rail freight market health and trends that may impact the industry in the future.

Contributors to Rail Freight Market Growth

Coal is the largest contributor to the growth of Class I freight volume, with a 20% growth year over year. Other positive rail segments include nonmetallic minerals (8% increase), metallic ores and minerals (4% increase), and intermodal shipments (2.3% increase). Regional roads also helped fuel growth, with coal, stone, sand, petroleum, and intermodal transportation all increasing. Some segments, like chemicals, forest products, and lumber, are still under-performing and will need to concentrate on growth initiatives to remain competitive and profitable.

Rail freight traffic is strongly linked to overall economic health. According to the Association of American Railroads, Class I railroads carried 37.9% of the total freight moved during 2016 and generated $12.9 billion in revenue. The rail freight industry is also a huge economic driver of high-paying job creation—in 2014, America’s major freight railroads supported 1.5 million jobs and $88 billion in wages (freight employees are among America’s highest compensated workers). The healthy U.S. economy is expected to generate more profits and jobs for the rail freight industry in the years ahead.

The Future of Rail Freight

The future success of the rail freight industry depends on its ability to adopt environmentally sustainable solutions and consolidate the supply chain through technology. Rail freight has been slow to incorporate digital advancements, but the industry is likely to place a greater emphasis on real-time predictive data, automation, cybersecurity, and other technology that will increase profit margins by streamlining operations and offering a better customer experience. The rail freight industry must also generate innovative solutions for minimizing emissions to keep up with regulatory pressures and the trend toward clean operations.

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