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Rail News: Rail Industry Trends
Rail rates to continue steady climb
“The hoped-for uptick in demand that many expected in the second half of [last] year never materialized,” the report states, adding that fall peak demand was as weak as 2006’s “lackluster period.”
However, railroads will fare better than trucks because relatively tight rail capacity and less exposure to cyclical shipments will continue to support rail rate increases.
Railroads’ volumes remained weak in market sectors influenced by the soft housing and automotive industries. But strong demand for less-cyclical commodities — like coal and grain — helped limit their overall traffic declines.
“The railroad industry has shown an ability to maintain its pricing strength, with increasing unit prices driving growth in revenue, even as volumes have been flat to down,” Fitch Ratings said.
Rail pricing is expected to remain firm. However, unit revenue percentage gains most likely will fall in the low- to mid-single digits, according to the report. Pricing power should continue to drive railroad margin performance and the Class Is should keep posting operating ratios in the 70s, Fitch Ratings said.
On the economic front, continued weakness in the U.S. housing industry, potential tightness in credit markets and high energy prices will restrain growth this year. Fitch Ratings projects ’08 gross domestic product growth of 1.7 percent, down slightly from 2007’s estimated 1.8 percent rise.
|Global M&A activity in ’07 to outpace ’06
Mergers and acquisitions among transportation and logistics firms reached a high level last year. Through 2007’s first three quarters, global M&A volume was on pace to exceed ’06 levels, according to a quarterly M&A activity report released last month by PricewaterhouseCoopers.
KeywordsBrowse articles on rail traffic Fitch Ratings rail capacity rail rates rail pricing rail mergers rail M&A PriceWaterhouseCoopers
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