June 27, 2013

SCI Verkehr: Global rail industry market feels the strain

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Certification issues, such as the delays experienced in Germany with Siemens' Velaro D, have had a negative impact on the global rail market. Certification issues, such as the delays experienced in Germany with Siemens' Velaro D, have had a negative impact on the global rail market.

A strained climate continues to persist in the global rail industry as the abundance of new orders expected to spur a turnaround have not yet materialised.

These are the findings of the SCI Rail Business Index which is based on around 100 reports from companies working in the global railway industry and provides senior managers' views on their current and expected state of business.

The index for the first quarter is at 13%, which is comparable with the first quarter of 2010 when the industry was experiencing the first shoots of recovery following the economic crisis of 2008-2009.

This recovery peaked at around 50% in mid-2011. However, a downward trend persisted until the third quarter of 2012 with only minor signs of recovery in the final quarter of 2012 and so far in 2013.

SCI says that while companies sense that the industry will face changes in the coming years, a "wait and see" attitude is currently predominant. This was reflected in "stable/unchanged" being selected as the overwhelming answer to many of the questions included in the survey.

Indeed SCI says the business situation in the second quarter of 2013 has worsened for a substantial number of companies due to a lack of incoming orders. Only around a quarter of managers surveyed said that their business is experiencing positive developments, the same number as in 2009.

This is reflected in decline in demand for products and services which has persisted since mid-2011 and contracted for the third quarter in a row in the second quarter of 2013. Rising incoming orders are reported by only 10% of companies, the lowest level since 2009, while 40% evaluated the demand trend negatively compared with no companies in 2011. However, with around a third of companies hoping for a positive development in their business and 50% hoping for at least a stable continuation, there is a sense of optimism about the next few months.

SCI also asked managers about the negative impact of other market issues on their business.

Administrative obstacles such as certification issues had a negative influence on 55% of companies, while 35% reported problems caused by increases in purchasing costs, 40% cited demand and 35% price trends. Companies pointed specifically to the difficulties surrounding certification processes in the key German market, and stricter processes in other countries, including to a certain extent China following the Wenzhou high-speed crash of August 2011.

To purchase the complete SCI Rail Business Index, visit www.sci.de

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