SCI Verkehr is now predicting that growth will accelerate to 22% over the next five years to reach €160 billion by 2015, although the rate of growth might tail off after 2013 as rail projects designed to stimulate national economies come to fruition. While growth is clearly expected to be at a lower rate than before the economic crisis, steady growth is actually easier to manage and of course preferable to a fall in demand.
The North American rail market is the only part of the world to suffer negative growth in the last two years, shrinking from €24.7 billion in 2008 to €19.5 billion today. Maria Leenen, SCI Verkehr’s CEO, says there are four main reasons for the drop:
• the US market is dominated by freight transport and this segment is very volatile because of its dependence on the procurement of freight wagons and locomotives
• planned infrastructure projects have not really started yet - SCI Verkehr takes the year of delivery to estimate the markets
• exchange rates - SCI doesn’t make allowances for currency fluctuations, but it does take the average of three years, and
• a much clearer picture of the maintenance and after-sales segment with real data points resulting in a better estimation of the after-sales-market in the United States, so that the average costs for overhauls and maintenance are significantly lower than previously estimated.
However, with SCI Verkehr predicting annual growth of 5% over the next five years, thanks to a recovery in the freight business and President Obama’s initiatives to kick-start investment in inter-city and high-speed rail, North America is expected to recover quite quickly.
As we report this month, several Class I railways are enjoying a strong revival in traffic and financial performance. BNSF recorded an impressive 52% increase in first-half earnings, while net income soared for both Union Pacific with a 53% hike, and Norfolk Southern with 59%. Canadian National also reported an 18% increase in revenue. Meanwhile work is starting on the first two high-speed projects in the United States, with groundbreaking for the huge California scheme taking place last month and geotechnical surveys underway for the Tampa - Orlando line in Florida.
In contrast with North American contraction, the Asian rail market dominated by China has continued to expand recording an impressive 22.5% growth rate since 2008 from €29.8 billion to €36.5 billion this year. As a result, Asia is now the world’s second largest rail market, pushing North America into third place, and catching up Western Europe, with SCI Verkehr expecting the gap to shrink further due to slightly higher growth in Asia.
There are three small markets in terms of overall volume which are worth watching as they have relatively strong growth rates. The Central and South American market, which is dominated by Brazil, has recorded the highest growth rate in the last two years.
It jumped by 36% from €2.5 billion to €3.4 billion, and SCI Verkehr is forecasting annual growth of 6.5%. The other two are the €5.6 billion Africa/Middle East market with predicted annual growth of 4.5% and the €13.7 billion market covering the former Soviet Union countries with a forecast annual growth rate of 4.9%.
Change is also afoot among the leading suppliers. Up to now, Alstom, Bombardier and Siemens have been the only real global players offering a full range of products and acting on all markets worldwide. “The Big Three still have the technical advantage,” says Leenen, “but the Chinese competitors in particular are developing their technical know-how. CSR and CNR have doubled their market volume (+108%) in the rolling stock segment within the last five years, while the Big Three only grew by 17% in that period.”
Leenen also points out that the Chinese suppliers increased their market penetration in their home market, and are becoming more successful with projects in foreign markets such as Argentina, Tunisia, Saudi Arabia, the Emirates, and India. However, Western Europe is not yet the main market focus of the Chinese, but that will change incrementally. “The Chinese are increasing their impact step by step, but without hurrying,” she says.
There is a bigger Chinese presence at InnoTrans this month, and Leenen is confident this will grow. “I’m sure we will see a different picture at InnoTrans in 2012 and 2014,” she predicts.