Thursday, August 22, 2013

IBISWorld: Track construction is strong, expected to grow

According to a report by industry research firm IBISWorld, despite a slight downturn during the recession, the railroad track construction industry has experienced strong growth in the past five years

primarily due to increases in government funding for transportation, as well as an increase in the volume of goods manufactured in the United States and goods imported from international sources. Many of these goods are transported via freight train, increasing the need for industry services.

After a major recessionary hiccup in 2009, in which revenue plummeted 10.8 percent, the industry rebounded strongly in 2010 and has been growing ever since. In the five years to 2013, revenue is expected to grow at an annualized rate of 1.0 percent to $4.3 billion, including a 4.3 percent increase in 2013 alone, IBISWorld says.

"Higher shipment volumes of manufactured goods, as well as an increasing volume of imported products into the United States, has helped fuel the industry's post-recession growth," said IBISWorld industry analyst Sean Windle.

The report says many of these goods are transported via freight train; as existing rail lines are used more frequently, the demand for repair and maintenance-related construction work has increased. Additionally, while most of the construction sector remained under duress in 2010 and 2011, railroad track construction firms enjoyed solid revenue growth. Federal spending programs, such as the American Recovery and Reinvestment Act of 2009, allocated billions of dollars for railroad track construction and other transportation initiatives, buoying industry revenue.

IBISWorld says that despite the industry's overall positive revenue growth, weaker demand conditions fueled an increasingly competitive environment, in which operators lowered prices to secure bids for public and private projects.

"Market share concentration is expected to continue to increase in the next five years, as larger companies leverage their economies of scale to lower prices and win bids for track construction contracts," says Windle.

IBISWorld says that in the five years to 2018, industry growth is forecast to accelerate. Several different factors will contribute to this strong revenue growth, including more investments for rail transportation projects at the local and state government level and increasing demand for the shipment of manufactured and imported goods via rail. Additionally, several high-speed rail projects are set to break ground during the next five years, which will further bolster industry demand.

 

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