Impact of Rail Costs on the Australian Freight Industry

As the international freight industry grows, Australia risks being left behind owing to the high cost of rail transportation.

Growth of the Global Freight Industry

The freight forwarding industry is growing at a phenomenal rate with billions of tons of cargo being transported around the globe via air, sea and land.

Rail Freight

In a number of countries, rail freight forwarding is anticipated to rise from between 50 and 80% by the end of 2010.

Indeed, in the UK rail freight has grown by an annual average of 6% between 1996 and 2003, and by a total of 41% in the same period. Rail freight's share of the overall freight market increased from 6% to 11% between 1996 and 2003.

Rail freight shipments are generally made up of traditional bulk commodities, such as coal, metals and industrial minerals. Overall growth in the rail freight market has been driven by three main shipment categories; coal, intermodal, and wagon load traffic.

Cargo Management and Rail Freight

For freight companies in many countries the main challenge is to improve their cargo management process in order to enable the predicated rail freight industry growth to take place effectively.

Currently, the cargo management process is expensive and labour intensive. This is because much of the work (such as verification of shipments) has to be done manually. Such manual systems hinder the adeptness of freight dispatching and sequencing. The reason for this is that businesses cannot track where their cargo is easily.

Australian Rail Freight Industry

However, in Australia there is another serious issue which is impeding the progression and development of the freight industry there. The issue is the cost of rail transportation.

This is highlighted by the fact that transporting cargo via rail between Darwin and Adelaide costs the same amount as covering three times as much distance by road.

If the freight industry in Australia is to grow at the same rate as in other countries, the cost of rail transportation will have to come down. If it does not do so, then the Australian freight industry is likely to be seriously disadvantaged against its international competitors who can offer much lower rates.