"The close relationship between railroad expansion and the general development and prosperity of the country is nowhere brought more distinctly into relief than in connection with the construction of the Pacific railroads." ~ John Moody
Union Pacific Railroad (UNP) rose sharply recently after it announced a new CEO – Jim Vena, who formerly served as UNP’s chief operating officer. The market apparently welcomed Vena’s ascendancy due to his reputation for improving efficiency, which will come in handy when he takes the helm on August 15, 2023. UNP, like the rest of the railroad industry, faces increasing challenges.
Yet in both the U.S. and on a global scale, public initiatives present potential longer-term opportunities for railroad operators, infrastructure companies, and manufacturers of rolling stock and associated products and services. An April 2023 report by Extrapolate Statistics valued the global rail infrastructure market at $58.7 billion and estimated that the market would grow to about $83.8 billion by 2032. Extrapolate also forecast that passenger and freight activity would double by 2050.
In Asia, much of this growth will likely be driven by increased urbanization, development, and trade. In India, for example, passenger traffic has almost tripled since 2000. Freight traffic has grown by 150% over the same period. And China is rapidly building freight and high-speed passenger railroads both domestically and abroad as part of its Belt and Road Initiative.
Economic factors are also a big reason for the interest in expanding rail capacity in the West. But environmental concerns play a role as well. On a per-passenger basis, trains are as much as 12 times more energy efficient than air travel. Along similar lines, the Federal Railroad Administration estimates that freight locomotives are two to seven times more fuel-efficient as trucks, as measured by gallons per ton-mile. And it goes beyond that: one diesel-powered locomotive can haul as much as 800 trucks, so replacing truck hauling with rail shipping whenever feasible also reduces emissions by improving traffic for other vehicles. (As a side benefit, this significantly reduces roadway wear-and-tear.)
In the U.S. the railroad system is comprised of roughly 150,000 miles of rail lines in total. The majority of those are owned and operated by six large Class 1 freight railroad companies (as of this writing, defined as a rail company with annual operating revenues of at least $490 million.) Amtrak (which also counts as a Class 1 railroad company) runs U.S. intercity passenger rail service. It owns about 600 miles of track in the northeastern states, and operates on leased tracks owned by freight rail companies elsewhere. The rest of the system is made up of a number of small freight and passenger rail companies that operate in a very limited capacity. (The latter includes commuter rails that run between large cities and the surrounding suburbs, but it does not include urban public transit systems like subways.)
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