Canadian Rail Industry SWOT
This report provides an overview of the Canadian rail system and its strengths, weaknesses, opportunities, and threats. The industry has many strengths bound to its role in moving freight, particularly retail and agriculture goods. It is vulnerable to worker strikes internally, and factor such as diesel prices externally. It has opportunities in the passenger and urban and metro sectors.
- The Canadian rail system enjoys strong support from the international freight industry with 2/5 of rail infrastructure traveling either across international borders or overseas.
- A significant number of exports (1/6) travel across the Canadian rail system. Both import and export activity are anticipated to increase through 2025.
- High retail markets and agricultural demand are a source of continued ongoing strength for the Canadian rail system. Retail sales are anticipated to continue to grow through 2025.
- The Canadian rail system's approximate $10 billion industry gets 95 percent of its income from freight, which is based on consumer demand rather than consumer travel (meaning it will not be impacted negatively by reduced passenger travel).
- From 2011-2016, the railways invested approximately 20 percent (or $1.8 billion) into track infrastructure.
- The Canadian rail system contends with internal labor issues that have produced strikes, including one in 2020 at the Canadian National Railway. In that strike, 3,200 workers went on strike in protest of working conditions and a lack of medical benefits.
- Accidents (mainly related to non-main track derailments and crossing accidents) spiked in 2018 to 1,278 from the previous 10-year average of approximately 1,170. There is a need to maintain and revisit internal safety policies to lower the number of accidents and preserve public safety.
- The rail system in Canada consists of a small number of larger buyers and a large number of small sellers, which gives the buyers the advantage in controlling what product they buy.
- The Canadian public ranks environmental concerns and climate change as among their top priorities, and rail is positioned well to champion itself as an efficient form of freight and public transportation.
- Commuter railways transported a record number of passengers in 2018 (82.8 million), up 4.2 percent from 2017 and up 7.7 percent from the average of the previous five years. Commuter rail is a rapidly opening segment.
- The UK has identified a distinct opportunity in Canada's urban and metro rail systems. Declaring the freight sector to be "well serviced", it identifies the following as opportunities in the urban and metro sector: urban rail projects where the project exceeds local capacity for construction, developing or offering asset management technologies to support existing networks, consultancy services to assist with expansion, and the installation of electrification equipment.
- The profit of the Canadian rail system could be affected by negative U.S. diplomatic relations with China, which have caused a decrease in exports in 2020.
- The cost of diesel fuel directly affects the operating cost of rail freight operations. In 2018, the cost increased by 23.3 percent, which was 11.1 percent higher than the average of the previous five years.
- The Canadian rail industry is vulnerable to high taxes. In 2018, it paid a record $2 billion in taxes, representing 20.1 percent more than in 2017. A 27.6 percent increase in carbon-related levies and a 29 percent increase in income taxes contributed the most to the higher tax bill.
- Restrictive "Buy America" clauses and the high Canadian dollar have decreased the profit margin from the U.S.