Today marks the 89th anniversary for the death of Andrew Carnegie, the tycoon of steel and the first revolutionary in the railroad business. Now, in the 21st Century, we have commercial airplanes, automobiles of every shape and speed, even Mache-speed jets, yet the popularity of railroad travel remains extremely popular. Look to China if you don’t believe me. The Giant in the East controls 24% of global railroad traffic, yet only has 6% of the world’s track. The sector has been somewhat of a barely-explored venture until a few years ago, as demand for rural Chinese to enter urban areas has surged along with gigantic growth in China’s manufacturing sector.
Nearly half of China’s population still remains spread out on rural farms and small villages, while there is noticeably larger demand for people travelling among the metropolitan cities. The amount of raw materials being shipped from the Western provinces of China to the manufacturing hubs on the Eastern coast have tripled in the last four years, as the preferred shipping method within China remains freight. Meanwhile, China’s railroad service can satisfy only about 35% of demand for manufactured products, and the 2.4 million seats of capacity is far short of the 3.4 million in daily demand for individual travel. China is clearly getting the ball rolling quicker recently, when the government approved 1.25 Trillion Yuan (~ $160b) in order to build railroad infrastructure through 2010. Connecting the vast country will sustain China’s growth pattern for decades, as nearly every part of the railway supply chain will benefit from the sector transformation.
The sector has drawn particular attention from investors, with many overseas locomotive companies looking to grab a piece of China. In 2007, Alstom Transport, one of the largest railroad companies by market share, signed two contracts worth more than $465 million with the Railways Ministry to build electric freight locomotives and high speed lines on the mainland. Or take Daqin Railway, which operates China’s biggest coal hauling line. It raised $2 billion in an IPO, its share price rising over 80% for the year, dominating China’s railroad sector along with only a few other players. All aboard the fast train.
Nearly half of China’s population still remains spread out on rural farms and small villages, while there is noticeably larger demand for people travelling among the metropolitan cities. The amount of raw materials being shipped from the Western provinces of China to the manufacturing hubs on the Eastern coast have tripled in the last four years, as the preferred shipping method within China remains freight. Meanwhile, China’s railroad service can satisfy only about 35% of demand for manufactured products, and the 2.4 million seats of capacity is far short of the 3.4 million in daily demand for individual travel. China is clearly getting the ball rolling quicker recently, when the government approved 1.25 Trillion Yuan (~ $160b) in order to build railroad infrastructure through 2010. Connecting the vast country will sustain China’s growth pattern for decades, as nearly every part of the railway supply chain will benefit from the sector transformation.
The sector has drawn particular attention from investors, with many overseas locomotive companies looking to grab a piece of China. In 2007, Alstom Transport, one of the largest railroad companies by market share, signed two contracts worth more than $465 million with the Railways Ministry to build electric freight locomotives and high speed lines on the mainland. Or take Daqin Railway, which operates China’s biggest coal hauling line. It raised $2 billion in an IPO, its share price rising over 80% for the year, dominating China’s railroad sector along with only a few other players. All aboard the fast train.
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