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Canadian freight rail low-price winners in the global context

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New, independent report shows that Canada’s freight rail rates are among the lowest in the world

CPCS, a leading independent global transportation firm, says Canada’s rail freight rates are among the lowest in the world. These findings are a big deal. As Canada looks to strengthen the links in its supply chains, this report shows that Canadian railways provide world-leading value for shippers to get their products to market and, ultimately, for consumers from coast to coast to coast.

The firm outlined its findings in a report titled International Comparison of Rail Freight Rates. Using publicly available data, the study surveyed 11 countries representing two-thirds of global GDP. Jonathan Thibault is RAC’s Manager of Economics, Data, and Research. We asked him to help break down the report for us.

There are plenty of railway performance reports out there, such as RAC’s annual Rail Trends report. Why is the CPCS report important?

There aren’t a lot of studies that compare railway performance globally. The CPCS report is extremely useful due to its global scope. It’s timely and it is transparent – the data sources and methodology are clearly outlined throughout the report.

The CPCS report covers two-thirds of global GDP across 11 countries[1] in 2021.  These are trading nations like Canada, and most are market-based economies like Canada’s.

The report clearly shows that Canadian railways have among the lowest freight rates in the world, with an average revenue per revenue ton-mile of just 4.16 US cents. This is the lowest rate of all market-based economies surveyed.

What does a low freight rate, or revenue per revenue ton-mile, mean for shippers?

A railway’s average revenue per revenue ton-mile refers to how much money it collects in relation to the volume of freight transported, considering both weight and distance. Through this number, we infer an average rate for what a shipper pays when they want to transport something by rail. The lower the rate, the better for the shipper and for consumers.

Canada’s low rate is proof that, as Canadian railways became more and more efficient over the past several decades, they passed on the savings to shippers and consumers. This is because there is robust competition between our largest railways.

As rail freight rates increased in the U.S., and inflation drove up the prices of consumer goods, industrial products, and commodities, our railways innovated, invested, and drove operational efficiencies to keep costs low for their customers.

These low rates help Canada stay competitive in global markets. As a trading nation, by delivering goods across the U.S. border and to Canadian ports at a low cost, railways contribute to shippers’ success in the global marketplace.

What does the report say about Canadian freight rates vs. the United States?

Since 1988, rail freight rates in Canada grew at a rate of 1.1 per cent per year; U.S. rail rates grew at 1.7 per cent per year. Over a 30+ year period, this is a significant difference. Canadian rates have been lower than U.S. rates for several years; in 2021, they were 11% lower. These rates can significantly impact the prices regular people see at the store.

Overall, it’s a sign that the market is working as it should in Canadian rail and does not call for additional regulation or intervention. Competition and innovation are keeping rates competitive.

The performance of Canadian railways is a real success story, and I encourage everyone interested in Canadian transportation policy to read the full report.

[1] Note: Australia was included as the 11th country in the study but does not appear in the figure. Read the full report for further details.