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Business Environment Profiles - Australia

Rail freight service price

Published: 30 August 2024

Key Metrics

Rail freight service price

Total (2025)

138 Index

Annualized Growth 2020-25

2.1 %

Definition of Rail freight service price

This report analyses the service price of general rail freight. The data for this report is sourced from the Australian Bureau of Statistics' Producer Price Index (PPI) for Rail Transport, which is a subdivision of the Transport (freight) and Storage Division. The overall PPI measures the price of all goods and services received by producers. The rail transport PPI is a component of the overall PPI and measures the weighted average price of rail freight transport. The base year of the index is 2011-12.

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Recent Trends – Rail freight service price

IBISWorld forecasts the rail freight service price index to average 137.5 index points across 2024-25, representing a decline of 2.7% from the previous year. Falling diesel prices are set to reduce operating costs for rail freight service providers, allowing them to charge lower prices following surging fuel costs over the previous three years. However, growth in coal, iron ore and grain production volumes are expected to bolster demand for rail freight services, likely constraining price declines.

Key drivers of rail freight service prices include fuel prices, labour costs and demand conditions. The level of capital investment in rail infrastructure can also affect competition and supply and in turn prices. Rising global oil prices have increased fuel costs for rail freight service providers over the past five years. Oil prices soared over the two years through 2021-22 as the fallout of the Russia-Ukraine conflict created disruptions in global energy markets. Tight labour market conditions and driver shortages have also increased operating costs for rail freight operators, which has placed upward pressure on rail freight service prices.

Total rail freight volumes in Australia have risen over the past five years, to 445.4 billion tonne kilometres (tkm) in 2022-23 (latest available data). Bulk freight, such as agricultural and mining commodities typically account for over 90% of total freight volumes. As such, demand for rail freight services is heavily influenced by mining and agricultural activity. Australia's mining output has fluctuated over the past five years, with iron ore, lithium, and bauxite production rising. However, coal, gold and nickel production volumes have fallen. Coal producers are a major user of rail freight services on Australia's east coast, with coal production and rail transport both interrupted at times by adverse weather conditions over the past five years. Much of Australia's iron ore production is also transported by rail. However, major iron ore producers like BHP and Rio Tinto operate private rail networks. Growth in agricultural activity, including a record a wheat crop in 2022-23, have also increased demand for rail freight services and placed upward pressure on prices over the past five years.

Demand for rail freight services have risen over the past five years, which combined with rising operating costs for rail freight operators has pushed rail freight service prices higher. Rising agricultural and mining production volumes have increased bulk rail freight volumes, causing prices to rise. Overall, IBISWorld expects the rail freight service price to increase at a compound annual rate of 2.1% over the five years through 2024-25.

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5-Year Outlook – Rail freight service price

IBISWorld forecasts the rail freight service price to increase by 1.4% in 2025-26, to 139.4 index...

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