Sunday, December 27, 2009

High Speed Rail Industry and Stock Report 2010

By James Rickman, SVS

Expect double digital growth worldwide for the next three years in the high speed rail industry. Much of the sectors growth is driven by China now reporting it developing the world's largest high-speed rail network. The super train network connects two industrial powerhouse cities Guangzhou and Wuhan reducing the trip to about three hours. The Chinese Ministry of Railways reports further develop of commuter service plans to buy 1,000 high-speed trains by 2012. For 2009, Chinese railway investment exceeds $292 billion. The data unveiled in the recent “Research Report on the Investment in Chinese Railway Transport Industry, 2009” indicates that China plans to build at least 42 new additional high-speed lines connecting every major industrial center throughout China investing a total of $730 billion by 2012.

Today, China accounts for over 25% of the world’s railroad traffic but has only 6% of world’s rails in place therefore massive infrastructure projects are underway particularly as its economic recovery demands hit 9% GDP growth. Spending on railways in China jumped 126.5% year-over-year in the first half of 2009, leading to a huge increase in the nation's steel production at a time when global demand was decidedly weak. China's crude steel output in July reached a record 50.68 million metric tons, up 12.6% compared with last year, according to figures from the National Bureau of Statistics.

German train producer Siemens inked a recent $1 billion contract to build and deliver 100 new high-speed trains for China. The company's Velaro train has a top speed of 218mph (350.84km/h). A typical train has 16 cars and carry more than 1,000 passengers. With a total length of more than 1,300 feet (396.24m), the new train is the world's longest single high-speed units in use, according to Siemens China. See map of Chinese Rail System online:

Watch equity stocks like, Guangshen Railway Co. (NYSE ADR: GSH) as long term holds. The company has solid long-term prospects in China's transportation sector. Guangshen's 2008 operating revenue jumped 11.23% in 2008 on revenues of $1.76 billion. Recently, Northern Trust Fiduciary Services (Ireland) Limited has sold 8.912 million H-shares of Guangshen Railway.

President Obama has announced similar plans to make high-speed passenger rail service a centerpiece of his transportation agenda funded in part through the $787 billion stimulus plan including a total of $8 billion for improvements in the U.S. rail system. The Obama plan also proposes a separate five-year, $5 billion investment in high-speed rail as part of the administration's suggested fiscal year 2010 budget (FY10 budget outline) to make a down payment on constructing enhanced rail network. See Obama’s

A report just released by the U.S. Federal Transit Administration, “U.S. Rail Modernization Study “ estimates it may cost $50 billion to bring the rail systems in Chicago, Boston, New York, New Jersey, San Francisco, Philadelphia and Washington, D.C., into good repair and $5.9 billion a year to maintain them. These seven city systems carry 80% of the nation’s rail transit passengers, making more than 3 billion passenger trips a year. They also include some of the oldest subways and commuter railroads. Some of their facilities date back more than a century.

In terms of the global railway equipment market, presently General Electric (GE) has significant competition from global locomotive and railway car plant giants -- Germany's Siemens (SI) , Bombardier (BDRBF.PK), and Alstom (AOMFF.PK) all holding a combined 55% of total global market share (each 14%, 18% and 23%). Bombardier holds the largest market share of global railway equipment technology and sales market and Alstom leads on electric multiple unit trains (EMUs) and ordinary single-decker and double-decker electric locomotive market. International Business Machines Corp. (NYSE: IBM) won a contract to provide software for high-speed trains the Guangdong province. Also, IBM last month announced that it was opening a "Global Rail Innovation Center" in Beijing. Others to watch in the high speed rail sector include Canadian National Railway (NYSE: CNI), Union Pacific (NYSE: UNP), and Norfolk Southern (NYSE: NSC).

Capitalizing on the double digit sector growth, GE Transportation (GE) just announced its newest line of fuel efficient and low emissions Evolution Series locomotives, the Model ES44C4. GE Transportation has sales in excess of $4.5 billion delivers a cleaner, faster, safer and more reliable alternative to the aging North American fleet of DC-powered locomotives.

The new evolution series of locomotives deliver significant performance improvement over existing DC-powered locomotives in three key areas:

Better environmental performance. Compared to older DC locomotives, GE Model ES44C4 uses up to 17% less fuel and reduces emissions by approximately 70%. Six hundred of GE's latest locomotives can displace up to 800 older locomotives, translating to an annual reduction of more than 70 million gallons of fuel. The overall annual emissions reduction from this displacement is estimated to be 48,000 tons of nitrous oxide; 1,500 tons of particulate matter; and 1.0 million tons of carbon dioxide, a major greenhouse gas.

Advanced traction control. Model ES44C4 delivers sophisticated traction control technology with its patented Dynamic Weight Management System that continuously monitors traction at the axles and automatically adapts to maximize performance on heavy trains. This system—– similar to traction control on an automobile—limits wheel slip at start up, on inclines and in adverse weather conditions, ensuring optimum performance and less wasted energy. In addition, this latest Evolution locomotive has a higher top speed than traditional DC-powered locomotives.

Greater reliability. Older, DC heavy-haul locomotives currently require frequent and expensive maintenance to keep them running, which translates to significant time off the tracks instead of hauling freight. GE’s new AC motors have fewer parts to maintain and eliminate the electrical problems that hamper DC motors. As a result, they are easier to maintain and provide a higher level of reliability, which will allow the new ES44C4 to spend more time on the rails instead of in the shop for maintenance and repairs. Ultimately, this new platform could replace the older generation of DC-powered locomotives.

About Author: Mr. Rickman is a respected analyst, innovative expert in business content, Internet marketing and web development services for over 30-years experience. He is a published author in sustainable industries with several books including Eight Billion People. Mr. Rickman holds advanced business and technical degrees from Boston University. For more information visit : or call (503) 621-4953.