Rail freight service price

IBISWorld forecasts the rail freight service price index to average 151.2 index points across 2025-26, representing a rise of 3.3% from the previous year. Growth in coal, iron ore and grain production volumes are expected to bolster demand for rail freight services, placing pressure on available network capacity. While falling diesel prices are set to reduce some operating costs, maintenance, infrastructure upgrades and labour costs are increasing. The combination of service delivery constraints and rising costs are set to drive rail freight service prices higher during 2025-26.

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 war created disruptions in global energy markets. Tight labour market conditions, including driver shortages, and increased maintenance costs due to flood damage and 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 447.9 billion tonne kilometres (tkm) in 2023-24 (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, coal and lithium production rising. However, bauxite, alumina 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 sustained above average harvests of wheat and barley 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 4.1% over the five years through 2025-26.