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The Railroad Industry's Outlook for 2013

Resilience and resourcefulness are two terms that have become closely associated with North American railroads in recent years. The industry has emerged from the worst economic recession since the Great Depression in relatively solid shape, and enters 2013 positioned for growth.

More important, it has demonstrated that it is capable of dealing with changes in its traffic base that not so many years ago would have dealt a crippling blow. The big change has been the precipitous drop in coal, once the railroads' single-largest revenue source. Cheap and abundant natural gas combined with tightened environmental regulations on coal have taken some of the gleam off the black diamonds that the industry has relied upon for generations. But in a not-so-strange twist, the abundance of natural gas has actually worked in the industry's favor, because a highly efficient, rapidly growing means of extracting it from the ground"”fracking"”is now big business for railroads, the single-most efficient and productive form of surface transportation. This same efficiency and productivity have been the catalysts for growth in intermodal, which has consistently seen increases in traffic. All this, combined with continued strong pricing power, underpins an industry that in 2013 is expected to surpass $20bn in capital investment.

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