Transportation Sector Report & Trends

Global trade recovery is meant to boost the growth in transportation activity

Sector
Value

2,950bn USD

M

MEDIUM RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • Air transport boosted by the strong rise in (international) passenger traffic
  • US airlines financially stronger than ever in spite of their fleet of ageing aircraft
  • Maritime activity back on track due to world trade recovery
  • Tighter regulations dealing with environmental constraints penalizing transportation as a whole
  • European air (and rail) companies coming to grips with nationwide restructurings
  • High dependency on variations of fuel (i.e. diesel, gasoline or jet fuel) prices

What to Watch?

  • Evolution of the global economic growth rate
  • Development of service-related activities to improve profitability levels
  • Ability for (road) transport companies to pass rising fuel prices on to customers
  • Soaring environmental constraints impacting transport companies’ margin growth  

World trade growth appears to be the main driver for transportation of any kind whatsoever, although the requirements of people transportation strongly differ from these of goods transportation. In volume terms, world trade growth amounted to +4.3% on a yearly average in 2017 while it amounted to half as much as +2.1% in 2016. The good news is that we expect the global trade growth to hit +3.9% in 2018, in other words a supportive background for the second consecutive year despite a poor outlook across the Middle East.

Because of its flexibility, road transport is usually used to carry goods nationwide and takes the lion’s share (around 70%) of the transportation market as a whole. However, trucking companies have to pay attention to higher costs associated with retaining truck drivers and rising fuel prices that might cut margins eventually. The bigger the country, the most favored rail transport is. So railroad traffic shall profit from same uptrends as road transport, in addition to soaring demand in raw materials across America and Eurasia. Air transport enjoys the surge in air passenger travel even if some big players start complaining about low-cost airlines’ fierce (and new) competition over long-haul routes. The better outlook for maritime transport has still to contend with slack capacity, rising fuel costs and tighter regulations to ensure margin increases.

Road transport: High degree of fragmentation among road transport firms, especially in Europe 

Rail transport: The bigger the country, the better for rail transport 

Air transport: Low-cost airlines’ competition spreading out over long-haul routes 

Maritime transport: Stronger Chinese demand in bulk goods helping boost the marine sector

Key players

Country Role Sector risk
United States

#1 producer

A

Low risk

China

#2 producer

B

Sensitive risk

Japan

#3 producer

B

Medium risk

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DISCLAIMER

These assessments are, as always, subject to the disclaimer provided below.

 

This material is published by Euler Hermes SA, a Company of Allianz, for information purposes only and should not be regarded as providing any specific advice. Recipients should make their own independent evaluation of this information and no action should be taken, solely relying on it. This material should not be reproduced or disclosed without our consent. It is not intended for distribution in any jurisdiction in which this would be prohibited. Whilst this information is believed to be reliable, it has not been independently verified by Euler Hermes and Euler Hermes makes no representation or warranty (express or implied) of any kind, as regards the accuracy or completeness of this information, nor does it accept any responsibility or liability for any loss or damage arising in any way from any use made of or reliance placed on, this information. Unless otherwise stated, any views, forecasts, or estimates are solely those of the Euler Hermes Economics Department, as of this date and are subject to change without notice. Euler Hermes SA is authorised and regulated by the Financial Markets Authority of France. 

 

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