Transportation

Wanted: (road) transport drivers

Sector
Value

3000bn USD

M

MEDIUM RISK for entreprises

  • Fragmentation

  • Internationalization

  • Capital Intensity

  • Profitability

  • Air traffic on the upside, supported by the rising demand in air passenger travel
  • Shipping activity boosted by the resilience of world trade growth rate
  • Airlines’ profitability at steady level thanks to fair jet fuel prices
  • Grounding 737 MAX jets preventing a few (low-cost) airlines from meeting customers’ demand
  • Rising tariffs, especially between the US and China, looming ahead
  • Truck drivers currently facing labor shortages, particularly across the US
  • High dependency on variation of (jet) fuel prices

What to Watch?

  • Evolution of the global economic trade growth rate
  • Tight environmental constraints impacting transport (esp. shipping) companies’ costs
  • Ability for (road) transport firms to pass fuel price rises on to customers
  • Development of service-related activities (esp. delivery right on time) to improve profitability levels

World trade growth appears to be the main driver for transportation of any kind whatsoever, although the requirements of people transportation strongly differ from those of goods transportation. In volume terms, world trade growth amounted to +3.9% on a yearly average in 2018, down from +4.8% in 2017. The new item is that we expect global trade growth still to be positive although at a slower pace to +3% in 2019, in other words (at) a not that much supportive background, without even taken into consideration tariffs looming worldwide.

Because of its flexibility and its simplicity, 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, road transport companies have to pay attention to higher costs associated with truck drivers’ wages because driver availability remains one of the biggest challenges facing the trucking industry, especially across North America. The good news is that a high fleet utilization, coupled with solid enough trade growth, should keep profitability at a favorable level in 2019. The bigger the country, the most favored rail transport is. So, railroad traffic may cash in on the same uptrend as road transport, in addition to higher demand in commodities in America and Eurasia. Besides, the tight trucking market is currently bolstering North America’s railroad traffic, expected to go up +3% in 2019.

The marine shipping industry has coped with the impact of new emission regulations (IMO 2020) on the fleet and the risk of rising protectionism hitting global trade. Dry-bulk and tanker operators are working in a more balanced market, with supply growth expected to be mostly in step with demand in 2019. The liner market, which remains awash with excess capacity, could give up some recent rate gains following additional US tariffs in Chinese imports. Meanwhile, air transport keeps enjoying a rising demand in air passenger travel even if some big airlines have started complaining about low-cost airlines’ fierce competition over long-haul routes. 

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

Rail transport: The larger the country, the better for rail transport and infrastructures

Air transport: Cost-based competition of low-cost airlines curtailed by upstream supply chain bottlenecks

Maritime transport: Overall Asian demand on the rise, helping the shipping sector be resilient

Key players

Country Role Sector risk
United States

#1 producer

A

Low risk

China

#2 producer

C

Sensitive risk

Japan

#3 producer

B

Medium risk

Contact

Contact Euler Hermes

Economic Research Team

research@eulerhermes.com

Sector Risk Analyst

Marc Livinec

marc.livinec@eulerhermes.com

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