Market Trends of north america road freight transport Industry
Transportation and storage sector soars 18.97% in 2022 due to to e-commerce and infrastructure investments
- Transportation and storage in North America experienced a growth increase from 18.67% YoY in 2021 to 18.97% YoY in 2022 due to rising demand for warehouse and distribution centers for e-commerce. According to ATA, approximately 72.6% of the country's freight by weight is transported by trucks. In 2022, the US Department of Transportation unveiled the Port Infrastructure Development Program, allocating over USD 703 million for 41 projects spanning 22 states to enhance port capabilities, supply chain reliability, and job prospects.
- Transportation and warehousing contributed a GDP of MXN 1.84 trillion (USD 0.094 trillion) during the third quarter of 2022, marking a 0.62% quarterly increase and a substantial 21.3% surge compared to the previous year's corresponding period. The Infrastructure, Communications, and Transport Ministry, in collaboration with the public and private sectors, committed investments totaling MXN 768 billion (USD 39.38 billion) in 2022 to enhance Mexico's road and rail infrastructure. This comprehensive effort aims to modernize railways, highways, and bridges while also addressing road safety enhancements.
- In North America, the United States is the largest contributor to the GDP of the transportation and storage sector, accounting for 86% of the total North American transportation and storage sector's GDP. The United States contributes six times the combined value of Canada and Mexico. The Canadian government provided an additional CAD 1.9 billion (USD 1.46 billion) to the National Trade Corridors Fund over four years (2021-2025), which may spur investments in much-needed improvements to Canada's roads, rails, and shipping routes, build long-term resilience for the Canadian economy, and support internal trade.
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Low supply and high demand for natural gas in the United States are anticipated to increase natural gas prices
- In 2021, natural gas prices declined by 14.7% YoY. However, in 2022, natural gas prices recorded a YoY growth of 34.3%, and the YoY growth of gasoline prices stood at 2.02% due to high inflation and the Russia-Ukraine War. The supply of crude oil became more constrained, and the gasoline demand increased, which raised the price even higher. The diesel refining margins in the country were expected to decline by 38% in 2024. The prices are expected to keep dropping in 2024 and average close to USD 3.70/gal.
- The primary driver of high gas and diesel prices is the price of crude oil, which is now 75% higher than in 2021. For instance, in Canada, gas prices jumped by more than 50% in 2021, pushing the cost of a liter to more than USD 1.56 in many parts of the country. Similarly, many western states faced much higher gas prices in the United States because of more limited refining capacity.
- There has been a rapid rise in diesel fuel prices, squeezing freight transportation companies and their customers. The impact is evident more in Mexico, where about 80% of trucks are managed by small trucking companies or owner-operators. The increase in natural gas prices in the United States will inevitably spread to Mexico's gas and power markets. However, Mexico imports 80% of its fuel from the United States. Still, gas and diesel cost less in Mexico because the Mexican government offers subsidies to the trucking industry to offset operating expenses. A weaker-than-expected supply response in the United States, combined with high natural gas demand in domestic and export markets, is expected to increase the prices further.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- Regional manufacturing sector gets a boost with CHIPS and Science Act and Green Manufacturing Initiative
- The e-commerce industry in North America grew by over 6.74% YoY in 2022, led by fashion and electronics sub-segments
- Canada ranked 7th in the Logistics Performance Index due to a rise in investment and infrastructure development
- US boosts highway investment by 55% to improve infrastructure, targeting supply chain efficiency by 2026
- National Export Strategy of the US aims to boost regional commerce by strengthening small businesses
- Fuel prices and driver wages, account for more than 60% of trucking operational costs share, rising the total road freight rates
- GM Group, a major truck supplier in North America, aims to produce 400,000 EVs in the region by mid-2024
- Growing gasoline prices and driver wages impacting road freight pricing despite government infrastructure investments
- A rise in gas prices acted as a major catalyst for increased PPI and CPI in the region
- Agriculture, fishing, and forestry registered the highest growth during the review period owing to rising trade under the US-Mexico-Canada Agreement (USMCA)
- The shift toward Mexico from China is expected to boost manufacturing production in the coming years
- Mexico government invested USD 394 million in boosting its logistic capabilities in 2023
- Increasing funding for road infrastructure projects in the region facilitates significant growth
- North America aims to domestically produce 25% of its Asian imports to increase regional integration
- Production and sales of commercial vehicles, especially heavy trucks, are increasing in the region
- Road transport infrastructure investments undertaken by regional economies along with booming trade boosting road freight volumes
- Road freight transportation dominated other modes in terms of tonnage handled and reached over 19 billion tons in 2022
