Market Trends of north america freight and logistics Industry
Transportation and storage sector soars 18% YoY in 2022 due to to e-commerce and infrastructure investments
- The transportation and storage sector in North America experienced a growth of 21% YoY in 2021 and 18% YoY in 2022 due to rising demand for warehouse and distribution centers for e-commerce. 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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Rising tensions in the Middle East are expected to affect crude oil supplies and lead to sudden price hikes in the region
- In 2023, US retail gasoline prices dropped by USD 0.43/gallon (gal) YoY, mainly due to lower crude oil prices and increased gasoline inventories in H2 2023. The average price was USD 3.52/gal, hitting a high of USD 3.88/gal in mid-September 2023 and USD 3.05/gal by the 2023 year-end. This decline was a result of lower crude oil prices in 2023 compared to 2022. Gasoline prices surged after Russia invaded Ukraine in February 2022, but they dropped in late 2023 due to increased refinery production and higher inventories. Refinery maintenance and low inventories caused higher prices in August and September 2023.
- The increase in fuel prices affected the trucking operational costs in North America. The impact is more evident 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.
- In Canada, gasoline prices rose 0.8% YoY in February 2024. In North America, strong crude oil production is expected to continue in the coming years. Also, as more Canadian crude oil is expected to reach global markets with the Trans Mountain Pipeline expansion coming online, there will be amply supplied crude oil markets. However, increased risks due to rising tensions in the Middle East are expected to affect crude oil supplies and lead to sudden price hikes.
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OTHER KEY INDUSTRY TRENDS COVERED IN THE REPORT
- North America population witnessed growth by 0.56% YoY, fueled by external migration and recovery in the death rate
- Agriculture, fishing, and forestry registered the highest growth during the review period owing to rising trade under the US-Mexico-Canada Agreement (USMCA)
- The e-commerce industry in North America grew by over 6.74% YoY in 2022, led by fashion and electronics sub-segments
- 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
- Canada leads in North America region, with 7th rank in LPI fueled by logistics quality and infrastructure growth in 2023
- Road freight transportation dominated other modes in terms of tonnage handled and reached over 19 billion tons in 2022
- North American sea ports are enhancing maritime connectivity to overcome challenges like global shipping congestion
- Road freight rates in North America surged by 2.81% YoY in 2022 due to a rise in fuel costs
- US announces USD 26.5 billion plan to improve bridges and develop 27,000 km high-speed rail system by 2030
- Regional manufacturing sector gets a boost with CHIPS and Science Act and Green Manufacturing Initiative
- A rise in gas prices acted as a major catalyst for increased PPI and CPI in the region
- The shift toward Mexico from China is expected to boost manufacturing production in the coming years
- 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
- GM Group, a major truck supplier in North America, aims to produce 400,000 EVs in the region by mid-2024
- Increasing oil, bulk, and general cargo exports coupled with rising construction projects are driving growth
- Increasing investments by the US Department of Transportation to boost port efficiency and optimize performance
- The total freight transported in North America reached over 35 billion tons in 2022, an increase of 2% YoY
