Increased freight volumes and international trade will spur steady industry growth
Los Angeles, CA (PRWEB) May 25, 2013
Depressed trade volumes, slow manufacturing production and retail spending reduced demand and hurt Local Freight Trucking industry revenue over the past five years. Specifically, 2009 was the worst year for the industry, with revenue plummeting 20.5% due to sharp declines in freight volumes and trade because of the global economic downturn. “In that year, demand declined as fewer products required shipment,” says IBISWorld industry analyst Lauren Setar. “Demand has improved since the worst of the downturn, due to higher trade volumes, greater demand from manufacturing and greater retail spending.” As a result, industry revenue is expected to grow 3.5% in 2013. However, the recession caused revenue to decline overall in the past five years at an average annual rate of 2.1% to $16.2 billion.
Additionally, the Local Freight Trucking industry has been plagued by fluctuating fuel costs. Although industry operators implement fuel surcharges, which boost industry revenue, they are not sustainable in the long term. When industry operators increase costs with fuel surcharges, consumers typically find alternatives and demand falls. “Unlike 2008, when fuel prices were high and revenue increased, a severe drop in diesel prices and subsequently surcharges caused revenue to decrease in 2009,” adds Setar.
During this period of weak operating conditions, many companies in the industry recorded losses and some were pushed out of the industry altogether. The industry has a low market share concentration, primarily due to the industry's relative ease of entry and exit. The low barriers to entry allow for a large number of small companies and owner-operators. With little starting capital, a potential new entrant could purchase a truck and operate in the industry. However, the larger and well-established industry players can gain long-term contracts and earn higher revenue. Industry concentration has increased slightly over the past five years; the number of companies operating in the industry is expected to decline at an average annual rate of 0.6% in the five years to 2013. Aided by a fall in the number of businesses during the recession, many industry companies have acquired others.
In the next five years, revenue is expected to return to steady growth, underpinned by increased freight volumes and a rebound in international trade. As the economy continues to recover, including improvements in manufacturing and retail spending, a greater number of goods will need to be shipped, requiring local freight trucking. Adding to revenue growth, the world price of crude oil is expected to rise and companies will heighten fuel surcharges to offset costs. For more information, visit IBISWorld’s Local Freight Trucking in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry provides local general freight trucking within a metropolitan area and its hinterland.
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
Barriers to Entry
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