How can you protect your business as external events impact the transportation of goods and services?
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Our international team of trade experts is here to help. Contact us to learn more about our coverage options for the Transportation Industry or request a free, no obligation quote that includes credit reports for your largest trade partners.
Transportation Industry
In 2023, the transportation sector experienced mixed results. Freight transportation demand weakened, while air travel demand grew as expected. Ongoing conflicts in Ukraine and the Middle East, along with high interest rates, have reduced consumer demand for goods and services, impacting both freight and passenger transport. Despite strong spending on durable goods like cars, the US economy is projected to slow in 2024, with only 1% GDP growth.
As a result, consumers are likely to prioritize services, such as travel, over goods, increasing pressure on freight transport as businesses face challenges in distributing products amid declining demand. Air travel, which saw above-average growth in 2023, is expected to return to pre-pandemic levels as demand stabilizes and prices remain steady. Water transport is forecasted to contract by 0.3% in 2024.
Despite the sluggish economy, government investments in transportation infrastructure and supply chains are expected to improve efficiency, reduce costs, and stimulate demand for transportation and logistics services. Trends are tightening on the industry when it comes to logistics because we want to see it improve. Otherwise, the industry remains stable year over year.
Consumers are prioritizing services, such as spending on travel, over other goods. International travel has not fully recovered which was a key driver of capacity growth in some markets last year. Business traffic is now structurally lower as remote working becomes more normalized in certain sectors.
Fuel costs remain a significant challenge for the transportation industry, especially as jet fuel prices are closely tied to volatile oil markets. For 2024, jet fuel prices are expected to align with oil price projections, estimated at $85 per barrel for Brent crude and $80 per barrel for West Texas Intermediate. This level of pricing places pressure on airlines, as fuel is one of their largest operating expenses.
Economic risks and weak demand pose major challenges for the shipping industry. A slower recovery in global trade threatens growth, as shipping companies struggle to balance supply with demand. Overcapacity and weak trade volumes are putting pressure on freight rates and profitability. If trade continues to lag, the industry may face prolonged financial strain, forcing companies to downsize fleets or cut costs to stay competitive.
Low unemployment rates give some support to consumer demand, but amplifies wage pressures and labor supply issues. Ongoing staff shortages and labor disputes—will likely limit sectoral activity and growth in the short to medium run while potentially disrupting service delivery and adding upwards pressure on employment costs.
Escalating conflicts could drive up inflation, oil prices, disrupt global trade, and weaken travel demand. The Russia-Ukraine war has widened the gap between jet fuel and oil prices. While freight rates have fallen since late 2022, they remain under pressure from overcapacity, with unpredictable disruptions like the Red Sea conflict causing temporary rate spikes. In early October we’ve been seeing port closure conflicts and rail disruptions developing. We are following these conflicts closely and watching for developments that could affect the supply chain. Updates to come.
The transportation sector is under increasing scrutiny to reduce greenhouse gas emissions and carbon costs are stepping up. Not all airlines will be equally affected as Europe’s regulations are stricter and more expensive. Industry capital expenditure is settling above pre-pandemic levels due to necessary fuel-efficient aircraft upgrades and capacity expansion.
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Atradius is here to help. Contact us to learn more about our coverage options or request a free, no obligation quote that includes credit reports for your largest trade partners.
Benefits to Credit Insurance
Trade credit insurance is a risk management tool that can help protect your company’s commercial accounts receivable from the devastating effects of loss caused by a bankruptcy or protracted default of your buyers. No company wants to face the unknown. At Atradius, we give our clients peace of mind knowing that their policy protects them from a customer’s sudden inability to pay. Especially in an industry that must adhere to high-cost environmental regulations, trade credit insurance can help with cash flow and to ensure companies are financially stable.
Atradius analyzes industry trends and the risk of every buyer to ensure you are working with stable customers. If a previously stable customer starts showing signs of deteriorating payment trends, Atradius alerts you right away so you can take steps to protect and insure your accounts receivable. By evaluating the supply chain from every angle Atradius can alert clients to trouble coming down the pipeline before there is a loss.
Companies in the midst of an intense growth phase may need to put up accounts receivable as capital to receive additional funds from a bank. Having a trade credit insurance policy with Atradius that mitigates your risk means banks are more comfortable loaning the funds you need.
Atradius can offer companies a team of experts to support their trade credit insurance needs. Atradius is a global company with a presence on every continent. With innovative services and practical tools to manage a company’s receivable and build the foundation for solid business growth and success.
Get Your Questions Answered or Request a Quote
Atradius is here to help. Contact us to learn more about our coverage options or request a free, no obligation quote that includes credit reports for your largest trade partners.