Opportunity: Falling Diesel Prices
With plummeting crude oil prices driving diesel prices lower, operating costs at trucking companies are falling dramatically. Retail diesel prices in the US, which averaged $3.82 in 2014, hit a four-year low at the end of the year. Prices are expected to average only $3.07 per gallon in 2015, which could result in diesel surcharge savings of as much as $24 billion, according to Bloomberg. Reducing surcharges should free up trucking companies to raise shipping rates, which would help them cover rising salary and health care costs.
Lower fuel costs allow trucking companies to lower surcharges, which should enable them to raise shipping rates without affecting the cost to shippers.
The average U.S. retail price for diesel and regular gas, a major operating cost for trucking fleets, fell 11.7 percent and 21.1 percent, respectively, in the week ending December 15, 2014, compared to the same week in 2013.
Total U.S. manufacturers' shipments, an indicator of the volume of goods shipped by truck, rose 2.9 percent year-to-date in October 2014 compared to the same period in 2013.
Total U.S. revenue for general freight trucking rose 9.2 percent in the third quarter of 2014 compared to the previous year.
Companies in this industry provide long-distance and local trucking, including truckload (TL) and less-than-truckload (LTL) services.
Major companies include US-based Con-way, JB Hunt, Schneider National, Swift Transportation, and YRC Worldwide, as well as Hitachi Transport System and Seino Transportation (Japan), Norbert Dentressangle (France),
Stobart Group (UK), and TransForce (Canada).
General trucking services include long-distance (85 percent of industry revenue) and local (15 percent) trucking.
A carrier's major customer is a shipper: a company seeking to have its goods transported by truck.
Cash flow is somewhat seasonal, as many shipments are made prior to the winter holiday selling season.