Regional Market Outlook on Truck Types
Brazil’s cargo transportation is significantly dependent on roads. Trucks and trailers account for more than 60 percent of all goods moved in the country. The second most important mode is rail, which is responsible for another 21 percent.
Brazil’s transportation costs are high in the country and the government has allocated funds to improve the road infrastructure to bring down the freight costs from 12 percent which is way higher than the logistics cost of developed countries.
Freight Transport Modal Split
- Brazil’s spending on logistics represents 12 percent of the country’s GDP whereas in the developed countries it is typically 8-10 percent which highlights that transportation costs are high in the country
- Brazil’s cargo transportation matrix is greatly dependent on roads. Trucks and trailers account for more than 60 percent of all goods moved in the country. The second most important railroads, which is responsible for another 21 percent of the share. The remaining 18 percent correspond to the other modes of transportation, such as those done by water, air or ducts
- The country has 1.7 million km road network where 74,000 km are main roads out of which only 14 percent are paved and 28,000 km railroads. The government is investing about USD 30 billion in order to improve the road and rail framework in the country
Trucking demand and use of open trucks in Brazil market
- In Brazil, more than 50 percent of the trucking demand is driven by agro and FMCG industries
- Open trucks are widely used in agricultural, fertilizer and metal industries and it is having advantages of flexibility in terms of weight, dimension, and loading of the products
- Currently, shippers from FMCG industry prefer to operate with closed trucks due to the poor floor conditions of open trucks and to reduce the damage of the products
Overview on Minimum Freight Law
In the current scenario shippers with larger volumes can look into larger truck with greater than 6 axles to optimize the freight volumes and also freight rates.
Minimum freight rate law increased the freight rates up to ~20 to 25 percent which impacted the complete supply demand balance and the negotiation power for shippers is expected to be low.
The carrier profit margins are expected to improve due to the new law and the shippers may find difficulty to negotiate with carriers on the profit margin.
Total Operating Cost Comparison – Open and Closed Trucks
Operating cost of open truck is less in comparison to closed truck but transporting FMCG related goods through open trucks can lead to goods damage and most of the open trucks have bad trailer floor which results in difficult forklift operations during loading and unloading.
Majority of the carriers operating open trucks are experienced in handling non-damageable materials like grains, soya and steel hence shippers are advised to engage with open truck carrier having experience in moving FMCG related goods.