European hauliers squeezed as rates fall and costs keep rising


(C) Andrii Yalanskyi

By [1]15/05/2024

Both spot and contract rates in the European road freight market have fallen as the sector continues to struggle with weak demand and high operating costs - but there could be a rate recovery on the horizon. Data platform Upply, Transport Intelligence (Ti) and the International Road Haulage Association (IRU) found that the European road freight spot rate index was down 8.2 points year on year in Q1 24. The decline was attributed to low demand, largely caused by inflation in Europe that suppressed consumer buying habits.

But according to McKinsey, a 33-month low of 2.4% in March's European inflation rate has somewhat increased confidence, and could translate into higher demand. "The magnitude of spot rate declines is decreasing. This may indicate a less negative demand environment that could lead to rate normalisation," said Upply, Ti and IRU.

Meanwhile, the decrease in the contract rates index slowed, but was still down 1 point, YoY. But despite the decline, however, the elevated price of operating expenses in recent years, such as vehicle maintenance, insurance and tyre costs, has meant contract prices remain high overall. Upply CEO Thomas Larrieu said: "The road transport sector is facing a difficult economic environment.

Weak demand caused spot and contract rates to fall in the first quarter of 2024, while costs for operators remain high. "However, signs of economic recovery are beginning to emerge, with prices already rising on some routes in April. We expect the situation to improve gradually throughout the year."

Ti data forecast "modest growth" this year, of 1.1% for the region, in terms of road freight revenue market sizing, and according to the IRU's latest forecast, EU road transport volume growth in 2024 is expected to improve to 0.4% YoY. Ti's head of commercial development, Michael Clover, said he also expected rates to pick up, adding: "Indicators suggest that import volumes are recovering and supply chain bottlenecks, which have recently been masked by low volumes, are becoming more acute again. "That represents a bad combination for capacity, which will filter into the road freight market over Q2 and Q3, and is likely to apply upward pressure to rates."

And while this might offer some relief for struggling hauliers, stringent emissions targets and consequent CO2 tolls will again increase their costs. IRU senior director for strategy and development Vincent Erard said: "New CO2 tolls are notably adding to costs, rising recently, for example, by 40% in Hungary and 83% in Germany." Earlier this week, the EC announced almost all new HGVs with certified CO2 emissions would be subject to reduction targets and said the HGV sector must post a 45% reduction in emissions by 2030.

This was dubbed as "overly ambitious" and "idealistic" by the IRU, which warned The Loadstar that it could limit SMEs' ability to compete with larger firms.

Mr Erard added: "Increasing CO2 tolls on fleets, without having alternative zero-emission vehicles, infrastructure and incentives available for operators, is counterproductive.

We also need to promote proven efficiency measures for operators, especially SMEs, to accelerate decarbonisation progress."


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