Transporting goods on Europe’s roads has never been so expensive.
According to the study The european road freight rate development benchmark recently published by the IRU (World Transport Organization) together with the Upply and Ti consultancies, the transport cost index is at record highs. It is 7.5% higher when compared to the situation a year ago and has been on the rise for four consecutive quarters.
The sector, a key piece for the European economy (more than half of the goods travel by road), is experiencing an adverse situation influenced by several factors. The demand for products in the post-covid phase has skyrocketed. Just think of the boom in electronic commerce and the accumulated savings, which have created imbalances.
“Companies have now understood that logistics ends up being their main problem. It no longer makes sense to invest in marketing expenses, because here the key is to ensure that there is a product to sell”, says Mickael Devena, vice president for Southern Europe and Latin America at project44, a logistics consultancy and platform.
The first element that weighs on the bill is the increase in fuel prices. Diesel, after collapsing in confinement in the second quarter of 2020, was now 52% more expensive in the first quarter than it was then and is still almost 20% higher than before covid.
As if that were not enough, another added factor must be taken into account: the cost of the trucks to transport the merchandise. Given the lack of components for vehicles (such as semiconductors), now getting a new truck is more difficult and more expensive (the average price for the tractor is between 90,000 and 100,000 euros).
“There are brands that have raised their sales prices by up to 18,000 euros”, commented Enric Antonio, from the BMC dealers, during the edition of the International Logistics Exhibition (SIL) in Barcelona. According to industry sources, waiting times to get a new vehicle can reach up to a year.
One of the consequences of this traffic jam is the increase in the prices of second-hand trucks. The extreme occurs in the US, where, according to Refinitiv data, they have become more expensive by 40% compared to 2020 prices, while in Spain we would be in the order of a 20% rebound. In fact, the lack of availability makes one or two year old trucks almost as expensive as new ones.
The sector also has a structural problem that has worsened with the war in Ukraine and that is the lack of drivers. At the end of 2021, before the conflict, between 380,000 and 425,000 carrier positions were vacant in Europe, of which 80,000 were in Poland and 10,000 in Lithuania.
As of February 24, 2022, Ukraine announced a military state of emergency, which automatically imposed a ban on leaving the country for men between the ages of 18 and 60, resulting in additional loss of labor. Some employers in Europe have terminated employment contracts for Russian and Belarusian drivers.
This means that, in addition to the drivers who were missing at the end of 2021, more than 166,000 truckers from Ukraine, Belarus and Russia who worked in Europe could have left their jobs due to the conflict, with the result that in the Old Continent they are now missing more than 500,000 truckers. This will, according to the aforementioned study, “increase upward pressure on wages”, which will contribute to increasing the bill for companies in the sector.
It is not something that will be fixed soon. 72% of professional truck drivers in Europe are over 50 years old, and there is no generational change, young people no longer want to be truck drivers. Worldwide, 24% of professional driver positions are not filled. In addition, only 2% of this group are women, a percentage that can be improved.
Another consequence of these distortions are delays in the delivery of goods traveling by road. The percentage of shipments that do not arrive on time (depending on the time window of their initial designation) is currently close to 20%, when before the pandemic it was 10%, according to a project44 study.
A new European regulation that has entered into force this year (Mobility Package) adds more tensions to the sector. Indeed, it provides for the return to the country of registration of the car every eight weeks. The measure aims to stop the fictitious administrative relocation of transport companies to Eastern Europe to save costs.
But, according to Scan Global Logistics, this will take between 7.5% and 12.5% ??of the capacity out of the market, since the truck will not be available during its return, and this will add costs for making the trips with mostly empty trucks. : more emissions and more scarcity of vehicles.
“Demand has become very volatile. Companies have difficulty getting merchandise to arrive on time and they have to have information to be flexible and take alternatives,” says Michel Devena. “We must assume that delivery times will lengthen. Just in time is over”, he warns.
