Declining demand for European road haulage is pushing up available capacity, but the easing of trucking space is being accompanied by rising rates as the driver shortages worsen and operating costs increase.
Road transport capacity increased steadily through the second half of 2018, and by the end of the first quarter of 2019, an additional 31.4 percent of free cargo space became available for shippers, according to a report by Transporeon and its research unit TIM CONSULT.
But shippers are finding that while there are no space constraints, their road haulage rates are rising as trucking service providers are forced to factor in the cost of driver shortages, sharply rising toll fees, volatile diesel prices, and pressure to invest ahead of tough new emissions targets.
The report by Transporeon, a software-as-a-service group, found that compared with the first quarter of 2018, an additional 15 percent of transport capacity was available as European economies started to experience slower growth.
“The strong increase in available transport capacity that we monitored in the recent months is initial evidence of a slowdown in economic growth,” said Oliver Kahrs, managing director of TIM CONSULT.
“The German government’s Annual Economic Report 2019 published at the end of January is supporting this view, which assumes an increase of the price-adjusted GDP by only 1 percent.”
Kahrs said the transport price index in the first quarter was 8.4 percent below that seen in the last three months of 2018, but road transport prices remained relatively high even though 15 percent less capacity was available.
“For domestic German transports, prices in Q1 [the first quarter] this year were even 4.5 percent higher than in Q1 2018. One reason could have been the adjustment of truck toll charges at the beginning of the year,” he said.
Tight capacity easing
Philip Stephenson, chairman of UK-based forwarder Davies Turner Group, said his data mirrored the findings of the Transporeon report and that the strong growth in European freight volume was slowing.
“One year ago, European haulage capacity was very tight, especially in Germany, while now there is currently the capacity to handle demand, despite the well publicized driver shortages,” Stephenson said.
“We have also noted that haulage prices in the first quarter of 2019 were higher than in the first quarter of 2018. That is not surprising, despite the situation regarding supply and demand, as we are seeing a much-needed catch up in pricing as underlying operational costs continue to increase strongly due to driver shortages pushing up employment costs. Road tolls and fuel prices are increasing.”
From Jan. 1, 2019, the German toll rates on four-axle trucks meeting the Euro 6 standard rose by 60 percent. German transport associations warned last year that the tolls will add $2.2 billion to the annual costs of trucking and logistics companies.
But the driver shortage across Europe is an even more pressing problem. A Transport Intelligence report in December 2018 that found a shortage of 127,500 drivers in just six countries — the UK, Germany, France, Denmark, Sweden, and Norway.
The report found Germany has 45,000 vacancies, with predictions that this could increase by 28,000 drivers each year as two-thirds of drivers retire over the next 15 years. Only 2,000 people are receiving truck-driving qualifications each year.
Tim Phillips, director of Duma Consulting and former CEO of Freightex, wrote in the report that although drivers have been brought in from Eastern Europe to help fill the gap, this has created a similar shortage in the markets they left.
“This is currently being partially filled by drivers from further afield, such as Ukraine. However this is not an inexhaustible supply and there are trucks parked up with no drivers,” he said.
Dearth of drivers
While the Europe road haulage industry struggles to find a solution to its dearth of drivers, another fast emerging concern is compliance with the latest EU emissions targets.
The European Parliament voted overwhelmingly on April 17 to approve a legislative proposal that sets the first ever EU-wide carbon dioxide (CO2) emissions performance standards for heavy-duty vehicles. Under the proposal, the average CO2 emissions of trucks sold in 2025 and heavier than 7.5 metric tons must be 15 percent lower than 2019 levels, a mandatory target that the European Commission (EC) said can be achieved using technologies that are already available on the market.
But Matthias Maedge, general delegate to the EU for the International Road Transport Union (IRU), argues that the targets imply a heavy reliance on electrification, which he says is not a viable solution for long-haul trucking.
“It is not clear how the 30 percent reduction target will be met and what technology will be available,” Maedge told JOC.com. “Combustion technology will remain the technology of choice for decades to come for long-haul trucks over longer distances and heavier loads. The reality is that there are no alternatives.”
There are strong supporters of the European drive to drastically cut CO2 emissions, including Transport & Environment (T&E), a Brussels-based nonprofit organization focusing on the health impact of transportation across all modes.
In its reaction to the new rules, T&E pointed out that trucks in Europe account for 22 percent of road transport emissions, despite making up just 2 percent of vehicles on the road. The EC expects the activity from heavy-duty commercial vehicles to jump by more than 50 percent in the period 2010-2050.