<H1>What are the problems of logistics companies during the war, new opportunities for Ukrainian carriers and the future of the industry<H1>
The problems of logistics companies are now visible to the naked eye: many branches are literally destroyed, bridges are blown up, and most of the employees were forced to leave their homes.
Also, the war excluded from operation key trunk roads connecting the West, Center and East (the Lviv-Kyiv and Kyiv-Kharkov highways). Accordingly, logistics routes have become longer, using detours due to safer roads. This, in turn, affected the increase in the delivery time for parcels, cargo, etc.
The first and most important change that took place in Ukrainian logistics is the elimination of the “center of gravity”. As you know, the largest warehouse hub in Ukraine - 70-80% of all professional warehouse space - was in the Kyiv region. 1.8-2.2 million square meters were concentrated here. m of professional warehouses, the companies operated with an area of 10,000–20,000 sq. m.
Europe is seeing record price changes for road freight. The reasons for this are inflation, weakening demand, social instability and the war in Ukraine.
The European benchmark for road transport rates was prepared by analysts from Transport Intelligence, Upply and IRU. The report was submitted for the second quarter of 2022.
Among the main reasons that influenced the price level is the war in Ukraine. After the invasion of Ukraine in March, the EU tax-deductible diesel price jumped 69% from its January level.
In addition, many indicators in the market point to a weakening demand for European road freight transport, with activity declining in all major countries, and inflation rates affecting consumer and business confidence.
Another reason is inflation, which is growing in all European countries and reached a record level of 8.6% in the eurozone in June.
According to the latest data, Spain sees the highest growth with +10.2% price growth, higher than other major European economies Germany (7.9%), France (5.8%), Italy (8%) . . and Great Britain (9.1%).
Experts also speak of a shortage of drivers affecting the entire European continent. Germany is in a particularly critical situation, with an estimated 50,000 to 80,000 truck drivers missing. Migrant workers make up 24% of German drivers, and the loss of Ukrainian citizens returning to defend their country has further limited the number of drivers in Germany.
France and Spain are seeing very significant increases in spot rates. In particular, growth amounted to 21.2% qoq in the Paris-Madrid direction. This is almost double the average increase in spot rates in Europe and is also the second largest increase in all European spot rates.
In Germany and Poland, all fares, with the exception of spot fares from Duisburg to Warsaw, reached new all-time highs on this route after an upward trend since the beginning of the pandemic. In contrast to the relationship observed on most European routes, spot rates on this route grew more slowly than contract rates. Demand, in particular, was affected by the weakening in these countries. The instability created by the conflict in Ukraine is particularly noticeable in this part of Europe and affects the development of industrial prospects.
In France and the UK, after Brexit, transport operations between countries have become more expensive and time consuming. Researchers at the London School of Economics (LSE) found that while exports have largely resumed, UK imports from the EU have fallen by 25% compared to other destinations. In addition, the range of goods sold was reduced by 30%. Low-value goods were the hardest hit by rising administrative costs.
The tariff index shows growth for the sixth quarter in a row, at the same time there are no signs of easing.
The authors of the report argue that the growth is due to the presence of stable demand.
Thanks to the gradual recovery of the economy after the effects of the Covid-19 pandemic, European aggregate demand has risen sharply. Sales in November 2021 increased by 7.2%.
The proposal also reduces the sharp rise in the cost of diesel fuel, which accounts for a third of all operating transport costs.
The shortage of professional drivers in the market increases staff costs. In 2021, the most severe driver shortages were in the UK, Germany, Poland, France, Italy and Spain.
A combination of factors contributed to the growth of tariffs for road freight in the region. The cost is expected to remain high in the first quarter of 2022.
“Demand for road haulage across Europe is strong and rates are at record highs. At the same time, demand is being held back by a combination of supply constraints, supply chain issues and uneven Covid-19 restrictions across the region. Increased demand and
The Ti/Upply road transport price index in Europe continues to break records. So, it was back in the 4th quarter of 2021, when this index reaches the highest level of 108.3. This corresponds to an increase of 1.1 points from the previous quarter and 3.2 points from last year, updates the latest road freight rate control published by Transport Intelligence (Ti), Upply and IRU.
The fourth quarter of the year is traditionally a period of rising prices, which is explained by high demand for the approaching holiday season. The new wave of Covid-19 that began with the introduction of the Omicron variant could have led to a reduction in consumption, but it did not. Now the pandemic is being managed more carefully, and this new option has not led to a lockdown of European economies.
In addition, demand remains very strong in the manufacturing sector as countries are still in a catch-up phase after the fall seen in Q2 2020. Even if this recovery is partially hampered by a shortage of raw materials, it is enough to drive up the price of road transport.
<h2>Power shortage<h2>
This price increase is also fueled by the prevailing power market stress. Road carriers are primarily faced with an ever-increasing shortage of drivers. New IRU data based on surveys conducted in 2021 on driver shortages in Europe show a shortage of up to 100,000 jobs in the UK and more than 60,000 in Germany and Poland.
On the other hand, haulers are having difficulty renewing or expanding their fleets. Heavy vehicle production has actually slowed down due to component shortages.
<h2>Rapid expenses<h2>
After all, the increase in transport prices can also be explained by an unconditional explosion in costs, which road carriers are trying to at least partially absorb. Since the profitability of the sector is relatively low, its survival depends on it.
Extremely prompt rise in price of fuel is tested first by autocarriers. In the countries of the region, especially in Spain, Germany and France, diesel prices, which account for a third of all transport operating costs, increased by about 25% in 2021 compared to the beginning of the year.
In addition, the shortage of labor in general and drivers in particular contributes to higher wages. The pressure is getting even stronger as workers are also suffering the effects of general inflation, which is driving up wage demands.
This tension leads us to believe that the increase in freight rates will remain. "The context of high demand and limited supply looks set to continue over the coming months, which should protect rates from traditional first-quarter cuts from peak season levels," said Nathaniel Donaldson, economic analyst at Ti.
European CRT22 Road Freight Market – Strongest and Weakest Recovery
The European road haulage market continues to be driven by a range of supply and demand factors influencing demand, growth, opportunities and challenges.
The economic environment supported the growth of the European road freight market during 2021, with the recovery driven by a surge in consumption as households cut their savings and deferred income returns to the economy. However, if we move to 2022, the outlook is less optimistic. As the war in Ukraine, supply chain disruptions, low unemployment and rising energy prices continue into 2022, inflation will be a critical factor in determining future levels of demand. With rising prices, households have less income and therefore overall demand will decrease compared to 2021.
The mobility package will show its impact more fully after 2023. Domestically, a cooling period for cabotage operations is expected to reduce domestic capacity, likely limiting growth. The cooling measure will have a disproportionate impact on Eastern European carriers as they are likely not currently complying with the new regulation. Countries such as Bulgaria, Romania, Lithuania and Latvia are likely to lose market share to countries further west such as Poland, the Czech Republic, Hungary and Slovenia.
Prices on the European road transport market continue to rise. This was in response to both a drop in capacity, an increase in demand, and an increase in the cost base, especially diesel prices. The Russian invasion of Ukraine and the restriction of oil supplies from Russia to Europe have led to a further increase in prices. While fuel costs are often driven by high taxes, it is very likely that the recent increase in the price of diesel fuel has driven fuel costs closer to 50% of truck operating costs.
Increasing demand for road haulage services further exacerbated price increases. Girteka recently stated that the increase in the cost base will continue until 2022, stating a possible increase of 35.0% from mid-2020 levels.
These factors led to a nominal market growth of 14.8% year on year, while the overall price increase in Europe was 4.9%. European domestic prices grew faster than international prices by 5.3% and 2.8% respectively. Domestic markets are facing increasing capacity issues, giving more pricing power to road carriers operating within their respective borders.
Ti's latest market forecasts for 2026 show that the European road haulage market is expected to reach a real CAGR of 3.0% from 2021 to 2026. The 2026 COVID Recovery Tracker (CRT26) shows that the overall road freight market in the region will increase by 23.1%. in 2026 than in 2019 in real terms. Based on robust trade forecasts, the international road freight market is expected to grow faster than the domestic one within 5 years, although it will remain the smaller of the two markets.