Responsible for the movement of goods and materials across the Continent, the road freight transport sector has always been a crucial component of the European economy. In recent years, there have been significant changes and developments in the industry, driven by various factors, such as the global pandemic, rising fuel prices, and the impact of technology and digitisation. In this article, we will explore some of the latest trends and insights on road freight transport in Europe to give you a better understanding of what we can look forward to in 2023 and beyond.
Continuous Recovery from Covid-19
There is no doubt that the logistics industry has been one of the industries hardest hit by Covid-19. Delivery delays and long queues at country borders became prevalent because of government lockdowns across the globe. Thankfully, the road freight sector, along with the rest of the European logistics industry, showed significant signs of improvement once the restrictions were lifted.
The economic recovery that began in 2021 continued apace in the first half of 2022, resulting in a significant increase in road freight transport volumes. In fact, EU road freight transport reported better performances in 2021 than in previous years, with the best result of 496.5 billion tonne-kilometres (tkm) recorded in the second quarter.
Unfortunately, while the road freight industry continued to recover from the effects of Covid-19, its growth decelerated in the second half of 2022. Experts blamed this on “stagflation”, a combination of economic stagnation and inflation brought about by the financial hardships caused by the lingering effects of the global pandemic and Russia’s invasion of Ukraine.
Challenges Posed by Rising Energy Costs
The rising cost of petrol was one of the biggest challenges faced by European road freight transport last year. Because of inflation, diesel prices surged. The Russia–Ukraine conflict, and the subsequent restrictions on the supply of oil and gas to EU member states, continued to put pressure on fuel prices.
For example, a CNR survey in France revealed that fuel prices rose by an average of 18.5% for heavy goods vehicles running on diesel. Meanwhile, for French road freight transport operators whose vehicles run on natural gas, there was a 43.3% increase in fuel prices.
As a huge proportion of their profits were being spent on fuel, European freight companies had no other choice but to manage these higher operational costs if they wanted to stay on the road. However, industry experts are optimistic that we will see a decline in energy prices in 2023.
Wage Inflation Dampens Demand for Transport Services
Spiralling inflation and the Russian invasion of Ukraine continued to create a domino effect across Europe. As fuel prices continued to soar, so did the cost of living and basic commodities. Confronted by their diminished household purchasing power, workers in the transport sector demanded an increase in wages. To this end, trade unions organised strikes in different parts of Europe, creating significant labour shortages and affecting the demand for transport services.
Because of the ever-worsening labour shortage, drivers and operating managers were better positioned to negotiate a wage increase. However, this posed an additional challenge to embattled road freight operators who were already having to deal with a weakened workforce on top of rising fuel and operational costs.
Transport Price Hike Slows Down
A Ti/Upply/IRU research paper revealed that European transport prices reached new heights in the third quarter of 2022. The average contractual rates were 19.6% higher than those in the same period in 2021. A rise of this magnitude is unprecedented and has not been witnessed in decades. Again, experts blamed the transport price hike on the rising cost of diesel. However, the good news is that these price hikes began to slow down. This indicates that European prices have peaked and started on a downward trend, marking the end of a series of staggering price increases that plagued road freight transport in Europe in 2022.
E-Commerce Continues to Drive Industry Momentum
Historically, the European automotive industry has been one of the biggest driving forces behind the road freight transport sector. However, the Covid-19 pandemic hit the industry hard, causing it to experience a 0.5% decrease in production in 2022. The shortage of semiconductors has also affected supply, while Germany, the largest European market, suffered a decline in demand.
Fortunately, e-commerce came in and saved the day. This industry helped drive momentum to the sector during the pandemic, accounting for 40% of cross-border purchases and providing international transport flows. Although financial experts expect e-commerce to weaken, the industry reported a turnover of €718 billion in 2021 and is forecast to hit an annual growth of 11%.
Industry Resilience Amid the Challenges
The European road freight transport sector has faced numerous challenges in recent years, including the Covid-19 pandemic, rising fuel costs, wage inflation and transportation price hikes. Despite these difficulties, the sector has shown remarkable resilience, with continuous recovery from the pandemic and a decrease in prices. As we move forward, it will be interesting to see how the industry adapts to these challenges and continues to evolve in response to changing market conditions.
Do you want to learn more about the latest news and insights on the European logistics industry? Or perhaps you need some expert advice on moving your goods from Point A to Point B. Our team at Good Logistics will be happy to answer any queries you might have.