Lately, the idea of a steady logistics industry seems like a distant reality. Staying on top of road freight trends, virtually impossible. 2022 presented us with extraordinary challenges including extra fuel costs, driver shortages, and an unpredictable road freight market. But regardless of the difficulties we’ve faced, it’s important to acknowledge the opportunities created by these unexpected obstacles. That’s why we’re sharing our latest report, The European Road Freight 2022 Year in Review, which promises to provide you with much needed clarity and information. We offer you this insightful document with the goal of helping you gain a deeper understanding of recent events, build more resilient business strategies, and better plan for the future.
Based on our own and publicly available transport data, our report (and associated on-demand webinar) provides you with an analysis of the complex factors impacting the overall road freight market. More specifically, we discuss how these elements change road freight and logistics for shippers and carriers. In this article, we’ll introduce some of the key developments included in our report, and how they’ll influence 2023.
“Driver shortages, record-high fuel prices, supply chain disruptions, war, and the return of inflation continue to dominate the news cycle and are top of mind for many. We worked, and will continue to work, side-by-side with shippers and carriers to navigate these challenges.” – Thomas Christenson, Chief Operating Officer, sennder
The war in Ukraine
Russia’s invasion of Ukraine on February 24th had far-reaching consequences including sanctions on Russian trade goods – oil, coal, iron, steel, wood, to name only a few – and a hefty spike in global energy costs. The road freight market was already experiencing tight capacity and the added pressure caused by the sanctions created a decline in spot market activity. Even over the holidays, normally a peak period, the spot market remained at par with contract market rates. However, during the 4th quarter of the year the price increase halted, and consumer demand was strong causing an upturn in orders and manufacturing. The result? An unanticipated shortage in carriers across Western Europe, particularly in Ukraine. Shippers importing key goods faced shortages and price hikes with, for example, the cost of grain increasing by almost 50 percent as compared to 2021.
Rising fuel costs
In 2021, the EU relied on Russian exports to meet 25 percent of its oil and 50 percent of its gas needs. The rapid increase in energy costs driven by the invasion of Ukraine and cutting ties with Russian products impacted smaller carriers and food and beverage shippers the most. Both relied on relatively consistent pricing and availability to maintain their business models.
Inflation and interest rates
Not since the creation of the Eurozone in 1999 has the EU witnessed such high inflation, particularly in energy costs which accounted for 1/3 of overall increase. The significant spike in prices put a strain on consumers’ disposable income and lowered their confidence in the economy. The inflationary impact on Eastern European carriers, which make up about 17.5 percent of all German transports, included increased financial pressure as the price of new trucks, labor, maintenance, and overhead increased. Meanwhile, B2C businesses found it hard to find and maintain volume, and B2B companies reduced investments industry-wide.
COVID-19
Even though China maintained a zero-COVID policy, much of the country’s laborers were on sick leave and, in some cases, up to 70 percent of its employees were infected. With China, the EU, and the USA reducing or eliminating COVID-19 isolation, testing, and movement regulations, more carriers could operate at a pre-pandemic capacity.
In the first half of 2022, more relaxed regulations meant a surge in consumer demand and related activity in consumer-goods shipping. This demand has reached its peak, with only those in aviation and tourism still feeling its effects. Much of the EU road freight market is waiting to find out how China will emerge from the recent COVID wave.
“We are well positioned to support our carriers in growing their businesses, especially by helping them connect with our shipper network, which has a strong demand for low carbon transport.” – Graham Major-Ex, Director of Green Business
Demand for green logistics
In 2021 The Green New Deal saw the EU commit to reducing greenhouse gasses by 55 percent by 2030, and zero net car emissions by 2050. This pledge stimulates the use of electric fleets for distances less than 300 kilometers and hydrogen trucks for longer runs. To encourage the shift from diesel fuel to electric vehicles, the EU is offering a minimum 50 percent discount on road tolls by 2024, which currently cost carriers around 25,000 Euros per truck each year.
We are seeing electric vehicles in use on lanes in Netherlands,Germany, Belgium, France, Spain, Italy although immediate carbon emissions savings are being earned via the use of advanced biofuels rather than buying electric trucks. Carriers who choose environmentally sound options will be at an advantage over traditional diesel carriers, winning the business of forward-thinking shippers. Meanwhile, the use of green logistic strategies remains very important for shippers, with many turning to carbon tracking as a way to visualize the impact of electrification and biofuels.
Looking toward 2023
The impact on energy resources, and prices, caused by the war in Ukraine has been substantial. But because many parts of the Western EU experienced a mild winter and received an expedient natural gas supply, overall energy costs are down 30 percent from their peak. Any increase in activity has the potential to increase prices once again as our oil stockpiles are at historic lows, along with consumer spending.
In 2023, shippers producing food and beverage products will remain prosperous while big purchase manufacturers, such as automobile OEMs, will likely suffer setbacks. Truck driver shortages are expected to continue over the next five years as 30 percent of drivers are retiring, or already retired, and this could create carrier challenges. Demand is predicted to increase throughout the year. All of this is to say, 2023 will be a mixed bag of positive and negative logistics events. As keystones of our global supply chain, carriers and shippers will need tools to withstand the ups and downs of the coming year. Automating their daily processes via digital tools (i.e., GPS tracking and carbon monitoring) can increase visibility and help meet climate targets without sacrificing profitability.
We encourage you to take a look at The European Road Freight 2022 Year in Review, where you’ll find a more thorough explanation of the factors influencing carrier and shipper markets, and what you can do to better prepare for 2023. In our on-demand webinar, sennder’s Julius Koehler, co-founder and managing director, and Nick Fraser, strategy and planning, guide you through the report and our findings to help you put the data into action. We hope you’ll find the information valuable and look forward to seeing how our report helps you create a more resilient logistics strategy.
Download Your Copy of the report, here