Weakening demand is eating into European road freight operators’ profitability this year, with contract and spot rates declining through the first quarter.
Data from Upply x Ti x IRU’s European Road Freight Rate Development Benchmark Report indicates a quarter-on-quarter dip of 2.3 points in contract rates for the three months to April, and spot rates dropping more precipitously, falling 3.8 points quarter on quarter.
Last year rates appeared to be on a gradual rebound from the drop-off after the surge in the second year of the pandemic.
Assessing the Q1 dip, the report says subdued consumer demand is compounding weak industry sentiment, “dampened as the world engages in a trade war which brings constant uncertainty and reduced international demand for European manufacturers”.
It adds: “The result is reduced demand pressure on all sides, leading to rate falls in both spot and contract markets.”
However, it notes: “Geopolitical changes and global economic instability have renewed focus to strengthen local and regional economies. This has led to initiatives such as ‘Buy European’, encouraging support of European goods, business, and alternatives to non-European options.
“As a result, there is potential for increased demand for dedicated contracts, with a preference for long-term agreements rather than fluctuating spot rates, in the medium to long term.”
Indeed, volumes show signs of renewed industrial momentum in key EU economies, with trade between Germany and France, Germany and Poland, Poland and France, Poland and Italy, and Spain and France all climbing
Upply CEO Thomas Larrieu said: “European road freight is going through a complex phase, as major uncertainties in global trade are likely to weaken the still fragile economic recovery.
“At the same time, this may lead to an acceleration of near-shoring, which could stimulate demand for road transport. The current balance of power remains favourable to shippers, but it is wise to secure long-term capacity based on balanced partnerships with carriers.”
For the bulk of the sector, comprising single-truck and small fleet operators, hope of seeing that volume potential materialise into higher rates are not widely felt, sources in the sector having said regulators had failed to take stock of the industry’s make-up.
Of particular concern has been EU policymakers’ inability to blend green policies with adequate funding, which risks leaving the industry behind.
Vincent Erard, senior director for strategy and development at the IRU, said: “Road transport stands at a critical inflection point – where resilience, sustainability and competitiveness must converge.
“Despite economic headwinds and global trade uncertainty, Europe’s transport sector has the potential to power a new cycle of regional growth.
“Policymakers and industry must now co-create conditions that enable long-term investment, digital transformation, and decarbonisation – especially for the SMEs that form the backbone of our supply chains.”
