European road freight prices hit a new record high in the first quarter of 2022, driven by fuel prices.
The Ti/Upply/IRU European road transport price index stood at 110.9 in the first quarter of 2022, 4.3 points higher than in the 4th quarter of 2021 and up 7.5 points year-on-year. This is the fourth consecutive quarter that road freight transport prices in Europe have risen, according to Upply's data.
NB : Our price estimates are based on actual transactions. The index may therefore be subject to revisions as new data are incorporated into the Upply database.
A rise fuelled by diesel prices
The continued rise in freight rates started in 2021, fuelled by the strong economic recovery that followed the terrible year of the pandemic outbreak. At the beginning of 2022, however, the increase in transport prices was mainly fuelled by the surge in diesel prices. A factor that also played a role in 2021, but to a lesser extent. Compared to the lowest level of €1.10 reached in the second quarter of 2020 due to the pandemic, the weighted average cost of diesel was 52.7% higher in the first quarter of 2022. And even when compared to the pre-pandemic peak of €1.40 per litre recorded in Q4 2018, diesel prices in Europe are showing an increase of 20%.
Another factor weighing on hauliers' costs is the shortage of manpower, and in particular of truck drivers. This leads to pressure for wage increases.
The increase in road transport prices observed in the first quarter of 2022 is therefore ultimately linked more to the need to pass on the surge in costs, in a sector with very low margins, than to demand-driven growth. The European economies, in fact, are now showing signs of weakness. "After buoyant consumer spending in 2021, rising inflation in the first three months of 2022 and the expectation of higher interest rates to come have seen confidence amongst consumers erode in much of Europe, including in Germany, the UK, Spain, Italy and even in the more dynamic French economy", states the TI/Upply/IRU report.
Inflation aggravated by the conflict in Ukraine
Pressure on costs was exacerbated by the conflict in Ukraine and the subsequent restriction of oil supplies from Russia to Europe. And the worst is yet to come. "The price spike did not occur until after the invasion of Ukraine on the 24th of February, and carriers were able to make use of fuel purchased in advance at lower prices through the end of February and early March. With lower cost fuel now depleted, and fuel prices expected to remain elevated, greater upward pressure from fuel prices is expected on rates in Q2 2022", the report indicates.
The war has also had a further impact on the shortage of drivers, as Russian and Belarusian drivers were a significant labour force for Eastern European hauliers and particularly in Poland and Lithuania, two countries that are major providers of road transport capacity in Europe. More than 166,000 truck drivers from Ukraine, Belarus and Russia working in Europe may therefore have left their jobs as a result of the conflict, which should exacerbate the problem of the shortage of drivers in Europe already observed at the end of 2021, according to the IRU.
A threat to the level of demand
For the foreseeable future, the increase in transport prices is expected to continue, fuelled by an explosion in costs that nothing seems likely to impede in the short term as expensive diesel and labour shortages establish themselves over the long term. As such, on the French domestic market, in April there was an unprecedented rise in prices.
On the other hand, the curve could start to dip down in the second half of the year. "The price surge could be contained by a lull in European demand in response to widespread inflation in goods and services. This weakening in demand, synonymous with lower volumes transported, could help ease the upward pressure on rates", Thomas Larrieu, Managing Director of Upply, added.
Where to learn more
> Download the Upply / Transport Intelligence report on European road freight rates as of the 1st quarter of 2022
> Watch the webinar