European road freight rates fall to a two-year low in Q2

Road freight rates fell to their lowest level in two years in the second quarter of the year amidst the COVID-19 pandemic, the slump in demand leading to high levels of available capacity in the market, according to a report released today.

 The European Road Freight Rate Benchmark Q2 2020published by market intelligence specialist Transport Intelligence (TI) and digital freight platform, also found that carriers faced increased operational costs from factors such as border controls and investments in PPE while over three-quarters of (road freight) lanes showed greater volatility than the same quarter a year ago.

The ‘benchmark’ was down 1.8% year-on-year at €1,083.

“The pandemic has rapidly changed the demand and supply dynamics in European road freight. Over the last quarter, volumes fell dramatically as countries entered to tight national lockdowns. With factories halting production and retailers closing stores, road freight activity plummeted. Data from Verizon Connect that studies readings from tachographs show total driver operating hours fell by an average of 50% across Europe from mid-February to early April,” the report said.

“However, the supply-side story was more complicated. Although there has clearly been a net increase in available capacity, complicating factors such as border controls, decisions to reduce driver operating hours, and government support schemes (such as furloughing) have had a significant impact on the market. With country-level legislation and operations changing at different speeds, levels of available supply on individual lanes have fluctuated throughout the quarter.

This means that although the benchmark rate did fall to its lowest level since Q1 2018, a drop of 1.8% year-on-year or 0.3% quarter-on-quarter was not that great overall.”

However, looking at individual lanes, the report underlined that there were some strong fluctuations. For example, Duisburg (Germany)-Madrid (Spain) saw the biggest price change with rates falling 9.6% year-on-year.

“Volatility has been a prominent feature in the market over 2020. The report shows the majority of the 36 lanes investigated were more volatile, both compared against the previous quarter and Q2 2019.

The report also studies how diesel prices affect rates over time. Although there was a slump due to the sharp drop in oil prices, these savings do not appear to have been passed on to shippers.

Some of Europe’s largest trade lanes by volumes are also analyzed. GermanyPoland rates pushed higher, with FranceSpain relatively stable and France-Germany rates below Q1 levels.

Andy Ralls, a Quantitative Analyst at TI, commented, “We have seen a fall in rates in general into Q2, with higher volatility across the majority of lanes. However, this quarter has shown that market forces are perhaps not as influential as the pricing power of the road freight operators. In normal times, a sharp fall in demand ought to lead to a sharp fall in rates, but operators have managed to control supply effectively and factor the additional operational complexities into the pricing of road freight on a Europe-wide level.”

For his part, Thomas Larrieu (chief data officer), remarked: “Q2 was mainly about controlling the down falling effects of the coronavirus crisis on transportation prices. Our forecasting tools anticipate an increase of the demand for road transportation in Q3 and Q4 leading to a stabilization or even an increase in market rates on our current watched trends here.”


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