“The average price for a load in Europe has already reached record-breaking levels”.
On Monday, Edvardas Liachovičius, CEO of Girteka Group, issued an update on the current situation in the market. With 9,000 trucks, the company is the largest asset-based logistics company in Europe.
“Throughout the 25 years of working in the industry as an executive, I have seen and experienced a lot of different market situations in logistics. Yet the current state of affairs is truly one of a kind,” began Liachovičius, “While there is a huge demand for transport services, the industry is still struggling, as truly unique economical conditions are present in Europe.”
Increasing the costs of transportation
“The average price for a load in Europe has already reached record-breaking levels, but the continuously rising inflation and any kind of disruption to global supply chains could send out a ripple effect to our local economies, potentially increasing the costs of transportation between up to 20 and 35 per cent. The prices, naturally, would follow suit and threaten the well-being of carriers and shippers alike.
As the Girteka chief says, despite the temporary setback in March 2020, road freight transport companies’ trucks have not stopped moving since. Liachovičius points out that average prices for services across Europe have risen correspondingly.
“You would think that this would benefit carriers, making it a carrier market – yet on the contrary, as the global economy attempted to adapt to the swings in demand for goods, the prices for the most important materials continued growing. That included oil, and as the price for the commodity began to climb, so did the operating expenses for transport providers.”
Despite consumers spending more than ever during the pandemic, resulting in rising demand for Full Truck Load (FTL) capacity, carriers had to deal with inflation. Inflation meant rising costs for necessities for everyone, including truck operators.
While the most obvious item to increase in price over the past year is fuel, other operating expenses have gone up as well, ranging from salaries, administrative costs, to basic truck and trailer maintenance.
Liachovičius outlined the issue, “More than one-fifth of transportation costs are related to fuel. Combining this with the fact that, per the EC’s Weekly Oil Bulletin, fuel prices have reached and plateaued at their record-high prices of around €1,500 per 1,000 liters of fuel in the European Union (EU), with the Eurozone’s average prices being around €1,530 per 1,000 liters of fuel, the largest slice of the operating cost pie has only continued to grow.”
Even rising gas prices have a negative influence on the average logistics company, as the price of AdBlue has continued to climb due to the status quo with natural gas,” continued Liachovičius.
“Fuel is a particularly sensitive topic to carriers, as mentioned above, on average, over 20 per cent of the total operational costs for a road freight transport company are related to the liquid you put in a tank.”
Trucking companies have also experienced growth in operating costs due to the fact that there is a clear lack of human and vehicle resources.
As Liachovičius said, “while Europe has experienced a driver shortage like never before, truck manufacturers have also struggled to produce enough trucks for road transportation providers globally, especially as there is a shortage of semiconductor chips that are responsible for various systems on trucks.”
Both cases, due to the relationship between supply and demand, mean that logistics companies have to spend more to have enough resources.
Further regulatory changes are also coming in 2022, as the EC Mobility Package will include new rules for transport companies.
“They will, undoubtedly, improve the working conditions of our colleagues on the road. While potentially it could result in higher transportation prices, Girteka Logistics has been preparing for the changes and made the decision to expand its presence in Poland, allowing us to be closer to our customers with our expanded presence in Western Europe.”
“So far, none of our trucks are sitting idle at our transport bases and are continuing to move daily, proving that we have been successful in retaining and recruiting drivers,” Liachovičius concluded.