European available road freight capacity dips after all-time highs

European available road freight capacity on the spot market hit record levels in April and May to the backdrop of COVID-19, although the current month has brought some relief in the supply-demand imbalance, according to the latest Transport Market Monitor published by German cloud-based logistics software provider, Transporeon and its subsidiary, Tim Consult.

However, while available capacity in the first two weeks of June was up 30.1% on the same month in 2019, it showed a fall of 22.5% on the previous month. Prices in June are so far down 14.3% on a year ago but are up 3% on May 2020.

“Over the corona months, February and March and especially April and May, (available) capacity increased dramatically over previous years,” commented Tim Consult’s managing director Oliver Kahrs. “We had 70-75% more capacity in some of these months, compared to last year, which had a dramatic effect on carriers and the market.

“The capacity levels we saw in April and May were the highest we’ve ever seen since we began monitoring the sector in 2008 and are due to COVID-19 effects.”

As for prices, some stability had been in evidence in February and March, but price levels declined sharply from April as corona kicked in and available capacity increased significantly. One branch of the road freight market which has not followed the general trend with regard to capacity and pricing during COVID-19 has been FMCG and foodstuffs in particular, with the lockdowns buoying demand for such goods.

Looking ahead, Kahrs said that the slight increase in spot prices in June (compared to May) and the ongoing increase in industrial output is expected to have a positive impact on available capacity and might also result in in further price stabilisation.

However, a return to pre-crisis levels is not forseen, at least for the next six to eight weeks, and will depend on how the pandemic evolves.

Waberer’s example

An indication of the difficult market conditions in the sector currently, earlier this month, one of Europe’s leading full truckload (FTL) operators, Waberer’s International, announced that its international transportation segment (ITS) would from now focus on contracted clients and major trade lanes. 

The company underlined that until now it had followed “a ‘taxi’ model that optimises the match between trucks and orders centrally and continuously. In the current environment, this model produces a lot of uncertainty in terms of revenue streams and truck utilisation and relies heavily on the ‘spot’ transportation market that has a lower profitability, and therefore will be abandoned.”

French findings

As reported yesterday in Lloyd’s Loading List, a survey conducted last week by the France’s leading trade federation, the Fédération Nationale des Transports Routiers (FNTR) indicates that France’s road freight operators are making only a timid recovery from COVID-19 and there are fears that the industry will remain in a fragile state for some time to come. While haulage firms report a significant improvement in activity compared to the months in lockdown, it remains well below the levels before the health crisis. On average, they lost 40% of their turnover during March (-48%), April (-44%) and May (-27%), the survey found.

“Moreover, this recovery has no positive effect on margins, since the crisis poses specific problems, particularly in terms of additional costs, with prices moving downwards. Indeed, between the increase in ‘empty kilometres’, disrupted flows, lower prices, loading difficulties, negative indexing of diesel fuel and the direct and indirect costs associated with COVID-19, transporters fear a lasting weakening of the sector,” it underlined.

Freight price pressures in June

In addition, one-third of the firms surveyed have seen a drop in road freight prices in June, compared to 28% in May, mainly due to overcapacity. Many haulage companies also highlighted downward price pressures exerted by customers. Requests for rate decreases of 5% are the most common, but in some cases these amount to more than 15% or even 20%, the FNTR survey highlighted.

Looking ahead, it reported that 55% of company bosses believe their workforce will remain stable over the next three months, with 32% anticipating a reduction in staff numbers. They also expressed growing concern about replacing and recruiting employees

The survey also noted that the impact of COVID-19 in the road haulage sector has differed markedly depending on the type of goods. Transport related to the automotive vertical continues to be the most affected with 76% of companies still in partial shutdown, followed by dangerous goods and industrial goods.

Only 36% of firms expressed confidence in the outlook for the sector compared to 33% last month, the FNTR survey concluded.