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No matter the year, the fourth quarter in logistics is an interesting, to put it simply, period. The three months encompass the busiest period in terms of deployed capacity, as consumers begin preparing for the busiest shopping period of the year, now fueled by such promotional events as Black Friday and Cyber Monday. However, in order to prepare for the two weekdays of sales, and their prior pre-sale promotional campaigns, both mortar and brick and e-commerce businesses have to fill up their stock beforehand. The process is not done in a week, however, as shoppers can continue buying presents or whatever items they need throughout the intense periods for all of the parties that are involved.
Still, the road transportation industry within Europe has experienced quite a bumpy ride throughout the past few months while still experiencing the shock of the first wave of the pandemic. Shortages all across the board, whether it would be personnel or equipment, were and still are affecting the process of carrying cargo on the road.
Record-breaking highs
The combination of the post-pandemic shock in road transport, stressed-out supply chains, and shortages have resulted in unprecedented average rates across Europe. While the backdrop of the strained sector is positive, namely the recovering economic activity globally, the question is whether can the logistics sector handle the additional demand for capacity.
According to the most recent market update by Transport Intelligence (TI), including research by Upply and the International Road Transport Union (IRU), “prices have hit historic highs across Europe, driven by a mix of robust economic growth, global supply chain bottlenecks, rising costs, and scarce capacity.”
The report pointed out that during Q3 2021, the freight rate benchmark stood at 107.3. Compared to the same quarter in 2020, the rate index is higher by three points.
“As retail and manufacturing sectors across Europe have seen demand rise steeply up to the end of Q3 2021, capacity shortages have increasingly become a feature of Europe’s road freight market, especially in the UK where a shortage of qualified HGV drivers has led to empty supermarket shelves and severe congestions at the port of Felixstowe, amongst other challenges,” commented on the developments throughout the quarter the company behind the research. However, per TI, the shortage is Europe-wide and the United Kingdom is not exclusively facing the problem.
One of the major factors why transport prices are increasing is the fact that carriers have to cover their costs that have risen throughout the past months. The European Commission (EC)’s weekly oil price bulletin continues to show a worrying trend that fuel prices have increased over the past year, growing to their highest level as of October 25, 2021.
Other business-associated expenses have also gone up, including the prices for both new and used trucks – with the latter’s price increase being influenced by the lack of the former, as various shortages, notably the lack of semiconductor chips, affected the manufacturing output by truck makers across the globe.
“The challenges have been more pronounced in certain locations, and certainly in the UK, but the effects are creating upwards pressure on rates. Heading into peak season and with the addition of rising costs, particularly higher diesel prices, all the ingredients for a period of sustained rate inflation are in place,” commented on the quarterly developments Nick Bailey, the head of research at TI.
Uncertainty in 2022
While peak seasons in road transport are complex, they can be simpled down to the fact that many shippers are looking to move their goods, as carriers look to balance their cargo flows in order not to have too many of their trucks in one region, resulting in unnecessary empty kilometer driving.
The current peak season of Q4 2021 will not be a typical one. Rates are set to only grow, as “economic activity appears robust enough to support elevated rates in the short-term,” noted TI. Still, the long-term, in particular Q1 2022, will introduce several changes to the European road transport industry. Firstly, additional Mobility Package regulations will come into force in February 2022, changing the way that road transport is organized throughout the continent. Namely, either the truck or the driver will have to return to their respective country of origin after a certain period on the road, and furthermore, the driver will have to take their weekly rest at a separate resting place, rather than the cabin of the truck.
The way that transport will be organized within the European Union (EU) will undoubtedly change, as the lawmakers within the bloc aim to improve the working conditions of the drivers. The improvement of said conditions is viewed as one of the ways to reduce the ever-growing driver shortage within the EU. Ensuring proper and comfortable conditions for the people behind the wheel is only a single piece of a large pie that is to be fine-tuned, by governments and businesses alike, if the shortage is to be solved in the coming years. The new year will also bring changes to the UK-EU border, as the Island will implement full customs controls from January 1, 2022. While some goods, such as agri-foods and plant imports, will be excluded from new procedures at the border until at least July 2022, the new customs procedures could further destabilize the already strained supply chains within the UK, as carriers could be even more reluctant to take the journey across the Channel.
“Monitoring the real-time situation in the coming months will be key, especially as we will enter the slower economic period after the new year,” commented Pavel Kveten, the Chief Operating Officer (COO) of Girteka Logistics European Business Unit.
According to Kveten, there is still a lot of uncertainty as to what will happen in the next year, as the upcoming peak season could create an even tighter bottleneck across supply chains, resulting in a difficult start to 2022. “At the same time, we see this as an opportunity for us to provide much-needed capacity for our current and potential customers during the last two months of the year, expanding Girteka Logistics’ presence in Europe with our asset-owned fleet of over 9,000 trucks,” added the COO.
“Manufacturers of various goods are struggling to produce enough goods to satisfy consumer demand, as materials are struggling to reach their final destinations from overseas, creating a backlog of freight at ports,” pointed out Kveten. He concluded that the first few months of the coming year will present forward-looking insight on how the road transport industry will fare in 2022, as following a difficult 2021, “stabilizing the course of the whole logistics sector will be the number one priority of all parties involved to make sure that the economy stays on the right course as well.”
