European road freight rate index hits all-time high

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The Upply Ti IRU European road freight rates index for Europe hit an all-time high in Q1 2022 as rising cost pressures, supply and capacity disruptions, regulatory change and war in Ukraine created a potent mix of rate drivers.

The Benchmark index rate rose by 4.3 points over the previous quarter, while it increased 7.5 points over the first quarter of 2021.

  • The Q1 2022 European Road Freight Rate benchmark index stood at 110.9, 4.3 points higher than in Q4 2021 and 7.5 points higher than in Q1 2021.
  • Q1 2021 is the seventh consecutive quarter of rate increases across Europe.
  • Rising fuel costs, up around 52.7% y-o-y on average across European markets, and the ongoing driver shortage have helped push up road freight costs and rates across Europe.
  • New data from IRU shows driver shortages across Europe in 2021 reaching up to 425,000 unfilled positions; made worse by the war in Ukraine.
  • Freight rates are expected to remain elevated through 2022 as volatility from inflation and the fallout from the war in Ukraine continue to increase costs, though as inflation takes hold overall demand may decrease, relieving upward pressure on rates.

The result of the forces currently exerting themselves on the European road freight market is an uncertain, challenging and complex market environment. 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 France.

The effects of inflation on the supply side of the European road freight market, especially on diesel prices, have led to substantial increases in rates in Q1 2022. The war in Ukraine and the subsequent restriction of oil supplies from Russia into Europe has led to further upward pressure on prices. The EU-wide weighted average of a litre of diesel has risen sharply since Q3 2021. Compared with the pandemic-induced low of €1.10 during Q2 2020, the weighted average cost of diesel was 52.7% higher in the first quarter of 2022.

The worst effects of this fuel price increase may be yet to be registered in the quarterly index, as the price spike did not occur until after the war started in Ukraine on 24 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 reserves now depleted the impact on rates is likely to increase in the near term.

While the most apparent effect of the war in Ukraine has been to increase fuel prices, the conflict has also worsened the European driver shortage, driving up labour costs and applying more upward pressure on rates. New data from IRU shows driver shortages across Europe increasing to up to 425,000 unfilled positions in 2021. These shortages have been worsened by the war, with over 228,000 non-EU truck drivers operating in Europe in 2021, many from Ukraine and Belarus.

In addition to fuel price increases and driver shortages in the context of the war in Ukraine, another significant change this first quarter is the entry into force of new EU Mobility Package rules in February. Impacts on costs and rates are still limited as 22 of 27 EU countries are late in implementing the new rules on the posting of foreign drivers, including collecting driver remuneration, and new market and profession access rules. The impact of these new rules on European rates will become clearer in subsequent quarters.

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