The European road transport sector has faced significant challenges over the past few years, marked by pandemic-induced disruptions, supply chain issues, and economic downturns. In 2023, consumer behavior shifted, with a tendency to spend more on services rather than goods. This transition led to decreased demand for goods and consequently for transport services. To adapt, shippers reduced their excess inventory, further diminishing transport demand. Fortunately, these corrections and supply chain issues have subsided, leading to normalized inventory levels and better container throughput in major European ports.
Post-COVID Economic Shifts
Changing Consumer Behavior
In 2023, consumer behavior shifted significantly, with a greater focus on spending on services rather than goods. This change led to a decreased demand for goods and, consequently, for transport services. Shippers responded by reducing their excess inventory, further diminishing transport demand. However, these corrections and supply chain issues have since subsided, leading to normalized inventory levels and improved container throughput in major European ports. As a result, this trend of normalized stock levels has given some breather to the transport sector, which suffered prolonged disruptions during the pandemic years.
Impact on Major European Ports
A European survey conducted before summer 2024 indicated that 90% of consumer goods shippers had stock levels that were either at the desired level or too low. Consequently, major European ports like Rotterdam and Antwerp-Bruges saw increases in container throughput, which bodes well for road transport that handles a significant percentage of containers destined for the hinterland. Furthermore, consumers now experience improved purchasing power due to decreasing inflation and wage growth outpacing inflation, alongside a robust labor market, which is beneficial for both consumption and transport demand. These factors collectively contribute to an optimistic outlook for the road transport sector as it aligns with enhanced consumer capacity, potentially boosting demand for goods transportation.
Struggles in the Transport and Manufacturing Industries
Weak Construction Sector Demand
Despite positive signs in consumer demand, the construction sector’s demand remains weak. The manufacturing industry also struggles with high energy costs, impeding its ability to stay competitive. These persistent headwinds are reflected in the sluggish growth of European road transport volumes. According to Eurostat and ING Research, there has been a slight recovery in European road transport volume, but it remains lackluster, indicating a struggling industry. The sluggish growth rates cast doubts on the sector’s ability to rebound quickly, with these challenges fundamentally impacting various facets of the European road haulage industry.
German Truck Mileage as an Indicator
Notably, German truck mileage, often a bellwether for European road transport, fell by 3% in 2023 and experienced a minor contraction up to October 2024. The attempts by trucking companies to circumvent Germany due to some steep toll increases, combined with the weak performance of the manufacturing sector, have contributed to this dip. Looking ahead, the article anticipates a continued slow and uneven recovery for road transport into 2025, with the European Purchasing Managers’ Index for manufacturing still signaling a contraction. These indicators present a stark picture of the current state of road transport, reflecting broader economic challenges and diminished industrial outputs within key sectors.
Fluctuating Demand and Driver Shortages
Uneven Recovery and Market Performance
The German industry—including energy-intensive sectors and the automotive industry—continues to face challenges in achieving sustained growth. Conversely, economies in countries like Spain and Poland are showing better performance. Improvements in consumer demand and a return of driver shortages indicate a slight improvement in the market. However, the expected growth in road transport volume will only reach 0.5% in 2024, with a projection of 1% in 2025, still lagging behind long-term average growth rates. The disparity between growth rates among various European economies highlights regional differences impacting the overall market.
Resurfacing Driver Shortages
Driver shortages, which eased temporarily in 2023 due to reduced demand, have resurfaced as markets started to pick up. The EU now faces a shortage of about 500,000 drivers, an ongoing supply constraint exacerbated by several factors. For instance, Western European workers can find other jobs with similar pay that do not require extended periods away from home, and new-generation drivers prefer shorter working hours. Additionally, demographic changes limit the availability of potential workers, and an aging labor force leads to increased retirements. This multifaceted issue remains a pressing concern for the industry, impacting both the current and future availability of crucial labor resources.
Freight Rates and Diesel Prices
Volatile Freight Rates
Freight rates in European trucking have been volatile. Contract freight rates have stabilized, but spot rates, which provide short-term market insight, reveal ongoing market weakness. These day-to-day rates fell below contract rates in early 2023 due to excess capacity. However, signs of recovery appeared in 2024 as large fleet owners adjusted their capacity. Nonetheless, the third-quarter setback linked to lower diesel prices highlighted the ongoing fragility of freight rates. This volatility serves as a significant challenge for hauling companies, particularly those managing smaller fleets or operating under tighter financial constraints.
Impact of Diesel Prices
Diesel prices have been lower in 2024 compared to 2023, despite geopolitical tensions, offering some respite to the transport sector. Yet, the growth potential for European road transport remains dampened for several reasons. Consumers are spending more on services with minimal freight transport needs, Europe’s population growth is stagnating, and European global competitiveness, especially in energy-intensive industries, is under pressure. Trade tensions and import tariff increases could further negatively impact import and export flows. Consequently, the reduced fuel prices serve as a temporary relief against broader, persistent challenges that undermine the sector’s growth trajectory.
Opportunities and Strategic Adaptations
Nearshoring and Supply Chain Diversification
The European road transport sector has navigated through some significant hurdles over the past few years, primarily driven by disruptions caused by the pandemic, issues within supply chains, and economic downturns. By 2023, there was a notable shift in consumer behavior, as more individuals started spending on services rather than goods. This change naturally led to a decreased demand for physical products and, as a result, a lower need for transport services. In response, shippers worked on reducing their surplus inventory, which further decreased the demand for transportation.
Fortunately, the industry’s challenges began to subside as the supply chain issues got resolved. Inventory levels returned to normal, and container throughput in major European ports improved significantly. This normalization helped stabilize the transport sector, offering much-needed relief after years of uncertainty and disruption.
Overall, the sector is slowly adapting to these new consumer behaviors and market conditions, showing a resilience that promises a smoother path ahead. The cumulative effects of the adaptations and corrections have positioned the European road transport industry in a better place to handle future challenges, ensuring more efficient operations and reliable services going forward.
