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European Road Freight Rate Benchmark Q2 2020: Rates fall to two-year low

Ti and Upply’s European Road Freight Rate Benchmark Q2 2020 shows that road freight rates have fallen to their lowest level in two years amidst the COVID-19 pandemic.

  • The Q2 2020 European Road Freight Rate Benchmark was €1,083, down 1.8% year-on-year
  • The slump in demand led to high levels of available capacity in the market
  • But carriers faced increased operational costs from factors such as border controls and investments in PPE
  • Over three quarters of lanes showed greater volatility than the same quarter a year ago

The pandemic has rapidly changed the demand and supply dynamics in European road freight. Over the last quarter, volumes fell dramatically as countries entered into tight national lockdowns. With factories halting production and retailers closing stores, road freight activity plummeted. Data from Verizon Connect that studies readings from tachographs shows total driver operating hours fell by an average of 50% across Europe from Mid-February to early April.

However, the supply-side story was more complicated. Although there has clearly been a net increase in available capacity, complicating factors such as border controls, decisions to reduce driver operating hours and government support schemes (such as furloughing) have had a significant impact on the market. With country-level legislation and operations changing at different speeds, levels of available supply on individual lanes have fluctuated throughout the quarter.

This means that although the benchmark rate did fall to its lowest level since Q1 2018, the drop of 1.8% y-o-y or 0.3% q-o-q was not that great overall.

However, looking at individual lanes, there were some strong fluctuations. Duisburg-Madrid, which is explored in further detail in the report, saw the biggest price change with rates falling 9.6% year-on-year.

Volatility has been a prominent feature in the market over 2020. The report shows the majority of the 36 lanes investigated were more volatile, both compared against the previous quarter and Q2 2019.

The report also studies how diesel prices effect rates over time. Although there was a slump due to the sharp drop in oil prices, these savings do not appear to have been passed on to shippers.

Some of Europe’s largest trade lanes by volumes are also analysed. Germany-Poland rates pushed higher, with France-Spain relatively stable and France-Germany rates below Q1 levels.

Andy Ralls, Quantitative Analyst at Ti, commented,

“We have seen a fall in rates in general into Q2, with higher volatility across the majority of lanes. However, this quarter has shown that market forces are perhaps not as influential as the pricing power of the road freight operators. In normal times, a sharp fall in demand ought to lead to a sharp fall in rates, but operators have managed to control supply effectively and factor the additional operational complexities into the pricing of road freight on a Europe-wide level.”

Thomas Larrieu, Upply’s Chief Data Officer, commented:

“Q2 was mainly about controlling the down falling effects of the coronavirus crisis on transportation prices. Our forecasting tools anticipate an increase of the demand for road transportation in Q3 and Q4 leading to a stabilization or even an increase of market rates on our current watched trends here at Upply.”

Source: Transport Intelligence

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