Source: https://www.mlszksz.hu/tovabb-nottek-a-fuvardijak-es-meg-nincs-vege/?v=35b5282113b8

Freight rates have continued to rise, and it's not over yet!

Road freight rates continued to rise in the third quarter, despite the low number of orders – we can read in the 2024. Q3 Road Freight Price Index (KFX 24Q3) industry analysis published by the strategic consulting firm DigiLog Consulting.

Although fees have increased significantly, costs have increased even more
Compared to Q2, costs have increased only slightly in Q3 – by only 1.1-2.1% – and fees have also increased to a similar extent, but the majority of companies are still losing money in their transport activities. The reason for the shortfall is that they have still not been able to fully pass on the cost shock that occurred in Q1 2024.
Compared to the same period of the previous year, DigiLog Consulting measured a 6.8% increase in fees in international transport and a 14.9% increase in domestic transport, while in Q3 2024, a 10.2% increase in total costs was observed in international transport and a 17.8% increase in domestic transport. More than 2/3 of the extreme cost increase came from the increase in usage-based tolls (in addition to an average 50–60% increase in domestic tariffs, the German toll rate also increased by 80–85% and the Austrian toll rate by 8–12%).

The decrease in fuel prices pushed down the cost price in this quarter, but changes in all other cost items had an upward effect (driver wages increased by 7–12%, depreciation by 6–9%, and leasing interest by 30–50%).
Although the efficiency and productivity indicators of carriers deteriorated compared to the previous quarter, they improved compared to the same period of the previous year. The weakening of the forint also slightly helped the results of international companies in the period under review.

Road haulage companies are struggling to survive
Despite significant rate increases, the 10.2% and 17.8% cost increases between July and September have not yet been fully passed on. In the case of international transport, a 3.4% and a further 2.9% rate increase would have been necessary to compensate for the increased costs. The low level of orders in the freight market did not allow for such a large increase, so domestic hauliers are closing their fifth loss-making quarter.

The recession is dragging on, there is less to transport
The biggest problem is the dragging on of the economic recession, which is causing a serious decline in the economic sectors that supply carriers with goods. In the third quarter, the domestic GDP not only lagged behind the previous quarter by 0.7%, but also showed a decline of 0.7% compared to the same period of the previous year, according to the seasonally and calendar-adjusted data of the Central Statistical Office. Although retail turnover, which provides turnover for domestic transport, still shows an increase compared to the previous year (July: 2.5%, August: 4.1%, September: 1.7%, according to data adjusted for the calendar effect), its trend is downward. In contrast, the slump in the construction industry has a particularly negative impact on the demand side of domestic transport. Even worse news for international carriers is the slowdown in industrial production. In the third quarter, In the second quarter, the transport sector showed negative results not only compared to the previous year (July: -1.5%, August: -9.6%, September: -7.2%, according to raw data), but also compared to the previous months, and its trend is also deteriorating. The production of electrical equipment (electric motors and Li-ion batteries) and vehicle production show a particularly large lag.
As a result, freight transport performance also declined. In the second quarter, compared to the same period of the previous year, we can still see a modest 1.1% surplus, but there is already a 2.7% lag in transport data measured in freight tonne-kilometers from the previous quarter. We can expect similarly unfavorable data for the third quarter.

Carriers are forced to downsize, they are already reducing their capacity
The smaller volume of goods and the extremely increasing costs have put carriers in an economic pinch, who have not been able to adjust the number of their vehicles to the reduced demand in the short term. In 2023, a significant amount of vehicles ordered in 2022 arrived, but at the same time, the sale of used trucks has become almost impossible. Thus, the number of freight vehicles even increased until the first quarter of 2024. However, in the second quarter, it is clearly visible from the statistics of the Central Statistical Office that the number of tractors among domestic heavy goods vehicles began to decline dynamically. (In Q2 2024, the first registration of tractor trucks decreased by 4.3% compared to the previous quarter, and by 16.4% compared to the same period of the previous year). This is supported by the DigiLog Consulting III. quarterly measurements, which already show a fleet reduction of nearly 1% in the industry compared to the previous quarter.

Further increase in rates is inevitable
Despite the fact that, according to macroeconomic forecasts, in addition to the slow growth of retail volumes, the weakness of the construction industry and industrial production in the next half of the year is still certain, further increase in freight rates can be forecasted.
The majority of carriers cannot continue to operate at a loss, so in order to survive - even at the cost of significantly reducing their capacities - they are forced to raise their freight rates above their cost. The increasing number of bankruptcies among micro-enterprises also contributes to the forced reduction in capacity, which will cause a capacity shortage if traffic recovers.

DigiLog Consulting will continue to publish the Road Transport Price Index quarterly in the future to help all players in the transport market navigate this extremely turbulent economic environment.

“Thanks to the objective results and detailed analyses, the index is now widely used by clients, carriers and forwarders alike,” emphasized Ferenc Lajkó, CEO of DigiLog Consulting.