European Truckload Market is Stable but Uncertainty is High

By Stan La Haye | Senior Manager, Transportation | Chainalytics  State of the TL Market in Europe The European economic recovery is expected to continue...

By Stan La Haye | Senior Manager, Transportation | Chainalytics 

State of the TL Market in Europe

The European economic recovery is expected to continue this year and next. However, this outlook is surrounded by higher-than-usual uncertainty due to the numerous elections to be held in Europe this year and the upcoming Brexit negotiations within the UK.

Despite this uncertainty, European truckload rates have been flat with little movement over the last 12 months, and will likely remain stable at least through 2017. There are still no signs of structural truckload rate increases.

Brexit’s impact on European freight markets

The UK invoked Article 50 of the Lisbon Treaty, the mechanism for leaving the European Union, on March 29. This launched complex negotiations on trade deals, which will determine the ultimate impact on the European transport market.

One immediate impact of Brexit — correctly predicted by many — is that the value of the British Pound has fallen. Changes in the Pound to Euro rate have a direct impact on trade and thus transport rates. Chainalytics’ analysis of UK shipments confirms an increase of transport out of the UK.

In the short term, changes will continue to be driven by currency fluctuations, whereas in the mid-term (i.e., 12-24 months), information about UK trade agreement negotiations and their impact on trade, employment, duties, and connected transport rates will be the primary driver.

How to prepare for potential market changes

Most companies have a wide range of transport data available to use in transport optimization and procurement efforts. However without access to external freight market intelligence, you have to rely on internal company data and carriers’ input to understand where to focus your procurement efforts and what is good go-to-market timing.

Having accurate market intelligence enables you to see how you are performing against the market and how the market is developing, which is key when defining a tender strategy and determining when to go to market with which trade lanes. 

When preparing, consider these three suggestions:

  • Analyze current rate internal data for each of your shipping lanes to determine their specific position to the external market.
  • Track various spend and market levels across your network of carriers, location and season.
  • Utilize market surveys that explore elements such as procurement outcomes, rate and capacity forecast, and other topical issues.

Following these recommended steps can help you determine how you need to move forward based of your current market standing. For example, if you are “at market” when the market drops, there is strong chance you will be able to hold on to current favorable rates or drive them down instead of facing an increase. However, if you are “below market” when the market tightens, you can expect a more significant rate increase than the rest of the market, or a lower increase with potential capacity shortages which may force you into the spot market. To formulate the best strategy for your business, monitor your market position in the regions that most concern your business.

Stan La Haye is a Senior Manager within the Chainalytics Europe practice. Stan leads the European transport consulting practice and furthermore focuses on further building the Freight Market Intelligence Consortium, Chainalytics’ platform which provides strategic freight market intelligence, benchmarking, and comparative analysis to its members.

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