Companies have to brace for more steep increases in shipping and logistic costs. There are numerous explanations for the raise in freight rates:
Without a question, one of the most serious issues currently affecting the transportation costs are the Mobility package modifications (we informed here about the newest restrictions and when they step into force), which are slated to take effect on various dates. The most recent will go into effect on February 21, 2022, and will directly address driver rest requirements, the return of trucks to their nation of registration, and cabotage law revisions. As a result, the average number of working time for drivers has been reduced to four weeks. This means that the industry will need to recruit more drivers to make up for the difference. However, freight forwarders are practically not able to find personal, and the consequence is, trucks will stand still, not being able to transport waiting goods. The lack of available freight space increases freight rates dramatically.
According to industry organizations, HGV drivers are still in very short supply across Europe, with a shortfall of 80.000 in Germany, in Poland of 124.000 and 400,000 all over the continent. The UK are suffering due to Brexit under an even heavier scarcity of drivers.
As a result of an aging workforce (average age of drivers is over 50) and difficulty in attracting young workers, predictions say that the situation will get worse. The aging of the baby boomer workforce has exacerbated the current driver shortage. Younger applicants are very hard to find as a result of poor driver earnings, unappealing working conditions, and lengthy working hours. To improve the situation the industry has to enhance the working conditions, first of all adequate payment. The shipper will of course see the raise in the total freight rates.
For a deeper focus read on at DHL Freights “Truck Drivers Shortage in Europe”.
Before the pandemic supply chains (and its resilience) weren’t on everyone’s lips on a daily base. But nowadays these interruptions in global supply chains exacerbate the transport sector position. There has been a tremendous traffic bottleneck in the global flow of goods since the August 2021 closing of the Suez Canal and the pandemic-related shutdown of significant ports in China and elsewhere. At a certain point, as many as 100 containers and cargo ships are only anchored off of the East Coast ports of the United States, not speaking of the ships in Chinese harbors. This still ongoing delays and freight shortage have freight rate raises as a consequence.
The price of oil has climbed dramatically in the last few months. Increased production quotas from the OPEC nations are expected to reduce the high fuel costs. Such a move has been rejected by countries across the world. In the future months, the situation in this strongly fuel-dependent industry will not improve.
Currently diesel buyers will have to spend currently about 41 percent more on fuel than in December 2020, with high crude oil and natural gas prices adding to the raising cost of diesel. The additional CO2 taxes coming into charge after the beginning of 2022 in most countries also play a significant role in the very high diesel and fuel prices.
With high shipping demand still outweighing restricted capacity in the freight sector, industry experts say freight forwarders have negotiating power to increase rates when negotiating new contracts. Logistics’ executives predict that rates set in most annual contracts will more than double from before supply-chain-related squeezed capacity. Contract prices are expected to rise due to these costs by double digits in 2022, according to several trucking businesses.
Why the Brexit pushes prices even more: This is the real cost of Brexit: What it means for Logistics & Transport
Because of the current economic climate, many import and export businesses are wondering when freight rates or shipping costs would decrease. What’s the answer? Not in the near future.
Importers, however, have a few options at their disposal, despite potential delays and hefty transportation costs. What you need to consider about today’s freight market:
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