The real cost of Germany’s toll increase

Market observations:

The European transport market is still strongly affected by the depressed economic situation, which directly impacts the demand for transportation services. In October, we observed a 1.8% decrease in demand, compared to the previous year. It's important to note that October 2022 was already affected by weakened economic conditions. However, at this moment, no conclusions can be drawn regarding a further decline in demand. This question is likely to be answered at the beginning of next year when figures for November and December are available. The construction and chemical industries are experiencing the most significant declines in demand for transportation services, with around 11% and 9% decreases, respectively, followed by the automotive and paper industries.
 

This lower demand for transport services is currently having a strong impact on available market capacity, which is ensuring a good availability of loading space, both in Europe and in Germany.

A look at the development of transport rates shows a predictable picture in relation to demand and capacity, with spot rates expected to fall sharply until March 2023. The last few months have been characterised by a seasonal trend at a lower level than in the last two years. On the other hand, contract rates rose to a new level in 2022 and have stabilised since then. Detailed analyses showed that cross-border freight rates fell much more sharply, while freight rates for domestic transport tended to follow the cost trends of transport service providers and remained stable.

The effects of the increased toll rates

Costs of transport service providers rose continuously, with falling diesel costs being the only balancing factor. From December, with the introduction of the new toll rates in Germany, carrier production costs will rise significantly again. While tolls have accounted for around 11% of the costs of a full truck load on average to date, our forecast is that this proportion will increase to around 18%. Service providers will not be able to cover these additional costs, and they are therefore likely to have an impact on freight rates. Simulations of the FTL transport networks, using 55 companies from the shipping industry, have revealed that companies should anticipate a price increase of around 6.5% for domestic FTL transport.

These calculations only take into account the mainhaul of the journey, as pre-carriage and on-carriage operations vary significantly. Compensation for the increased toll costs on empty kilometres is also only likely to occur in some cases and is dependent on intensive negotiations. In most cases, these increased costs will probably have to be borne by the service providers, who in turn can only counteract this by planning their routes and utilising their fleet more efficiently.

The outlook

The cost pressure on transport service providers will only ease minimally. If, as expected, demand picks up again in 2024, further increases in both spot and contract rates are likely to occur. However, the continued strong availability of transport capacities combined with a soft market demand should limit the extent of these increases.