Autumn can be unforgiving for some companies: road transport supply in the EU exceeds demand

Regarding the current state of mind of the Lithuanian transport sector, how environmental factors affect labor costs and the sector’s contribution to the country’s gross domestic product, Delphi In the program “Money Matters” we spoke with the Secretary General of the International Transport and Logistics Alliance Povilas Driž and the economist Aleksandars Izgorodins.

The situation of the Lithuanian road transport market

According to Mr. Driž, the situation in the Lithuanian road transport sector is currently quite stable, but at one time it was impossible not to notice the influence of the markets of other European Union countries on Lithuania.

“We have to pay attention to the markets that are our main sources of income: Germany, France, Italy and Spain. Consumption in these markets has fallen. We see that in Germany it is 5, 4 percent, in France 4.8 percent, so this wave affects us as well.

We noticed in the first quarter of 2023 that the decline occurred for six months compared to 2022. The number of road transports, measured in tonne-kilometres, fell sharply, but today, six months later, we see that this vector balances out slightly. There’s no longer such a big drop, but there’s also no upside, so we’ll see what happens in the next moment, in the times to come, and we hope, of course, to be optimistic,” he said.

According to the interviewee, there are more interesting factors to notice in the market.

“We are noticing even more interesting action, action that is taking place in the European Union. Our competitors, these countries, our markets which are our main markets, the carriers in these countries are showing signs of recovery. They are transporting more goods than us, unlike the last years. This drop, it can be summed up, compared to the last such significant one, in 2014-2015, is now really noticeable, very strong”, said P. Drižas.

According to him, even if orders are falling in the industry, it is impossible to say with certainty that the carriers who work with industrial and manufacturing companies are going through more difficult times, because these statistics are not monitored.

“We do not segment like this according to the goods transported. One thing that can be said is that both quarters of 2023 show no decline in trucking activity, relative to activity in other trucking segments. They show quite a good result. But, as I mentioned, Germany, France, our partners, our customers are less demanding and today the situation is such that the supply of road transport in the European Union is greater than the demand” , shared the interviewer.

Although there have been declines in the transport sector, it seems that the market is now balanced, but at the same time there are forecasts for the fall, which can be unforgiving for some companies.

“The transport sector is very fragmented in Lithuania. We have very small companies and very large ones. As a result, the mood of companies and that of transporters, depending on their size, often presupposes. Some who have contracts to term show stability and a certain form of optimism.

Those who work with what are called ad hoc cargoes, these non-contract cargoes, their situation is different. Here it is very difficult to say and apply an industry-wide description of how we will have to live now for the next six months. Of course, we are all optimistic, but a lot depends on how we will manage to avoid this situation with third-party drivers, on human resources, on how we will succeed in the regulatory environment,” said P. Drižas.

The transport sector is important for general well-being

According to economist A. Izgorodin, the contribution of the transport sector to the whole Lithuanian economy is significant and considerable.

“It is very important because the share of transport in GDP reaches 13 percent, which is one of the highest indicators in Europe,” he said.

Alexander Izgorodin

P. Drižas also agrees with the economist, but he notes that the tax contribution of the sector to the budget has decreased.

“We now have data for the first two quarters from the National Data Agency, on the taxes we pay. What we have found is that the contribution of the taxes we pay to the budget has decreased. This year , we have 415 million euros in six months, while last year road transport paid 436 million euros to VMI even in six months. This is a worrying indicator. We were among the top three taxpayers as an industry, and now we’re probably in fourth place,” he said.

It is difficult to say why this happened.

“It was probably due to the overall decline, the change in our situation, the number of transfers. We’ll see what happens at the end of the year,” said P. Drižas.

However, the number of employees in the sector is encouraging.

“The number of employees has remained stable and has even increased. Today, we employ approximately 120,000 people in the sector, including 81,000 drivers. According to our calculations, in 2022 the contribution of a Lithuanian driver to our common good amounts to approximately 70,000 euros. Therefore, we can conclude that the more workers there are, the better off Lithuania will be,” explained P. Drižas.

Rates in the sector

The prices of transport services are the subject of constant debate, because as they increase, this also contributes to the final price of the product, which is paid by consumers.

“It’s hard for me to talk about tariffs, because these are commercial matters for each company, but statistics show that tariffs have now stabilized. The problem with road transport is that you cannot decide only to raise or lower the prices. The competition is huge. In Lithuania alone we have more than 6,000 companies, so when it comes to the European Union, the competition is huge and the prices do not often not necessarily depend on the wishes of the company”, said P. Drižas.

According to the Economist, current economic factors suggest that we will continue to see lower inflation i.e. there should not be as much price increase as last year.

“One of the most recent aspects that should be mentioned is that it is likely that if the Chinese economy does not show a serious recovery in the fourth quarter of this year, then China will start exporting deflation to the western markets. Due to the reaction of commodity prices to China’s macroeconomic problems, metal prices could decline, prices of various components could decline, and it is very possible that the same price of oil may decline.

What I see from the various preliminary indicators, with regard to the Eurozone and Lithuania, it is clearly visible that Eurozone and Lithuanian companies are less and less inclined to raise prices and more and more to lower them. My guess at the moment is that this situation will not change in the fourth quarter, we will continue to see a slowdown in annual inflation, which will perhaps be close to 2 percent in the euro zone at the end of the year. “, said economist A. … Izgorodin.

However, according to the economist, it is very real that the arrival in the country of cheaper goods from China will be good news for the population, but it will be more difficult for the companies.

“Actually, I think it’s starting now. Again, because of the Chinese and American consumption risks, because of the pressure from German and Scandinavian industrial companies on our manufacturers. Indeed, current statistics show that the prices of industrial production in the euro zone and in Germany are falling quite sharply and I suspect that this is due to two aspects.

Firstly, it is clear that commodity prices have fallen, so there is no reason to increase prices, and secondly, what I see is the German export figures which are down, which means German companies, trying to preserve their export contracts and their market,” he said.

Border posts are closed

According to Mr Driž, it is difficult to say whether the closure of the two border crossings with Belarus will have an impact on transport prices, but the costs will certainly be higher.

“I don’t think so, because if you look at it that way, these two points were not intended for the passage of trucks loaded with goods, but, therefore, it can affect the rest of the points. If, as they say state officials, number of employees or human resources are geared towards faster throughput at the remaining points, of course, we will be better off.

The number of transport to the Belarusian part is up to 1 percent of all Lithuanian transport, it does not mean anything, but the people who work there, transport unauthorized goods and work for Western customers, do not pass no more time. at the border, this is of course such a general figure that a day spent without driving costs around 250 to 300 euros. Accordingly, if you spend 4-5 days on the wall, the final amount is known to become higher, then this may affect the price paid by the end user,” he shared.

Viktorija Chockevičiūtė, Povilas Drižas

True, according to the interviewer, it is important to mention that the Lithuanian transport sector does not circumvent sanctions.

“The first thing that should be mentioned is that the Lithuanian road transport sector practically does not participate in it when it comes to circumventing sanctions and dual-use goods. What we see from the same customs statistics , is that the most important problem concerns carriers from third countries or other countries of the European Union who carry out such activities.

Here we have to leave Lithuanian transport aside and say that the problem should not necessarily be with us, but companies that transport unauthorized goods, of course, these checks, these questions, sometimes detentions in customs warehouses – of course, bring negative effects. costs and are therefore reflected in the final price. We have faced this problem, but, perhaps, here we also need to understand the state institutions, which take measures to prevent those who circumvent the sanctions as much as possible,” said P. Drižas.

Source: The Delfi





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