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Hungarian road sector struggling despite economic recovery, latest report shows

The Hungarian road sector, which is responsible for handling approximately 80% of freight transport, continues to face significant challenges despite the technical end of the recession and a notable decrease in inflation, according to the latest report by DigiLog Consulting.

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The Hungarian Road Freight Price Index for the fourth quarter of 2023 (KFX 23Q4), published by DigiLog Consulting, highlights the sector’s continued losses due to falling demand and high road tolls.

The report highlights the unfavourable macro environment affecting the sector, with domestic consumption and retail trade still on a negative trend, down around 4% year-on-year. In addition, industrial production, a key component that drives transport demand, is down 7.4% year-on-year.

Of particular concern is the fall in trade volumes, reflected in a negative trade balance in December, where exports fell more sharply than imports. This has particularly affected international hauliers, who are heavily dependent on EU markets for exports and imports, adding to the challenges facing the sector.

Despite a decrease in fuel costs compared to previous quarters, other operating expenses such as driver salaries, tolls and vehicle maintenance increased. In particular, domestic tolls increased significantly by 17.6%, which may lead to an increase in freight costs.

Efficiency and productivity indicators within the road subsector have deteriorated, mainly due to low order volumes. This has led to a reduction in truck mileage and an increase in empty runs, further increasing the cost per loaded kilometre for hauliers.

Exchange rate developments, in particular the strengthening of the forint against the euro, have also affected the profitability of international transport operations, as revenues are mainly denominated in euros while costs are incurred in forints.

Despite some rate increases compared to the previous quarter, these have not been sufficient to offset rising operating costs, partly due to overcapacity in the market. Carriers have struggled to match capacity with reduced freight volumes, resulting in downward pressure on rates.

Looking ahead to 2024, while there are signs of economic recovery, challenges remain, including the weakness of the German economy and significant increases in tolls and fuel excise duties. These factors are expected to further escalate costs for hauliers, posing a significant challenge to the sustainability of the sector.