The world trade revival may be short-lived, as the protectionism is escalating. Experts also predict an increase in interest rates and the alarming developments in geopolitics. It will certainly also affect the transport and logistics sectors.
In its „Global Trade Outlook,” Euler Hermes, a credit insurance and debt collection company, warns of the alarming developments in geopolitics that lead to an increase in trade costs.
Financial protectionism is the greatest danger for global trade. There needs to be disciplined support from governments for longer-term investments and the digital revolution, as well as plenty of cash available on company balance sheets; but that may be not enough to balance this alarming trend,” warns Ludovic Subran, Chief Economist at Euler Hermes.
According to experts, while between e.g. 2003 and 2007, the growth in global trade volume had been an average of 8 percent, it was 4.3 percent last year and it will be even less in 2018—only 3.9 percent.
Logistics and transport services will be more expensive
If the trade costs are going to increase, can the logistics and transport services rates be next? Beata Kwolik, Operation Director at Hellmann Worldwide Logistics Polska, expects that it will happen this year.
In 2018, the transport and logistics costs are going to increase and that may affect the rates offered to customers. The trend related to the current situation began in 2017 and it will continue,” says Beata Kowolik.
In her opinion, there are several reasons for that. The first one is a lack of an adequate number of drivers.
„For this reason, the salaries for qualified drivers have been increased. The low, one-digit unemployment rate also does not help. The wheelset insurance premium went up, which affects the transport costs as well,” Kowolik points out.
The road system in Poland is getting better which in turn, affects the number of toll sections. There are more and more of them in the ViaToll system.
This also increases the costs. Therefore, I expect that the said trends in the transport and logistics services may bring an increase in rates for logistics and transport services,” concludes Kowolik.
Margins were not excessively high
Grzegorz Lichocik, President of the Management Board of Dachser in Poland, is of a similar opinion. He emphasises that the share of logistics costs in the price of a manufactured product is from a few to several dozens percent. (It depends mostly on a type and value of the goods and their degree of processing, the supply chain length. the speed of goods turnover, and administrative involvement.) Meanwhile, expenses incurred by logistics operators are not decreasing which currently is influenced mainly by the labour market situation. Furthermore, logistics operators incur capital costs related to logistics infrastructure (terminals, warehouses, cargo handling equipments, transport means). These expenditures are spread over time and largely fixed, and unfortunately, they do not always go hand in hand with prosperity.
The steady cost growth in this business is a few percent a year—from 3.5 to 6 percent. In case of sudden changes, however, it may be a steeper jump. In general cargo transport (pallet shipments), prices are usually determined on a yearly basis, while in full load transport, determining a perspective larger than a quarter is significantly risky. Furthermore, we have to remember about the EU plans regarding the Mobility Package and posted work which for Poland will most likely mean an increase in costs of transport companies,” estimates Grzegorz Lichocik.
Experts agree that the market is very competitive; that is why the companies are mainly looking for solutions that will help avoiding the price increase. Now, however, the logistics and transport sector, where margins were never excessively high, is being affected by very strong events.
On the one hand, we have a growing demand for services, driven by the growth of e-commerce and the economic prosperity, while on the other hand, there are challenges regarding the lack of manpower, the risk of changes in regulations, and the environmental constraints.
„These elements have resulted and will continue to result in an increase in prices in the transport and logistics sector but it is hard to definitely predict their degree and pace,” says Grzegorz Lichocik.