European truckers may diversify, consolidate

A new report from the British research firm Transport Intelligence describes just how hard the economic downturn has hit European motor carriers. European Road Freight 2010 notes that the recession has resulted in a thinning of carriers' ranks, especially medium-sized companies, with the surviving truckers downsizing their fleets to deliberately shrink capacity. At the nadir of the downturn, the report estimated, European truckers lost a quarter of their freight revenues.

When shipments fell in 2009, the resulting excess capacity brought about a huge drop in trucking rates. Although data indicate that European truckers managed to raise rates in the second quarter of 2010, the report's authors question whether prices will remain firm. Prices may have peaked in the second quarter because shipper demand and capacity probably were more in alignment during that period, they suggest.

If European truckers are unable to raise prices further, the report said, rising fuel costs in combination with a driver shortage could continue to threaten their financial viability. Motor carriers may try to avoid that threat by diversifying and seeking new revenues; one likely option would be developing contract logistics businesses. Finally, the report concludes, although merger and acquisition activity remains low, continued adverse market conditions will force more carrier consolidation.