Container transport rates are low and they have been for years. Industrial container transport is of secondary importance in many of our customers’ budgets. Naturally, prices vary on account of busy times or low tides (more about this in our extensive blog), but if we look at the average rate, it is at least 25% too low for healthy business operations. So what factors are at play here? And why is it a problem? That’s what we’ll be discussing in this blog.
Container transport: what are the prices?
In the case of one-way transport, rates for import and export trips are priced separately. To put it simply, import trips are trips from Rotterdam/Antwerp to cities in Germany such as Mannheim, Frankfurt and Mainz. Export trips take us from Ludwigshafen, Worth, Strasbourg, Kehl (Germany), etc. back to Rotterdam/Antwerp. On average, the current rate is about €1.00 per kilometre. The current average rate is determined by the market: supply and demand and within that bandwidth, we highs and lows. These rates are lower than the amount the haulier really needs.
Which factors determine the price?
The current volume of work in the transport market
The number of containers you book, in one go or a fixed number each week
The quality of the transport company: do they arrive on time, do they drive safely and are their records in order
Cost price
The current average rate is determined by the market: supply and demand. But what should a trip cost? What components make up the cost price?
The costs of rolling stock: truck, chassis, tyres
The driver’s staffing costs
Fuel
And if you use charters: the charter’s kilometre price
Business operation costs: the building, desks, ICT, staffing costs of those working in the office
The desired profit margin
Waiting hours allowance
One good example is the allowance for waiting hours, i.e. the time a driver and his truck have to wait for a container to be unloaded. A haulier receives about €50 for this. But take a washing machine repair at home, for instance. Call-out costs alone are often as much as €75, which will get you an engineer and a van. A truck with chassis and driver comes with completely different costs.
The desired profit margin seems a luxury but it is, in fact, of vital importance. No future existence without profits, no money for investments and no money for innovation. Ask a transport company to invest in a track-and-trace system. That will set you back a staggering €50,000. If the gross margin (not profits, no: the margin) is only €0.04 per kilometre, that’s quite a tall order. Desired profit margins are not even used for calculations at this time.
Driving below the cost price
Container transport is also cyclical, something we’re all aware of. We’re the first to notice a new crisis or unrest on the global market and that is why there will always be transport companies that have a tough time. This may be caused by a loss of customers, illness, broken down rolling stock, a wrong cost structure, et. In situations like that, a haulier often drives below the cost price in order to keep losses to a minimum. And that has been resulting in unhealthy situations for quite some time now: a downward price spiral. Prices for international road transport have fallen this year, especially during the first half. Costs, however, have risen (footnote 1) by an average of 4%. This is almost impossible in a sector where margins are extremely lean to start off with.
The importance of solid collaboration
SKB Logistics is a container transport company that operates on the basis of solid collaboration and mutual trust. We are of the opinion that this forms the basis for a shared result: stable transport, competitive but healthy rates, helping each other out in difficult situations (shortages, surpluses or a forgotten rush job) and safe situations on the road. We don’t compete on price and we don’t bid on auction sites. Good transport at a good, competitive price. Please contact us for a customised quote: + 31 85-111 7650 or info@skblogistics.nl.
[1] https://www.logistiek.nl/distributie/nieuws/2019/10/kosten-wegvervoer-dit-zijn-de-stijgingen-voor-2019-en-2020-101169824 Article based on sector figures from TLN.