The crisis in the transport industry is a fact. The economic slowdown in Poland and Europe – especially in industrial production and trade in goods – has significantly affected the financial situation of Polish carriers. Rising operating costs, reduced demand for transport services, and competition from cheaper Ukrainian carriers have led to an increase in corporate debt and the number of bankruptcies. These financial difficulties pose a serious challenge for the TSL sector, forcing transport companies to seek effective restructuring and financial solutions to survive in the market.
The current situation at the border with Ukraine
In mid-January, the 72-day strike by Polish carriers at the border with Ukraine ended. The blockade of border crossings was the result of an earlier agreement between the European Union and Ukraine, which allowed Ukrainian carriers to perform bilateral transport without permits. This was intended, among other things, to facilitate the delivery of humanitarian aid. However, the significantly lower operating costs of Ukrainian transport companies created unbeatable competition for Polish carriers, both in transport to and from Ukraine and in transport services within the European Union.
After intense negotiations, Polish carriers decided to suspend the blockade until March 1, 2024. The agreement with the Polish Ministry of Infrastructure includes testing new solutions at the border, talks with the European Union regarding support for Polish transport companies, tightening the SENT system, and a number of other measures intended to mitigate the negative effects of the EU-Ukraine agreement and ensure equal operating conditions for Polish and Ukrainian carriers.
Storm clouds over transport
The transport crisis at the border with Ukraine was the culmination of many problems that transport companies faced in 2023. The result was a decline in demand for their services by as much as 15-20 percent compared to the previous year.
1. Fewer shipments
According to Transport Intelligence forecasts, the real growth in the value of the road transport sector in Europe in 2023 was not expected to exceed 1.4 percent, which is a significant drop compared to the 3.5 percent growth in 2022.
In November 2023, the decline in the transport of goods amounted to 9 percent compared to the previous year, and in the period from January to November, 25 percent fewer goods were transported than in the same period in 2022. The decline was also visible in the data from Statistics Poland (GUS), indicating an overall decrease in cargo transported by various means by 3.1 percent compared to the previous year.
2. Decline in transport rates
Lower demand for road transport in Poland translated into a decline in transport rates. In the third quarter of 2023, spot rates were lower than contract rates. There was also a significant drop in retail prices in transport. In November 2023, they were 22 percent lower than in the previous year, also due to the reduction in crude oil prices. This year, their decline should slow down as Europe and Poland emerge from the economic crisis.
3. Increase in costs for transport companies
Polish carriers also struggled with a shortage of drivers and high wages (a double increase in the minimum wage in 2023 and another raise from January 2024), which increased operating costs.
4. Increase in debt of transport companies
The deteriorating situation in the road transport market and rising operating and investment costs had a direct impact on the financial condition of many carriers, especially smaller ones.
5. Bankruptcies and insolvency proceedings
According to data from the Central Economic Information Center (COIG), in the first half of 2023, 208 companies declared bankruptcy, including seven from the road freight transport sector. This number is equal to the total number of bankruptcies in this sector for the entire year of 2022. Additionally, 2,367 bankruptcy and restructuring proceedings were conducted in the first six months of the year, which is a significant increase compared to 2,730 proceedings in all of 2022 and only 1,051 in 2019.
6. Arrears in the TSL sector
The National Debt Register (KRD) reports that the debt of companies in the TSL (Transport, Spedition, Logistics) sector increased by 155 million PLN last year, reaching 1.3 billion PLN. The average debt of one company in the sector was 44.3 thousand PLN, which is an increase of 4.4 thousand PLN compared to the previous year. The KRD report also indicates an increase in the number of entities with financial problems – 670 new debtors have been added. Currently, there are 29.3 thousand debtors associated with transport and warehousing in the KRD, with the majority of the debt, i.e., about 1 billion PLN, burdening companies involved in road freight transport. The number of these debtors reaches almost 21 thousand.
Prospects for the road transport industry in 2024
The expected economic rebound, combined with falling fuel prices and increased cargo handling in ports, may contribute to increased transport activity and improved financial condition of companies. However, everything will depend on the development of the geopolitical situation, global trade dynamics, and the overall economic condition, especially in countries key to Polish exports, such as Germany.
Above all, industrial turnover in Poland and the EU must increase. Global trade in goods has the potential to rebound in the coming period, with the WTO predicting growth to 3.3 percent. In Poland, forecasts for economic growth and trade, along with a gradual decline in inflation, also seem to favor positive sentiment. However, it is worth noting that the expected economic rebound will be gradual, and the transport industry will continue to struggle with difficulties for the first two to three quarters of 2024.
Further reductions in oil prices may bring relief in terms of operating costs. Major types of crude oil recorded average monthly price reductions of 63 percent in December 2023. Over the entire year, prices fell by 61 percent for WTI, 52 percent for Brent, and 9 percent for OPEC, respectively.
Of course, provided there are no new threats. Bloomberg Economics estimates that in the event of direct Iranian involvement in the conflict in the Middle East, oil prices could skyrocket to as much as 150 dollars per barrel, global GDP could slow to 1.7 percent, and global production could decrease by a trillion dollars.
Challenges – sustainable development and the Mobility Package
In 2024, transport companies in Poland will have to face new challenges related to the need to adapt to new regulations and guidelines related to the Mobility Package and sustainable development. As the world moves towards more environmentally friendly operating methods, companies will have to invest in new technologies and strategies to remain competitive.
New regulations for the transport industry
The industry has been dealing with the Mobility Package regulations for several years. Last year, changes included, among others, the rules for settling the remuneration of Polish carriers working in another European Union country or the requirement for companies to submit declarations on the number of employed drivers.
From December 2024, transport companies will be required to replace analog and digital tachographs with 2nd generation smart tachographs. An obligation to store and present for inspection tachograph data from the current day and the preceding 56 days will also be introduced.
The transport industry will also have to adapt to other changes, such as the introduction of e-CMR – an electronic consignment note, which facilitates access to information about the location, condition, and status of goods, improving supply chain management.
The introduction of health certificates for the import of products from the EU and inspections of plants, animal goods, non-animal food, and plant products.
Pressure related to environmental impact reporting will increase
In 2024, transport companies will also feel increasing pressure to report on their environmental impact. Under the Corporate Sustainability Reporting Directive (CSRD), approximately 3,000-3,500 companies in Poland will have to submit reports in 2025, containing data for 2024. Many transport companies will have to adapt to these requirements, even if they are not directly on the list of companies covered by the CSRD, due to their contractors.
A recipe for payment bottlenecks
Payment bottlenecks are a serious problem for the industry. The average payment time for transport companies in the SME sector in the third quarter of 2023 was 21 days, while the general payment term was 13.5 days. About 57 percent of companies in the industry struggle with payment delays from contractors, and 45 percent with financial bottlenecks. This particularly affects smaller enterprises, which are especially sensitive to legislative changes and payment bottlenecks. These companies often struggle with staff shortages resulting from rising wages and more attractive offers from competitors. For small companies, even minor problems can lead to bankruptcy, especially in the face of longer payment terms by contractors.
If a company has liquidity problems resulting from unpaid invoices, the solution is factoring, preferably with companies specializing in serving entities from the TSL sector, such as Bibby Financial Services.
– Factoring enables better cash flow management and maintaining the financial liquidity necessary for operational activities and investments, despite rising costs and market uncertainty. A factoring company can also help in verifying contractors to avoid unreliable ones, and even take on the risk of such a contractor’s insolvency – explains Piotr Taras, Business Financing Manager at Bibby Financial Services. Thanks to factoring and other flexible financial solutions, small and medium-sized transport enterprises will have the opportunity to get through a difficult period, invest in sustainable development, and adapt to new market requirements. Cooperation with an experienced financial partner, such as Bibby Financial Services, can be key to long-term profitability and success in the transport industry.
Source: Bibby Financial Services Human Signs Press Office