Freight market shrinking capacity result of multi-year correction

AS 2025 drew to a close, the sharp cooling observed in late autumn did not evolve into a clear downturn or recovery. Instead, it settled into a baseline of persistent volatility.

Manufacturing activity across the Eurozone continues to hover around the threshold between expansion and contraction, while freight demand remains uneven and highly sensitive to short-term shifts. At the same time, transport capacity across Europe is structurally constrained, creating a paradox: subdued demand paired with a market that lacks the surplus trucks needed to absorb sudden volume changes.

This tension is now the defining characteristic of the European logistics landscape.

Today’s shrinking capacity is not the result of a single shock. It is the legacy of a multi-year correction that began after the pandemic and intensified during the 2023–2024 downturn.

During that period, bankruptcies in the European transport and storage sector surged by roughly 180% compared to historical baselines, permanently removing a large number of small and mid-sized carriers from the market. Many others downsized fleets or postponed investment, while thousands of smaller carriers exited the industry altogether. As a result, the traditional “safety buffer” of spare capacity has largely disappeared.

Unlike demand, capacity does not recover quickly. Operators are cautious about investing in new trucks due to rising compliance costs and ongoing regulatory uncertainty, as upcoming tolls, reporting obligations, and cross-border rules remain in flux.

This is not a cyclical problem that will resolve itself quickly. Even when demand cools, the market no longer has enough spare trucks to absorb fluctuations. That is why spot rates do not collapse in the way they used to, despite the fragile state of domestic EU demand.

The situation is compounded by Europe’s deepening driver shortage, which stood at 426,000 unfilled positions in 2024, and the numbers are growing. With an aging workforce and limited inflow of new drivers, capacity elasticity remains severely restricted, meaning that even if additional trucks were available, there would not be enough drivers to operate them.

Structural not cyclical

Several forces are converging to make volatility a structural feature of the European freight market rather than a temporary condition.

Recent macroeconomic indicators underline the market’s fragility. Eurozone manufacturing activity continues to hover around the stagnation threshold, with PMI readings fluctuating near contractionary levels. Growth, where it exists, is driven largely by domestic consumption rather than exports, leaving freight demand sensitive to even minor shifts in confidence.

Energy costs and geopolitics continue to add uncertainty. While diesel prices are more stable than during the 2022 energy crisis, geopolitical tensions still translate quickly into fuel price swings and planning challenges.

At the same time, regulatory pressure is intensifying, creating what many operators now describe as “regulatory inflation”:

Germany’s CO₂-based toll increases were the first major signal.

By mid-2026, the Netherlands is expected to replace the Eurovignette with a distance-based charging system, with other countries likely to follow.

Toll and road charges are no longer a marginal cost item. In key European markets, CO₂-linked and distance-based systems have pushed tolls to around 14% or more of total freight costs on average – depending on a country – and up to roughly 23% on certain single trips, with further increases expected as distance-based charging systems expand.

Finally, climate-related disruptions – from heatwaves affecting agricultural flows to floods impacting infrastructure – are adding another layer of operational unpredictability.

Taken together, these forces mean that volatility is no longer driven only by demand cycles, but by a complex interaction of economic, regulatory, and environmental variables.

Building resilience

In this environment, resilience is no longer about reacting faster; it is about designing networks that can absorb shocks without breaking.

A central pillar of this approach is a renewed focus on strategic long-term contracts. As spot rates softened in late 2025, the gap between spot and contract pricing narrowed significantly, reinforcing the value of contractual stability.

Long-term contracts are no longer just about price. They are about guaranteed access to capacity. In a structurally tight market, being a preferred partner determines whether your goods move smoothly – or face disruption.

Digitalisation is another key enabler. Predictive analytics, 24/7 real-time visibility, and scenario modelling are helping operators anticipate bottlenecks, reroute flows, and optimise assets across regions. Logistics is increasingly about managing data with the same precision as physical assets.

At the same time, pricing models are evolving. Flexible fuel and toll clauses, dynamic pricing mechanisms, and smaller, more frequent bid cycles allow both carriers and shippers to share risk without destabilizing long-term partnerships.

Resilient supply chains are increasingly built through collaboration: shared forecasting, transparent volume commitments, and joint planning around seasonality, promotions, and regulatory changes.

The goal is no longer to secure the cheapest route at any given moment, but to ensure continuity under uncertainty.

Outlook for 2026

Looking ahead, most indicators point to a slow and steady recovery rather than a sharp rebound. European GDP growth is expected to remain modest, driven primarily by household consumption rather than export-led expansion.

However, complexity will continue to rise. Regulatory costs, emissions reporting, toll systems, and ESG requirements will increasingly influence capacity availability and pricing. Companies that delay adaptation risk being exposed to sudden cost shocks or capacity gaps.

The European logistics market is no longer defined by simple cycles of boom and bust. Volatility and constrained capacity are becoming permanent features of the landscape.

Success in the coming year will depend on the ability to integrate three dimensions simultaneously: macroeconomic signals, regulatory transformation, and environmental disruption. Logistics networks built solely around cost optimisation are increasingly exposed.

In this environment, resilience is not a defensive posture – it is a competitive advantage. Companies that invest in long-term partnerships, data-driven planning, and adaptable network design will be better positioned to navigate uncertainty and support sustainable growth, even as market conditions continue to shift.

Tomas Šilinikas, pricing director, Girteka