ROAD FREIGHT PRICES IN BRAZIL

Brazil is a country strongly focused on the use of the road modal, a consequence of the low restrictions for operation and the long years of prioritization of this modal in the restricted government investments. The scenario of high supply, few requirements for operation and low inspection led to a reduction in the quality of services provided and depressed truck freight prices.

This diagnosis of the road freight transport market in Brazil has contributed to the direction of public policies that discipline the sector, in addition to alerting managers of contracting road transport companies to the risks of a collapse in the system.

However, for users of cargo transport services, the information that average freight prices in Brazil are flat is not enough to define their contracting policies. Nor does it mean that there are no opportunities for shipping companies to reduce costs.

Managers responsible for contracting road transport must always be aware of the efficiency of the company's internal operation and market parameters. In this sense, a detailed analysis of the freight paid on the different routes practiced is essential. It is also important to analyze the prices paid according to the type of vehicle used and to compare these freight rates with companies with a similar profile. It is also up to managers to know the costs charged by the carrier and compare them with the prices paid for freight.

To help companies obtain information about the road transport market in Brazil, the Center for Studies in Logistics – CEL/Coppead periodically organizes the Freight Panel1. This survey aims to compare freight prices on different routes and profiles. The information is provided by the industrial transport contracting companies.

In addition to comparisons with actual price data paid by companies, theoretically, reference freight rates are calculated for each transport profile. The amount is based on the costs charged by carriers to move the cargo.

Some of the results of the survey will be presented below.

Prices paid on different routes

The regions with the highest demand for transport services generally have the most expensive freight prices. In turn, regions that take advantage of the return of trucks to their cities of origin, after having made their deliveries, obtain quite significant discounts, maintaining a lower average price.

One of the results obtained with the Freight Panel points to variations between average freight prices in different regions of the country. Routes originating in São Paulo, for example, tend to be more expensive than routes destined for this state. The price paid for moving cargo from Rio de Janeiro to São Paulo is, on average, 34% lower than in the reverse direction. Among the companies participating in the study, the average value of road freight for a closed trailer carrying dry cargo was R$ 137/thousand ton/km in the São Paulo-Rio de Janeiro direction, against R$ 91/thousand ton/km in the direction opposite.

This same phenomenon occurs on routes with the same profile between São Paulo, Minas Gerais and Paraná. In the first case, the average value of the routes between São Paulo and Minas Gerais is R$ 124/thousand ton/km, with the return route being 18% cheaper. In the second case, shippers pay an average of BRL 132/thousand ton/km to take dry cargo in a closed trailer from São Paulo to Paraná, while the return is 19% cheaper.

Figure 1 – Average road freight rates by region (Truck – dry cargo – one delivery per trip)*

This information can be used in at least two types of actions, one short-term and the other long-term, the results of which can lead to a reduction in the companies' logistical costs.

The short-term analysis points to the possibility of reducing truck idleness on return routes and, consequently, reducing freight costs. It is the role of those responsible for transport management of shipping companies and carriers to create partnerships with local industries interested in using the availability of trucks on routes with less flow.

In turn, information on freight prices on the different routes suggests that, in the long term, the company can revise its logistics network in order to take advantage of possible gains and reductions in freight costs. It is clear that a study for the remodeling of a company's logistics network, involving the location of factories and warehouses, is influenced by several other parameters in addition to the price of road freight. However, information on the cost of routes is essential for calculating the total logistics cost in different logistics network restructuring scenarios.

Prices paid according to the type of vehicle

The profile of the fleet of trucks used to transport cargo is an important component in determining the price of road freight.

Compared to truck transport, the freight price for companies using trucks is 15% higher. In turn, a road train, with twice the capacity of the trailer, generally maintains freight prices 15% lower.

The research carried out by CEL/Coppead identified that, for routes over 200 km, companies using road trains pay an average of R$ 82/thousand ton/km; the bitrem, in turn, had an average freight price of R$ 88/thousand ton/km. Transport in these two types of vehicles is cheaper than in trailers which, considering the average of all routes carried out in the country, presented an average value of R$ 97 to transport a ton per thousand kilometers.

Thus, the larger the vehicle, the greater the consolidation of cargo and, consequently, the greater the gain in scale in the transport of goods. The acquisition and maintenance costs of larger trucks, although also higher, are offset by the greater volume of cargo transported in the same trip. Shipping prices therefore become proportionally lower.

As for truck or toco vehicles, in Brazil the freight price costs, on average, more than one hundred reais to transport a ton per thousand kilometers.

Figure 2 – Average road freight rates per vehicle (Trailer – dry cargo – one delivery per trip)*

Paid prices x theoretical prices

In general, the large companies contracting transport services in Brazil have a high bargaining power and negotiating strength in relation to their carriers, especially the smaller ones, which operate in a highly competitive market.

These shippers play an important role in shaping the profile of the cargo transport market in the country. If the big industries put pressure on their carriers for low prices, to the detriment of the quality of service, that will be the model for this market. On the other hand, if the demands for better services increase, the pressure for price reduction will probably be less representative and road transport could improve in terms of quality and safety.

It is worth mentioning, however, that the country's economic growth has increased the demand for transport. This means that if there is not enough supply, both in road transport and in alternative modes, there may be pressure to increase freight prices.

Thus, it is imperative that companies monitor the freight paid in the market. Managers of contracting companies, in turn, should not limit themselves to seeking price reductions. They must analyze opportunities for efficiency and productivity gains through better vehicle occupancy planning and better definition of the profile of the fleet used, among other management actions that can achieve reductions in the freight account, based on cost reduction and network optimization .

Analyzing current freight prices in Brazil from the point of view of carriers, one can observe the reason for complaints from these service providers, who allege that prices are depressed.

Figure 3 shows the comparison between the real prices charged in the market and the reference tariffs (calculated using some parameters pre-defined by CEL/Copeead2) that would be necessary to cover all costs and guarantee a profit margin for the carrier.

Figure 3 – Comparison between price and cost (Dry cargo – one delivery per trip)*

In the case of the transport of dry cargo by trucks and bulk/dry cargo trailers, the average price paid for freight in Brazil is lower than the calculated theoretical reference tariffs. This transport profile generally has a strong presence of self-employed truck drivers, especially when moving cargo over longer distances.

The price below the reference rate means that the carrier's margin is reduced and/or that not all transport costs are being remunerated adequately. This scenario reduces the quality of the transport service.

On the other hand, the handling of dry cargo in box or sider trailers has higher remuneration. In this market, the distances traveled are shorter and the presence of self-employed truck drivers is more restricted.

Prices paid according to the type of contract

Corroborating with the analyzes carried out earlier, it is identified that companies that use transport services that have a policy of hiring self-employed truck drivers pay, on average, a lower amount for freight.

The two freight curves shown in Figure 4 summarize the prices paid in R$/ton for different distances traveled. They were calculated with information provided by companies contracting transportation services.

The line with the lowest slope is the one with the lowest prices. It encompasses companies whose policy is to use freelancers in part or all of the transactions carried out. In turn, the steepest line was calculated with the parameters of companies that do not use self-employed people to transport their loads.

Figure 4 – Freight rates x hiring characteristics (Cart – dry cargo – one delivery per trip)

The choice of carrier profile to be used depends on each company. These choices can impact service levels provided and costs. It is the role of managers to define the desired efficiency parameters and calculate the total costs of each carrier profile. It is worth mentioning that the total costs are not just the prices paid for freight, as the costs of managing contracted service providers must also be included. In general, companies that work with spot hires and self-employed carriers reduce freight prices and increase management costs.

It is also necessary to evaluate opportunities for better use of vehicles in each profile used, actions that in the medium term may reduce total road transport costs.
CONCLUSION

Road freight is an important component of the logistics costs of industrial companies. The executives responsible for transport management must regularly monitor both the prices paid for freight and the costs charged by service providers. It is also up to such managers to identify restructuring opportunities that increase efficiency and reduce total cost.

As prices are dictated by the market, it is necessary for managers to keep themselves informed about trends in the segment, comparing the prices paid with those of other companies that hire the same transport profile. It is worth mentioning that the opportunities for cost reduction in transport are not only in the control of freight prices, but in better management of the use of assets and services, even if the transport operation is outsourced.

At the same time that managers have the challenge of not paying more than the market practice, they must also guarantee a minimum standard of quality and safety in transport.

In turn, it is the government's role to provide the necessary infrastructure to guarantee the supply of transport in all modes, allowing the sustainability of economic growth without impacting on the companies' logistical costs.
BIBLIOGRAPHY

CEL/COPPEAD. Logistic Overview – Road Cargo Transport Management – ​​Practices and Trends. Research Report, 2007.

FIGUEIREDO, KF; FLEURY, P. F; WANKE, PF Logistics and supply chain management: product flow and resource planning. São Paulo: Editora Atlas, 2003.
¹ Companies contracting road transport can participate in the CEL/Coppead Freight Panel, comparing their freight rates with those of the other companies participating in the group. More information on the website: www.ilos.com.br

² Each company has its specificities, so that the reference tariff may vary depending on the parameters of each one of them. CEL has developed an automated tool that makes it possible to change the costs of the carriers used to calculate the theoretical reference freight rates. Thus, it is possible to adapt the parameters to the profile of each company. In this article, some of the typical parameters of transport companies operating in the Brazilian market were used.