Road Freight Service Price

IBISWorld forecasts the road freight service price to fall by 5.7% in 2024-25, to 133.5 index points. The most significant determinant of the road freight service price is retail diesel prices. The price of retail diesel is highly correlated with the world price of crude oil, which surged following the Russia-Ukraine conflict and the pandemic-induced supply chain disruptions. Fuel prices are trending downward, as global supply chains rebuild capacity and the price shocks caused by the Russia-Ukraine conflict are easing, which is flowing through to lower fuel prices in New Zealand. Furthermore, inflationary pressure is on the way down, which is expected to further ease overall costs for freight operators, allowing the road freight service price to fall further over the year.

Demand for road freight is largely price inelastic as the industry faces minimal competition from substitute transport operators, particularly for the final stage of delivery direct to the recipient. New Zealand’s rail transport network generally operates at full capacity, which limits external competition for the road transport industry. As a result, road freight operators are generally able to raise prices during periods of increased demand, or due to inflationary pressures. In the early stages of the COVID-19 pandemic, the national Alert Level 4 restrictions, and the sharp decrease in the world price of crude oil resulted in temporary declines in retail diesel prices. However, a strong recovery in global demand, coupled with disruptions to global supply chains caused primarily by the Russia-Ukraine conflict, led to an unprecedented surge in inflation in 2021-22 and 2022-23. This trend has contributed to a surge in retail diesel prices and the domestic road freight service price. Although prices are easing, they are unlikely to fall below pre-pandemic levels in the short term. Consequently, IBISWorld forecasts the road freight service price index will rise at a compound annual rate of 1.8% over the five years through 2024-25.