From April to June 2024, the contract rates index decreased by 1.3 points quarter-on-quarter to 127.1 points, according to the latest report by analysts from Transport Intelligence. In contrast, the spot rate index increased by 3.5 points during the same period, reaching 127.7 points. Compared to the second quarter of 2023, the current contract index is 0.7 points lower, while the spot index is 0.8 points higher than last year.
There has been a significant change over the last quarter. Even between January and March of this year, the contract index was higher than the spot index, though the gap was narrowing. This shift follows several quarters of consistent declines in spot rates across Europe, which was particularly noticeable in the last months of 2023.
A slight improvement in the economic situation in Europe, although currently limited to some countries (Spain, Benelux countries), and an improvement in consumer demand, has resulted in a rise in spot rates. Conversely, the still weak level of production in Europe and slightly weaker increases in carrier costs have led to a slight decline in contract rates.
However, it is important to remember that cost levels are still historically very high. For example, vehicle maintenance costs are 15 percent higher than in 2021, and labor costs are on average 7 percent higher in Europe than last year.
Additionally, despite recent stable fuel prices, there is a fear that they will rise in the near future. The US Energy Information Administration (EIA) forecasts that the price of a barrel of oil may increase to USD 89 in the second half of 2024 from USD 84 in the first half of the year. Moreover, in the first quarter of 2025, the price may reach USD 91. This will translate into a corresponding increase in fuel prices.
Contracts hold on Poland-Germany routes
An interesting phenomenon occurred on the route to Germany, the most important from the perspective of the Polish economy and the transport sector. Contract rates increased, contrary to the pan-European trend.
On the route from Warsaw to Duisburg, contract prices rose by 2 percent quarter-on-quarter to EUR 1,542 (EUR 1.43 per km). Year-on-year, it was practically the same level. However, the spot rate increased much more, reaching EUR 1,716 (EUR 1.59/km), up by 1.3 percent quarterly and 6 percent annually.
In the opposite direction, the increases were more pronounced. The contract rate for Warsaw increased by 1.3 percent quarterly and 1.4 percent year-on-year to EUR 1,192 (EUR 1.10/km). However, the average spot price of EUR 1,511 (EUR 1.39/km) grew by 10.6 percent during the quarter.
Examining these numbers, on the route to Germany, the difference between spot and contract rates is 11.3 percent in favor of the former. In the opposite direction, the last quarter brought a significant increase, making the spot rate nearly 27 percent higher than the contract rate.
TI experts expect further increases in spot rates in both directions in the coming months. Regarding contract rates, the poor performance of German industry will drag them down. Many Polish sub-suppliers depend on what is happening in the manufacturing sector in Germany. On the other hand, the rising and high operating costs of Polish carriers dominating this route will partially neutralize the decline in contract rates.
Reshuffle on France-Germany routes
On another important route, connecting the two largest EU economies, there are visible declines in contract rates and an increase in spot rates. From Duisburg to Lille, the contract transport price was EUR 682 (EUR 2.26/km), down 1.4 percent quarterly and 1.2 percent annually. The spot price increased by 6.7 percent quarter-on-quarter to EUR 732 (EUR 2.42/km), although year-on-year it is still 0.5 percent lower.
Currently, the spot price is 7 percent higher than the contract price, even though in the first quarter of 2024 it was almost 1 percent lower. In the opposite direction to Duisburg, the contract price was EUR 470 (EUR 1.56/km), down 2.3 percent quarterly and 5.6 percent annually. Surprisingly, the spot price dropped by 0.5 percent quarterly to EUR 548 (EUR 1.81/km), but remained 4.3 percent higher than the year before. Spot rates are now over 16 percent higher than contract rates.
Experts expect the difference between contract and spot rates to increase in subsequent quarters. Improved consumer sentiment favors growth in the spot market, while low industrial production and reduced demand from large producers are dragging contract rates down.
Contract rates hold steady on routes to Spain
The third route traditionally analyzed by Transport Intelligence is Madrid-Paris. On the route to the French capital, contract rates decreased by 1.7 percent quarter-on-quarter and 4.9 percent annually. Meanwhile, the spot market witnessed growth of 4.2 percent quarterly and 8 percent annually.
In the opposite direction to Madrid, an interesting situation has arisen with an increase in contract rates by 4 percent compared to the previous quarter and 10.8 percent annually. The spot index grew more modestly quarterly, by only 1.4 percent, but stronger year-on-year, by 18.8 percent.
On the route to Paris, spot prices are 3.7 percent higher than contract prices, up from 2.2 percent in the previous quarter. The difference to Madrid is larger (8.1 percent), but it has shrunk from 11 percent in the first quarter of 2024.
The relatively good condition of the contract sector is due to the strong performance of the Spanish economy, which is one of the best-performing in Europe. Spanish industry is doing particularly well, as regularly reflected in PMI index readings.
More expensive imports to Europe
Experts from Transport Intelligence also conducted an interesting analysis of import and export rates to and from ports in Rotterdam and Antwerp.
For exports from these ports, the spot rate index increased by 1.9 points quarterly but is lower by 0.9 points year-on-year, standing at 119.9 points. In contrast, the contract rate index saw a stronger quarterly decline of 5.3 points (also down 0.9 points annually) to 132.5 points.
However, in the case of imports, both indices increased both quarterly and year-on-year. The spot rates index recorded stronger increases, rising by 5.2 points quarterly and 2.7 points year-on-year compared to 0.2 points quarterly and 2.5 points annually for contract rates.
This indicates that imports to Europe are increasing slightly due to rising consumer spending. In contrast, exports are developing more slowly due to the low level of industrial activity on the continent, particularly in the most important industrial regions. Therefore, we can expect a further increase in import rates and a decrease in export rates.
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