Photo: trans.iNFO

European road transport rates decline in Q1 2024 as interesting market trends emerge

The first quarter of 2024 witnessed a decline in both spot and contract freight rates in Europe. However, the route from Poland to Germany defied this trend, highlighting some notable market shifts.

You can read this article in 5 minutes

The European spot rates index dropped by 1.1 points and the contract rates index by 2.6 points compared to the final quarter of 2023. This decline is partly attributed to the introduction of higher road tolls in Germany.

At the close of the first quarter of 2024, the European spot rates index stood at 123.9 points. Despite a continual decline over several quarters, the decrease in rates has notably slowed at the start of the year. For context, the fourth quarter of the previous year saw a more significant drop of 4.5 points. By the end of March 2024, spot rates were 8.2 points lower year-on-year, a reduction from a 14-point year-on-year decrease at the end of 2023.

This moderated decline in contract rates may signal a gradual resurgence of demand and a potential stabilization of rate levels, according to analysts from Transport Intelligence (TI). They note that March saw the lowest inflation rate in Europe in 33 months, alongside a rise in industrial production and demand across several European nations. Despite this, major economies like Germany and France continue to experience economic slowdowns and subdued demand.

In the first quarter of 2024, the index for contract rates reached 127.6 points, down 2.6 points from the previous quarter, reversing a growth trend observed in the latter half of 2023. Year-over-year, the pan-European contract index is slightly lower by 1 point compared to the first quarter of 2023.

Despite these initial positive signals, carriers still contend with high operational costs. Diesel prices in Europe have decreased by approximately 9% in the first quarter compared to the highs of September, but remain 10% higher than pre-war levels in Ukraine. Ongoing tensions in the Middle East and the Red Sea also contribute to unstable raw material and fuel prices.

Additionally, several countries have begun implementing road toll increases, including environmental fees. Following significant toll hikes in Germany at the end of the previous year, 2024 saw smaller increases in Austria, the Czech Republic, and Hungary.

Focus on Poland-Germany Route

From Warsaw to Duisburg, the contract rate in the first quarter of 2024 was €1,508, up 5.5% from the previous quarter but down 3% year-over-year. The spot market also reflected this reversal of the downward trend, with rates increasing by 4.1% from the previous quarter to €1,657, though still 4% lower year-over-year.

Conversely, rates on the return route to Warsaw saw an increase. The average spot rate from Duisburg was €1,414, marking a 5.1% increase from the fourth quarter of 2023 and a slight annual decrease of 1%. Contract rates to Warsaw rose modestly by 1.1% from the previous quarter to €1,209, and were 0.5% lower than in Q1 2023.

TI analysts observed that spot rates in Q1 2024 were significantly higher than contract rates in both directions, influenced by slight increases in consumer demand and stable, higher road tolls in Germany.

Other Routes and Economic Influences

The route from Duisburg to Lille saw significant rate reductions, with contract rates dropping by 10.6% and spot rates by 6.6% from the previous quarter. The decline in freight rates between France and Germany is primarily due to falling fuel prices in Germany and the economic slowdown felt in both nations. The automotive sector, a significant component of trade between these two countries, saw a slight decline in exports from Germany, further impacting freight rates.

Looking ahead, while the broader economic context suggests no immediate rebound in Germany, TI analysts believe that slight increases in rates may occur as the situation improves. However, further declines in contract rates are possible as costs stabilize and economic performance remains weak.

Outlook for 2024

The International Road Transport Union (IRU) predicts a marginal increase of 0.4% in the volume transported on European roads in 2024, following a decline of over 1% in 2023. TI projects a 1% annual growth in the value of the European road transport market. These are positive signs, albeit not indicative of a significant market rebound that would substantially drive rates upward.

For shippers, contract rates may continue to see slight declines due to low demand expectations over the next year, but high operational costs will likely prevent significant drops. The market outlook remains cautious, with potential for modest improvements as demand stabilizes.