Available road freight capacity on the European market continues to rise, accompanied by a further decline in rates, according to the latest data by Transporeon.
The trend of rising road freight capacity in the European market seems to have stabilised as the industry continues to be faced with a sluggish economy alongside seasonal lows. Available capacity in the European market has been on an upward path since May 2022, according to Transporeon’s capacity index.
Source: Transporeon
Compared to the previous month, road transport capacity increased by 6.3% in February 2023. Large capacity index increases between Q4 and Q1 are a regular pattern in the index. However, the capacity index increased by 19.0% year-on-year, which doesn’t match historical patterns and points to an untypical scenario, mainly due to lower market volumes. While more balance in capacity is certainly good news for shippers, it is worrying that available transport capacity saw a two-digit growth in February.
Due to the continued and gradual increase in capacity since the middle of the year, spot prices are falling. More specifically, according to Transporeon’s data, the spot price index decreased by 7.5% in February 2023 over January, and by 10.6% compared to the previous year. The spot price index has been on a downward trend since August 2022.
A similar trend is to be seen on the contract side – the contract price index has been falling since September 2022, although the decrease has been more moderate and less volatile than the spot price index, with the rate of decrease ranging between -0.2% and -0.5%. However, year-on-year, the contract price index has increased by 10.4%. This shows that for shippers it is better to diversify their rate strategy and optimise their freight procurement by selecting different contract types so they can take advantage of the lower prices in the spot market with the ultimate goal of achieving cost reductions.
The exciting question now is how strongly the Easter business will affect capacity and price levels and how the Easter period will affect the relationship between supply and demand in the European road freight market. The Easter business will also show whether this shift to a more balanced capacity is here for the long-term. Assuming capacity continues to increase along with the economic downturn, the effect thereof will be a sustained downward pressure on spot rates.
Transporeon’s Capacity Index is available on GSCi – Ti’s online data platform. Supply chain strategists can use GSCi – Ti’s online data platform – to identify opportunities for growth, support strategic decisions, help them stay abreast of industry trends and development, as well as understand future impacts on the industry.
Visit GSCI subscription to sign up today or contact:
Michael Clover for a free demonstration: [email protected] | +44 (0) 1666 519907
