The European road freight capacity index increased by 16.2% in July 2023 compared to July 2022, according to the latest data by Transporeon. The latest figure marks the 13th consecutive month of year-on-year increase. The data reflects the stagnating transport demand in the European road freight market. In addition to the ongoing weakness in transport demand, the increase in available capacity in the summer months is also due to the traditional cool-down in the summer months when volumes drop and additional capacity typically opens up as a result.
As expected, the weakened demand development had a dampening effect on rates. Transport prices in the spot market have been on a downward trend since November 2022. Spot rates have fallen by 17.4% in July 2023 compared to the year before.
Unlike spot rates, contract rates are still holding up. Contract rates have been on a downward trend since September 2022 but were still higher than 2022 levels up until June 2023, when they experienced a 0.7% drop compared to the previous year. Contract rates continued to fall in July, dropping by 1.9% compared to the year before. The delayed fall we are seeing on the contract side probably has to do with the fact that rates take longer to materialise due to freight procurement cycles. As a result, we should expect further declines on the contract side in the months ahead.
The spot rate index has been below the contract rate index for seven months now. In January 2023, the spot rate index fell below the contract rate index for the first time since January 2021, signalling real volume decline.
The financial results of the European road freight companies reflect the volume decline in the market. For instance, DB Schenker’s Land Transport volumes in the first half of 2023 dropped 5.3% compared to H1 2022, and 6.7% compared to H1 2019. The forwarders names uncertainties regarding economic development, inflation and the effects of the war in Ukraine as the main drivers of the drop.
Overall, the road freight market continues to be characterized by a stagnating transport demand coupled with falling spot rates and increasing capacity. Smaller road freight operators that struggle to pass on the cost pressure to the freight forwarders are forced to exit the market, with the driver shortage making the problem even worse. The EU Mobility Package has also led to uncertainties to rising costs among road freight operators.
Transporeon’s capacity and freight rate data is available on GSCi – Ti’s online data platform. Supply chain strategists can use GSCi 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.
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