According to the latest report of analysts from Transport Intelligence and Supply, the European road freight rates further decreased in the first quarter of 2023. It is the second quarter in a row when the rates keep decreasing after the lasting growth period.
In the first three month of 2023, the spot index fell to 132.5 points compared to 142.1 points in the last quarter of 2022. The contract index decreased to 127.2 points; in the last quarter of 2022 it was equal to 130 points.
Despite the decrease in the past two quarters, the spot and contract indexes were significantly higher than the same indicators in the corresponding period of 2022.
Reduced transportation demand connected with decrease in consumers demand due to high inflation in most European countries contributed to the decrease in rates.
The additional factor affecting the decrease in transportation rates was fall in fuel prices: in the first quarter of 2023 they fell on average by 9% compared to the same period of last year.
Rates in Poland–Germany
In the first quarter, all rates on the route between Warsaw and Duisburg (Germany) were decreasing. On the route to Duisburg, the contract rates were 2.4% lower than in the previous quarter (and amounted in average to 1,496 Euro or 1.38 Euro per kilometer). The spot rates decreased more dramatically – by 6.6% to 1,680 Euro (1.56 Euro per kilometer). It should be noted that the contract rates increased by more than 24%, and spot rates increased by 16% compared to last year.
Back to Warsaw, the contract rates decreased by 2.1% to 1,184 Euro (1.09 Euro per kilometer) compared to the fourth quarter of 2022. On the spot market, the freighters demanded in average 8% less – 1,367 Euro (1.26 Euro per kilometer).
The analysts from TI report that the decrease in average spot market rates on the route to Poland (by 8.3%) was twice as high than the average decrease in Europe, which is caused by consumption decline in the country.
Rates in France-Germany
From Duisburg to Lille, the contract rates fell by 6.5% on a quarterly basis to 704 Euro (2.33 Euro per kilometer), and the spot rates – by 9.6% to 755 Euro (2.5 Euro per kilometer). In the opposite direction, the contract rates fell by 2.3% to 499 Euro (1.65 Euro per kilometer). It is interesting that the spot rates on this route increased by 1.9% to 577 Euro (1.91 Euro per kilometer).
Rates in France-Spain and Italy
The route between France and Spain was one of the few where the contact rates increased. It is connected to the growth of agricultural production in Spain. After several years of poor yield on the Iberian Peninsula, the French importers strive to ensure the supply of food products from Spain.
On the route between Paris and Madrid, in the direction to Spain, the contract rates grew by 12.5%, at the same time the spot ones decreased by 1.5%. On the route to the capital of France, the contract rates grew by 4.1%, and prices on the spot market fell by 4.3%.
The same situation can be observed in Italy as well. The best yield of 2023 led to an increase in the contact rates on export routes from this country in contrast to most European routes.
Rate Decrease Continues
The report authors state that the decline in production volumes and increase in available transportation capacity means that the downward trend in rates is likely to continue in 2023. Nonetheless, they will remain high compared to the historic levels due to high expenses. It will constrain the decrease in rates.
One other factor mitigating the decline in rates will be increasing wage pressure. The rates are not likely to fall to historically low levels, despite the significant decline in consumption and transportation demand.