European road carriers are facing a difficult start to 2024. The low level of demand, especially combined with the still-malfunctioning German "economic powerhouse", is weighing on freight rates, while costs remain high.
Content source : Upply - NB : Our price estimates are based on actual transactions. The index may therefore be subject to revisions as new data are incorporated into the Upply database.
The spot price index is once again below the contract price index, reflecting weak demand. However, price erosion in the spot market is starting to slow down. "This may indicate a less negative demand environment that could lead to rate normalization," says the Q1 2024 Ti/Upply/IRU report.
Inflation is continuing to fall. The rate of 2.4% in March in Europe was the lowest in 33 months. This trend could have positive effects on consumer confidence. In its spring forecast, the European Commission has also slightly raised its GDP growth forecast in the EU for 2024, now predicting an increase of 1.0% in Europe. The growth forecast for the euro area remains unchanged at 0.8%.
"However, signs of economic recovery are beginning to emerge, with prices already rising on some routes in April 2024. We expect the situation to improve gradually throughout the year," says Thomas Larrieu, Upply's Chief Executive Officer. "Costs are stubbornly high and we may well be moving into another challenging supply chain period, with indicators suggesting import volumes are recovering and supply chain bottlenecks, which have recently been masked by low volumes, becoming more acute again. That represents a bad combination for capacity which will filter into the road freight market over Q2 and Q3 and is likely to apply upward pressure to rates", adds Michael Clover, Head of Commercial Development at Ti.
Carriers face persistently higher operating costs. The choke-hold has loosened a little at the fuel pumps. However, after the uninterrupted declines observed during the 4th quarter of 2023, diesel prices have increased slightly since the beginning of the year, and states have now ended the aid measures that had been decided upon during the surge in diesel prices following the outbreak of the war in Ukraine. The average price of diesel at the pump in Europe was up 3% at the end of the first quarter of 2024 compared to the beginning of January 2024. In addition, the period of high inflation has created an upward pressure on salaries, reinforced by staff shortages, especially for driver positions. Therefore, on the two main cost items, namely personnel and fuel, road carriers have seen very significant increases compared to the pre-Covid and pre-conflict period.
In addition, costs for vehicle maintenance, insurance and tyres remain high compared to previous years, and a new factor is pushing up operating costs: the introduction in Europe of new tolls based on CO2 emissions. These changes resulted in toll increases of 7.4% (€0.033/km) in Austria, 40% (€0.158/km) in Hungary and 13% (€0.026/km) in the Czech Republic.
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