The analysis shows that transport costs are not decreasing, but demand is slowly increasing as the economy begins to recover. Toll increases in other nations are also a factor.
According to a quarterly study conducted by IRU & Transport Intelligence, both the spot rates and contract rates index declined in the first quarter 2024. The spot rates index for Europe dropped to 123.9 points. This is 1.1 points less than the previous quarter and 8.2 points less than the same period last year.
In terms of contract rates, this index was also lower during the first quarter of the year compared to previous periods. It scored 127.6 which was 2.6 lower than the last quarter of 2023, and 1 point less than exactly one year ago.
The latest IRU analysis highlights that despite continuing declines, they have clearly slowed down. This could indicate a rise in demand for transport services. Rates could then normalize in the second half of this year or even more towards the end.
According to IRU analysts, McKinsey’s data shows that in March, the inflation rate in Europe was at its lowest level in 33 months and consumer sentiment has finally improved after a long decline.
While the situation in France and Germany, the two largest economies of the Eurozone, is far from ideal at the moment, many countries in the eurozone are slowly recovering from the slowdown. In Spain and the Netherlands, the PMI index indicating industrial activity is positive. In France and Germany, the PMI index showed a significant improvement during May, signaling the awakening of manufacturing in these countries.
Transport Intelligence experts predict that the volume of European road transport in 2024 will increase by 0.4% per year. This is still a significant improvement over the 1.1% decline in 2023. This slight rebound will be the result of a decline in prices, an increase in real income, and the previously mentioned improvement in consumer sentiment.
Transport services are in demand as a result of increased consumption. This leads to an increase of rates.
Calendar of Price Increases
The second factor which should increase rates is the increase of tolls in countries other than Germany due to the inclusion in these road tolls of additional environmental fees. In Germany, a series price increases were introduced by the EU in December last year. The “tax” on emission has increased road tolls by over 80% in this country. Austria, the Czech Republic and Hungary also added environmental fees to their tolls. The increase in road transport costs in these countries was not as dramatic as in Germany but still higher.
In Hungary, the road tolls have increased by 7%. In the Czech Republic, they’ve increased by 13%. Around Lake Balaton, they’ve increased by 40%.
IRU experts write that road toll increases are a financial burden for carriers who already face high operating costs. This affects the overall freight rate.
Sweden added environmental fees to its tolls in May. Denmark will follow next. In 2026, the Netherlands, Romania, and Belgium will join them. Polish carriers that operate on international routes are sure to see price increases in Benelux. Our truckers are responsible for a large share of the transport from these ports. They also have a significant share in the cross-trade transport between Germany, France, Belgium and The Netherlands.
Costs refuses to decrease
Also, it is important to note the very high operating costs. These costs dampened the rate decline despite low demand. As demand slowly increases, costs will increase the price of transport services.
This is particularly true, as the costs of operating a business in Europe do not decrease. Fuel prices, which were predicted to drop in 2023, have started to rise this year. In Europe, the average retail price at the end Q1 was 3% more than it was at the start of the year. Fuel accounts for about 50% of carrier costs. It is therefore expected that spot rates will increase in the next quarters.
Contract rates may also experience slight declines. This would be due to the relatively low level demand expected for the next year. Analysts assume that shippers won’t feel the need to reserve large volumes for the coming quarters.