A decrease in capacity raises spot market rates

Lorry on motorway in motion

The European road freight capacity index decreased by -2.2% year-on-year in January 2024 for the first time in 19 months, according to the latest data by Transporeon.

The Capacity Index in January 2024 was 103.21. A reading under 100 indicates a capacity constrained environment. The Capacity Index has been over 100 since November 2022, suggesting that capacity availability has not been an issue over the past year. However, the rate of capacity increases has been falling gradually since March 2023, suggesting a reduced capacity surplus and that the capacity situation in the European road freight is normalising.

Compared to the previous month (December 2023), capacity in January 2024 has increased by 1.3%.

The small capacity decrease in January has resulted in a small increase of the spot and contract rate index. Since July 2023 we have seen a slow but steady recovery in spot prices. On the contract side, this trend of a slow recovery of prices has been evident since September 2023. For carriers, this pricing development offers hope of a gradual normalization.

On the spot market, the 14-month long trend of falling spot rates has been reversed. The Spot Price Index, which tracks the spot rates across Europe, reached 120.05 in January 2024, a year-on-year 2.5% increase, and a 5.7% decrease compared to December 2023. The month-on-month price decrease fits the pattern of the price index in previous years.

The Contract Price Index reached 122.77 in January 2024, a 0.3% increase compared to the previous year.

The spot rate index is still below the contract rate index, signalling real volume decline. However, the difference between the spot and contract rates has dropped since August 2023, suggesting a more balanced environment from a supply-and-demand perspective.

Moving forward, we should see further normalization in the European road freight market with a more balanced demand and supply environment. Lack of capacity is not expected in the medium-term due to the weak prospects of the European economy, although the Easter business might cause a further reduction of the capacity surplus.

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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