The increase in available capacity makes European road transport cheaper

Currently, there is significantly more road transport capacity available on the European market than a year before, reflecting subdued economic development. The capacity index increased by 22.7% in March 2023 compared to March 2022, according to the latest data by Transporeon.

Compared to the previous quarter, road transport capacity increased by 10.2% in Q1 2023. Available road freight capacity on the European market decreased only slightly by 0.1% compared to the previous month. The slight month-on-month increase is most likely due to seasonality, as the weeks around Easter are typically characterized by an increase in volumes.

Some smaller road freight operators have started experiencing financial difficulties due to rising operational costs and falling spot market rates, with some of them being acquired by larger road freight companies. Some of the most recent examples include Rhenus Logistics’ takeover of the Croatian Trans Integral and the Dutsch Nederlandse Transport Maatschappij as well as Geodis’ acquisition of the French Transports DEVOLUY.

In view of the high increase in capacity, transport prices continue to fall, particularly on the spot side. The rising available capacity leads to increased competition between road freight operators which in turn causes a significant drop in spot rates. Spot rates dropped by 18.2% in March 2023 compared to the year before but remained flat compared to the previous month, according to Transporeon’s price index. In Q1 2023, spot rates decreased by 11.8% year-on-year and are down by 13.4% compared to Q4 2022.

In March 2023, contract rates decreased by 0.4% compared to February 2023; but are showing an incremental pattern when compared to the previous year – contract rates are 7.5% higher compared to February 2022 despite more capacity on the market. In Q1 2023, contract rates increased by 9.6% year-on-year and decreased by 0.5% compared to Q4 2022.

The spot rate index has been below the contract rate index for three 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.

Overall, it appears that in 2023, shippers are navigating a more favourable freight environment as last year ended with high available capacity and falling contract and spot rates. The level of procurement activity will be high during Q1 and Q2 of 2023 as shippers re-evaluate their carrier and cost base due to significant market changes and subdued economic environment.

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