Nov 07 2023
European freight rates Q3 2023: Contract rates rally as spot rates continue to fall
The Upply x Ti x IRU European road freight rates index shows that the spot rates index moved further below the contract rates index in Q3 2023. The spot index fell for the fourth consecutive quarter, while the contract spot index climbed for the first time since Q4 2022.
Q3 2023 sees the spot index move further below the contract index. This now means spot rates are closer to their base level (2017 Q1) than contract rates. The spot market index dropped for the fourth consecutive quarter, down 1.2 points to 125.4, now putting it down 14.8 points year on year (Y-o-Y). The speed of decline in spot rates has slowed by more than a third as spot rates begin to settle in response to demand settling at a lower level.
The contract market rate has edged upwards 1.4 points quarter on quarter (Q-o-Q) and sits down just -0.4 points Y-o-Y. The Q3 2023 contract rate change is the first increase in the index since Q4 2022 as cost pressures compound.
The Q3 2023 European Road Freight Spot Rate Benchmark Index stood at 125.4, 1.2 points lower than in Q2 2023 and 14.8 points down y-o-y.
The Q3 2023 European Road Freight Contract Rate Benchmark Index stood at 128.1, 1.4 points higher than in Q2 2023 and now just 0.4 points down on Q3 2022.
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Freight rates are expected to remain subdued with a slight seasonal uptick in Q4, but rates are expected to stabilise in 2024, as European demand recovers and higher costs kick in.
Short-term demand-side pressure on road freight continues to fall across the continent. Consumers who now have less disposable income in real terms are consuming fewer goods, while businesses are reducing their output in the face of declining demand. Available Q3 2023 Eurostat data shows no change Q-o-Q in European retail trade but a 3.6-point fall in manufacturing. As a result, total demand-side pressure for road freight continues to fall, freeing up capacity and allowing rates to slide further.
The rate of decline in the spot price has slowed due to abated inflation, which fell to 4.3% in September 2023, down from a peak of 10.6% in October 2022. The result is smaller falls in the demand for goods, thus reducing the weight of downward pull-on prices, suggesting some spot prices may begin to normalise.
Contract rates have been kept high by an elevated cost base, and cost increases continue to push rates up. Contract prices are less exposed to changes in short-term demand. However, should the European economy continue to stagnate at activity levels below previous years, we can expect this to add downward pressure to contract rates as renewal volumes decline. Read more
Source: IRU