European road freight capacity tightens

Road freight capacity indexes measured the first decrease in European capacity for 19 months in January, which also meant that the 14-month long trend of falling spot rates has been reversed.

Surge in road freight demand in Q4 2023

The fourth quarter of 2023 saw 18% more freight offered for road transport than during the same quarter of the previous year, largely due to replenishing inventories and increased consumer activity in the lead up to the holidays.

The TIMOCOM transport barometer showed a clear increase in the ratio of freight to vehicle space, due to many carriers reducing their availability and that trend carried into the New Year, with the European road freight capacity index decreasing by just over 2% year-on-year in January 2024 – the first fall for 19 months.

Declining freight offers and normalizing capacity

With freight offers dropping by 31% across Europe in 2023, the rate of capacity increases has been falling gradually since last March, suggesting a reduced capacity surplus and that the capacity situation in the European road freight is finally normalising. Compared to December 2023 capacity in January 2024 has increased by 1.3%, resulting in a small increase of the spot rate index. Since July 2023 there has been a slow but steady recovery in spot prices, with HGV costs rising up to 10% over the previous year, but still lower than peak prices in 2021.

Rising costs impact carrier availability

Rises in salary and energy costs is the main driver, with carriers reducing the number of trucks they offered for transporting freight in the fourth quarter of 2023 by 15.3%, compared to the same quarter last year. Road transport associations have been vocal that prices will have to rise significantly in 2024, with some estimates assuming a rise of up to 12%, driven in particular by rising toll prices in Germany.

Outlook: Stabilizing demand and supply in 2024

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. Moving forward, we should see further normalisation in the European road freight market with a more balanced demand and supply environment.