Road freight rates to soften in 2023; demand expected to weaken: IRU

Cost pressure is also easing slightly compared to the extreme conditions in 2022, IRU noted.

The Upply X Ti X IRU European road freight rates index for Europe shows that spot rates fell by 2.4 index points in the fourth quarter (Q4) last year over the Q3 figure. This represents the first fall in the spot index since Q1 2020, but spot rates still remain up by 18.1 points over the Q4 2021 figure, according to the Geneva-based IRU.

Meanwhile, the contract rates index rose by 0.4 points quarter on quarter in Q4 last year and contract rates are now up by 19 points year on year.

The drop in European spot rates results from low peak season demand due to inflation, pushing consumer confidence down to record low levels while European inventory levels remain high, IRU said in a release.

Euro area inflation peaked at 10.6 per cent in October last year and Euro area consumer confidence reached a historic low of 95.1 points in September with negligible improvement throughout Q4 2022.

Spot rates often lead development in contract rates, so the fall in the index, along with clear indicators of lower demand for road freight services in the short term, suggest that contract prices will eventually begin to fall too, IRU noted.

However, any fall in freight rates over the next few months is likely to be moderated by supply side pressure causing road freight operating costs to remain high, even as this supply side pressure begins to unwind, IRU added.

New data from IRU shows that driver shortages across Europe actually eased marginally in December 2022, although the number of unfilled positions remained high at between 380,000-425,000—about 10 per cent of all driver positions.

Freight rates are expected to continue to soften in 2023 but will remain elevated in comparison to historic norms as supply side pressure keeps costs high.

ALCHEMPro News Desk (DS)