The Upply x Ti x IRU European road freight rates index has found that Q3 rates remained flat in the contract index quarter on quarter (q-o-q). In contrast, the spot rate index fell by 4.4 points q-o-q. Overall, both the spot and contract rate indexes have fallen year on year (y-o-y).
- The Q3 2024 European Road Freight Spot Rate Benchmark Index has fallen to 122.4 points, 4.4 points lower than in Q2 2024, and 6.1 points down y-o-y.
- The Q3 2024 European Road Freight Contract Rate Benchmark Index has remained flat compared with Q2 at 127.2 index points; however, it is down 2.2 points y-o-y.
- Diesel prices fell in Q3. By 30 September, they were 8% lower than in the beginning of July. But they began to increase again in October.
- The implementation of Directive (EU) 2022/362 amending the Eurovignette Directive is still underway. Sweden, Denmark and the Netherlands have recently shared their implementation plans.
- In order to comply with the EU’s Mobility Package 1, only 6.4% of EU vehicles eligible for retrofitting with the Smart Tachograph Version 2 had done so by June 2024, 60% continued to have analogue and digital tachographs, and 33% still had the Smart Tachograph Version 1, according to IRU’s survey of transport operators.
- The outlook for freight rates continues to be subdued, as industrial output remains low and consumer demand is still relatively weak, despite high operating costs.
European production challenges have a direct impact on the road freight market. As manufacturing output declines, so does the demand for freight services, which has driven spot rates down since Q2 2023 (with a brief inflection point in Q2 2024). However, despite falling demand in the short term, freight rates remain well above 2021 levels, primarily due to structural increases in operational costs.
Labour costs, the biggest cost component along with fuel in road haulage, have risen sharply due to inflation over the past two years. Moreover, substantial increases in costs related to motor vehicle insurance, maintenance and tyres are contributing to higher operational expenses for freight operators.
Diesel prices increased between mid-June and early July, driven by rising crude oil prices (due to the extension of voluntary cuts announced by OPEC+ in June). They were on a downward trajectory until the end of the quarter.
The EU weighted average diesel price reached €1.64/L on 8 July, up from €1.59/L on 10 June (+3%), before falling to €1.50/L on 30 September (-8% fall since its peak in July, and the lowest value seen since January 2023). However, fuel prices started to rise again in October due to the conflict in the Middle East, raising the possibility of oil supply disruptions and further crude oil price increases.
These elevated costs continue to keep freight rates high, despite the downward pressure from lower demand. They’ve prevented rates from dropping to 2021 levels, as carriers must cover their rising expenses. Thus, while spot rates have softened, they remain significantly elevated compared to pre-pandemic times, as the underlying cost structure has shifted upward. Due to these elevated costs, Ti expects continual upwards pressure on rates in the future, even with softer demand conditions.
Ti Head of Commercial Development Michael Clover said, “Overall, European road freight rates were relatively stable through Q3, largely due to stubbornly low demand across Europe. The outlook for contract rates is still very much dependent on the timing of Europe’s economic recovery, but rates aren’t expected to fall with ongoing cost pressure. The fall in spot rates in Q3 is indicative of the weak demand situation, but we expect spot rates to be a leading indicator of demand recovery and upcoming rate growth as when the market changes.”
Upply Chief Executive Officer Thomas Larrieu commented, “The road freight transport sector is navigating a turbulent period, characterised by a significant number of business failures. Downward pressure on freight rates is likely to persist in the coming months, though it is constrained by high operating costs that continue to rise, as we await a potential recovery in the European economy. To prevent the sector from weakening further – which could disrupt supply chains, especially when economic activity picks up again – digitalisation offers productivity opportunities that deserve to be explored.”
As part of the EU’s Mobility Package 1, transport operators must retrofit all vehicles registered in the EU and intended for cross-border operations with the Smart Tachograph Version 2 (G2V2). The legal obligation is to replace all analogue and digital tachographs by 31 December 2024 and upgrade all vehicles used in international traffic with G2V2 devices by 19 August 2025.
However, there have been material delays impeding the retrofitting process. In March 2024, out of the 3 to 3.5 million vehicles to be retrofitted (including trucks and buses; 90% are estimated to be trucks), only 0.4% of EU vehicles were already retrofitted with a G2V2 tachograph, while around two thirds still had a G1 tachograph (due to be retrofitted by the end of the year), and one third a G2V1 (to be retrofitted by August 2025), based on IRU’s survey of transport operators. Three months later (in June), the share of vehicles retrofitted had increased to 6.4%, while there were still around 60% G1 vehicles and 33% G2V1 vehicles to be retrofitted.
IRU Senior Director for Strategy and Development Vincent Erard added, “With escalating operating costs from maintenance, insurance and new regulations (CO₂ standards, Euro VII, etc) and volatile fuel prices expected to increase with the implementation of ETS2, road transport SMEs are under significant pressure. Policymakers must provide targeted incentives that encourage operators to decarbonise, focusing, in particular, on efficiency measures. Such support would ease financial burdens and contribute to environmental sustainability.”
