The Capacity Index in May 2024 was 94.67. A reading under 100 indicates a capacity constrained environment. The Capacity Index has been over 100 since November 2022, suggesting that capacity availability has not been an issue over the past year. However, the rate of capacity increases has been falling gradually since March 2023, suggesting a reduced capacity surplus and that the capacity situation in the European road freight is normalising.
Compared to the previous month (May 2024), capacity in June 2024 has increased marginally by 1.5%. This signals a slight drop in demand, as evidenced by the reading of 96.10.
I In June 2024, the Spot Price Index slid by -1.7% from May 2024 to 132.16. However, compared to the same period in the previous year, the Spot Price Index rose by 12.6%. On the other hand, the Contract Price Index showcased a modest growth of 0.4% from the previous month to 125.87 in June 2024 and a 4.0% growth from the previous year.
In June 2024, the Eurozone’s Purchasing Managers’ Index showed a further contraction in the manufacturing activity across the bloc from 47.3 in May 2024 to 45.8 in June 2024, while the new orders index dropped to 44.4 in June 2024 from 47.3 in May 2024. Intriguingly, input costs increased on the pricing front for the first time since February 2023, causing manufacturers in the eurozone to lower their discounts. For instance, according to sources, steel beam prices moved upwards in June 2024 due to rising production costs and increased offers from major mills in the eurozone. Sources also suggest that steel manufacturers were concerned with lacklustre demand which led to a comparable pricing situation between steel beam stock and freshly rolled steel.
A spike in fuel prices, driver wages, tolls, and electricity rates contributed significantly to the increased operational costs for hauliers in the EU. So much so, the cost of electricity was one of the topics at the meeting of the Spanish Union of Steel Companies (Unesid) recently. The Association long cautioned the authorities to Spain’s high energy costs associated with steel production.
Overall, low demand continues to push spot rates down; however, the magnitude of spot rate declines appears to be decreasing. This may indicate a less negative demand environment that could lead to rate normalization. On the supply-side, operating costs such as vehicle maintenance, insurance and tire costs, remain elevated compared to previous years, keeping cost high.
Author: Shruti Sasidharan
Source: Ti Insight
