Logistics Update: Volatile Freight Rates in Q4 2024
Logistics markets have for the larger part of 2024 seen a series of different challenges, affecting freight rates and capacity. Depending on the transportation form and route, freight rates are either quite high, volatile or both, making it hard for businesses to plan into the future.
In Q4 2024, the global transport sector demonstrated significant developments, particularly in terms of freight price dynamics across different modes of transportation. In the following is an overview of the changes in freight price index for road transport, ocean, and air freight from a European/Danish perspective.
The development described here can also be found through DI Trades Logistics Barometer, which tracks freight rates and capacity developments across air, road and ocean for a range of major transportation hubs and routes.
Logistics Barometer
Are you interested in monitoring capacity and price indicators for selected major freight routes?
As a member of DI Handel, you can access the interactive logistics dashboard right here: Logistics Barometer
Road Transport: Increasing freights rates spiked by surging fuel prices and increased demand for last-mile delivery
During the last quarter of 2024, road transport experienced a moderate increase in freight prices. Several factors have contributed to this trend, including rising fuel costs and increased demand for last-mile delivery services driven by the growing e-commerce sector.
Additionally, the implementation of new regulatory measures aimed at reducing carbon emissions has led to higher operational costs, which have been passed on to the shippers.
Despite these increases, the road transport market remains competitive, with significant investments in electric and hybrid vehicles, aiming to mitigate future cost increases and environmental impact.
DI Trades (DI Handel) Logistics Barometer shows an increase in spot freight rates of 9.95% for week 48 2024 compared to the same period last year, for an average of selected major routes in Europe.
This means that prices are now at index 132 (index 100 = 2019) and are thus still at a quite high price level, compared to the period before covid. On a weekly basis, prices depict a volatile behavior.
Ocean Transport: freight rates remain volatile
As for road transportation, ocean freight rates have also seen a rather volatile behavior in the recent months. Where prices generally decreased throughout the beginning of October, this changed in November, where prices increased slightly.
Compared to the same period last year, there has also been a quite drastic increase in freight rates. According to DI Trades Logistics Barometer, freight rates across selected major routes are 92% higher for week 49 2024 compared to week 49 in 2023.
Freight rates have fluctuated due to a combination of factors, including global economic conditions, port congestion, and geopolitical tensions.
Early in the quarter, rates were relatively stable; however, towards the middle and end of the quarter, there was a notable surge in prices. This is primarily driven by increased demand in the pre-holiday season and ongoing disruptions in major ports.
Efforts to enhance port infrastructure and improve supply chain resilience have been ongoing, but the immediate impact on freight prices has been limited. European and Danish shippers have had to navigate these fluctuations carefully, balancing cost-efficiency with supply chain reliability.
Air Freight: high demand and capacity constraints have put an upward pressure on prices
Air freight rates remained elevated throughout Q4 2024, continuing a trend observed earlier in the year.
The demand for air cargo capacity has been robust, driven by the need for expedited shipments of high-value and time-sensitive goods. Additionally, the limited capacity in the air freight market, exacerbated by ongoing challenges in passenger travel recovery and reduced bellyhold cargo space, has put upward pressure on rates.
The increased use of dedicated freighter aircraft has somewhat alleviated capacity constraints, but the costs associated with air freight have remained high.
DI Trades Logistics Barometer shows that for selected major routes, air cargo freight rates have seen a generally increasing trend throughout 2024. Prices for November 2024 are 5.4% higher compared to the same period last year and 5.9% higher than in October 2024.
European and Danish businesses relying on air transport have faced significant cost pressures, prompting some to explore alternative shipping methods where feasible.
To summarize, Q4 2024 has been a period with varying freight price developments across different transport modes.
Road transport has seen moderate price increases, ocean transport has experienced volatility with a notable surge towards the end of the quarter, and air freight has maintained high rates due to strong demand and capacity constraints.
These trends highlight the importance for European and Danish businesses to remain agile and adaptive in their logistics strategies to manage costs and maintain supply chain efficiency in a dynamic global transport environment.
Future readiness – how do you as a business prepare for future fluctuations in freight rates?
DI Trade has assembled a checklist with 10 tips, that companies can use the be more prepared for the future: 10 Tips - How to Deal with Volatile Freight Rates - DI Handel
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