Peak Shipping Season Is Fizzling Out for Freight Companies
Freight operators are bracing for a weak peak shipping season this fall, as they hold down costs during the period when companies usually start rushing goods through supply chains ahead of the holidays in the second half of the year.
“There’s no peak season to be expected in 2023,” said Stefan Paul, chief executive of Switzerland-based Kuehne + Nagel International, the world’s largest freight forwarder by revenue.
“There are no signals, neither on air or sea, at least not for the time being. So we have to be very cautious on that,” Paul said in an earnings conference call on
Freight businesses—from forwarders like Kuehne + Nagel, that operate as middlemen, to ocean container lines and airfreight companies—count on the seasonal upturn that traditionally begins in midsummer for a surge in volumes and earnings. Manufacturers and retailers usually begin lining up orders during the period as they prepare to stock store shelves for sales starting with the back-to-school period and culminating with Christmas and end-of-year holidays.
Kuehne + Nagel’s net turnover, or revenue that strips out direct transportation costs, fell 43% in the three months ended June 30 compared with the second quarter a year ago, to about $6.91 billion (reported as 5.97 billion Swiss francs), the company said Tuesday. Operating profit fell by more than half, to about $605 million (reported as 523 million Swiss francs), led by a sharp decline in ocean and airfreight demand.The company said it cut its unit costs by 14% from the first quarter to the second quarter.“What we do is we adapt our cost base towards the volumes and the market conditions,” Chief Financial Officer Markus Blanka-Graff said on the earnings call.Second-quarter revenue at rival forwarder DSV fell 40% from the year-ago period on lower volumes in its Air & Sea division, and operating earnings declined nearly 40% to about $697 million (reported as 4.71 billion Danish krone). Denmark-based DSV said it has been cutting costs over the past year and reduced full-time equivalent positions in its workforce by 1,900 during the quarter, part of a broader cutback in logistics employment this year.DSV raised its earnings outlook slightly, however, on what it said is an expected gradual recovery in global trade volumes and “no significant worsening” in economic conditions in the second half of the year.DSV CEO Jens Bjørn Andersen said expectations for ocean shipping volumes remain low over the near term but that airfreight business could pick up if consumer demand rises closer to the holidays. “I just wish we had really valid and strong statistics that we could point to when it comes to inventory levels,” he said on an earnings call.He said that so far there is little sign in shipping volumes that the freight market is rebounding, however. “It’s July, it’s always depressing,” said Andersen.
