Freight Companies are not Expecting a Robust Peak Shipping Season Come Fall 2023
For cargo carriers, the last quarter of the year is typically the strongest. Yet, the last quarter of 2022 was anything but with overstocked retailers canceling orders and carriers dialing back freight volume expectations. In early 2022 tight capacity and increasing shipping prices yielded significant profits to the larger logistics and transport sector. But consumer spending ended up shifting to services and retailers have been left with excess inventories.
This year, Switzerland-based Kuehne + Nagel International is not expecting a rosier panorama. Freight operators are already preparing for a weak shipping season come fall. Fall is usually the season when companies begin pushing goods through supply chains in preparation for the end-of-year holidays. Kuehne + Nagel operates ocean container lines, airfreight companies, as well as middlemen. In a good year, the midsummer surge is a revenue driver with manufacturers and retailers prepping for back-to-school and the previously mentioned end-of-year. So far this year large merchants have continued to cut back excess inventories and this does not appear to be letting up.
Compared with the second quarter of 2022, Kuehne + Nagel’s net turnover plummeted by 43% over the same period. A decline in airfreight and ocean demand cut profits by more than half and Kuehne + Nagel unit costs were slashed from the first to second quarter by 14%. A rival to Kuehne + Nagel, DSV A/S, is in a similar predicament with their air and sea division having posted significantly lower volumes compared to a year ago. They have reduced their full-time workforce by 1,900 during the first quarter of this year and logistics employment overall continues to be trimmed.
The Logistics Managers’ Index, established in 2016, tracks logistics metrics (inventory, warehousing, and transportation) coupled with the responses of 100 + professionals on the direction and movement of key logistics metrics. They then release a corresponding monthly report and June 2023 marked the lowest point in the history (6.5 years) of the index.
While ocean shipping volumes remain suppressed for DVS and others, if consumer demand improves airfreight could pick up. The DVS earnings outlook had improved slightly as significant worsening is not expected. But all of this does not bode well for 2023.
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