Major air freight and logistics companies are reporting steep decreases in volumes of transported goods, with the trade slowdown putting downward pressure on shipping prices. Airports, while very crowded with tourists, are seeing less freight compared with last year. All this is pointing to a further decrease in the global economy in the near term, writes eToro analyst for Romania, Bogdan Maioreanu.
Freight traffic across the European airport network decreased by 7.1% in H1 compared to the same period last year, and by -11.7% compared to pre-pandemic (H1 2019) levels. One of the largest logistics companies in Europe, DHL Group – Deutsche Post AG reported lower volumes and declining freight rates in Q2 2023, leading to a 20.1 billion euro revenue, almost 4 billion lower than in the similar quarter of last year. The operating profit of 1.7 billion euro was steeply lower than the record earnings for the same quarter in 2022, (2.3 billion euro).
In both air and ocean freight, the decline in volumes was particularly noticeable on trade routes from China. The situation in China does not show signs of improvement, with China’s exports suffering their biggest drop in July (-14.4% compared to the same month last year) since the start of the pandemic as global demand slowed.
At the American rivals from UPS, the latest earnings report is painting the same picture.The Atlanta-based shipping company reported a10.9% drop in revenues year-over-year to 22.1 billion dollars, driven by a 9.9% decrease in average daily volume, which was partially offset by a 3.3% increase in revenue per piece. While the EPS of 2.54 dollars beat the guidance by 0.04 dollars, in the second quarter, the company saw lower volumes across all industry sectors, with the largest declines coming from retail and high tech. B2C average daily volume declined 11.5% compared to last year. UPS also continued to see customers shift volumes out of the air and onto ground shipping, a cheaper option. Total air average daily volume was down 16.5% year-over-year, while ground average daily volume declined by 8.6%. Looking ahead, UPS now expects full-year 2023 consolidated revenue to be about 93 billion dollars vs. analysts’ 96.6 billion dollars forecasts.
UPS shares rose this year only 2.3% while DHL is up 25% year to date. But the lower freight volumes are starting to paint a picture of economic difficulties ahead. A recent report is showing that worldwide, the gross airfreight capacity continues to rise, fueled by both pure freighter capacity and increased passenger plane belly-hold capacity, keeping it above the demand, at least for the remainder of the summer. The capacity will likely decrease after the summer rush with the number of flights decreasing but will not extensively impact the supply – demand situation.
An element that might lead to stabilization of the situation could come from companies that will consider that the over-inventory slashing has been taken too far and thus could prompt a surge in airfreight demand. But this hypothetical situation is more likely to happen when businesses are starting to prepare for the winter holiday season.
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