Three of the four major forwarders that have reported their first-quarter figures — DSV, Kuehne + Nagel (K+N), and CEVA Logistics — mostly shrugged off signs of a growing economic malaise and improved their year-over-year growth both in volume and gross profit per TEU.
After strong growth in 2017 and early 2018, global economic activity slowed in the second half of last year amid an increase in trade tensions between the US and China, a decline in business confidence in the eurozone, a tightening of financial conditions, and higher policy uncertainty across many economies, according to the International Monetary Fund.
Despite the global economic headwinds, DSV managed to increase its ocean volume by 4 percent to 359,925 TEU; the sea and air division revenue rose 12.5 percent year over year to $723 million. DSV’s total revenue was $3 billion.
K+N, the world’s largest ocean freight forwarder, posted first-quarter volume growth of 6.2 percent year over year to 1.14 million TEU, up 70,000 TEU in the first quarter. The forwarder recorded double-digit increases in volume in the trans-Pacific as shippers raced to import China cargo ahead of the US tariffs, and similar growth in Asian exports to Europe.
CEVA Logistics, which is 98 percent owned by CMA CGM, reported a 6.2 percent increase in volume to 193,000 TEU in the first quarter. Revenue in the sea freight segment was up 3.8 percent to $797 million.
The first-quarter growth bodes well for annual global container volume, growth of which is projected to accelerate from 4 percent in 2018 to 4.8 percent this year, according to the latest Trends in the World Economy and Trade report from IHS Markit, parent company of JOC.com.
Panalpina’s volume slips
Panalpina bucked this positive first-quarter trend with a 3 percent decline in volume to 296,000 TEU, although the Switzerland-based forwarder, in the process of being acquired by DSV, did manage to break even in the ocean freight segment.
The forwarders’ results also showed that pricing sacrifices were avoided in the process of expanding business. DSV grew profit per TEU by 6 percent, CEVA’s yield per TEU was up almost 1 percent, and K+N’s yield per TEU was the highest it has been since the first quarter of 2017.
The strong start to the year came as something of a surprise to the global forwarders. DSV CEO Jens Bjorn Andersen said his company had never had such a strong first quarter, and CEVA CEO Xavier Urbain said March was the third-party logistics provider’s (3PL’s) most profitable month in years.
Urbain, who will become executive adviser to CMA CGM CEO Rodolphe Saade in June and hand over the reins to current deputy CEO Nicolas Sartini, said the logistics provider saw significant growth out of the Americas and Asia-Pacific.
“We have seen a lot of volume coming to Europe from Latin America, and also from the US,” he told JOC.com during an earnings call.
Rising volume in the Americas trade with Europe was also reported by DSV. Its air and sea division revenue, almost a third of which is derived from the Americas, increased 18 percent in the first quarter. Although much of that is from the US, Andersen said Canadian, Mexican, and Latin American markets were “doing well.”
The latest data from Container Trades Statistics show that annual volume from South and Central America to Europe has been growing steadily since 2013, with 2018 volume increasing more than 9 percent year over year.
Trans-Atlantic trade grows
It’s also a growth picture in the trans-Atlantic. According to the IHS Markit report, container trade from Europe to North America grew 4.8 percent to 4.96 million TEU last year. The report forecasts 5 percent growth for 2019 and 3.3 percent growth in 2020. North American exports to Europe surged 14.5 percent year over year to 3.48 million TEU in 2018, with growth of 400,000 containers shipped for the year. IHS Markit has pegged volume growth for eastbound trans-Atlantic containers in 2019 and 2020 at 2.7 percent and 4 percent, respectively.
Asked why container volume is increasing when global economic growth is slowing in the major markets, Andersen ascribed it to two factors — the capturing of market share from smaller players and the growing investment in digital solutions by the larger logistics companies that have been strengthening their value proposition over the past few years.
“We have seen a clear tendency among the big guys to take market share from the smaller players,” he said. “But we also invest significant sums of money in digitalization and new technology, and you need to have some financial firepower to make these investments. You need to have a network as well.
“If your only value proposition is to go down to the pub and have a few beers with your customer and try to offer some low rates, that is a vicious circle and you will ultimately get into trouble.”
It was a sentiment shared by K+N CEO Detlef Trefzger, who said that although global economic growth is noticeably slowing, “In this volatile market environment, we are well-positioned. Consistent with our business strategy, we focus on introducing new digital platforms and highly specialized industry solutions.”
The latest solution from K+N is KN Pledge, a new guaranteed transit time full containerload (FCL) product tethered to instant quoting capabilities that portends an era of technology-led product development for shippers as incumbent 3PLs seek to fight back against a wave of digital upstarts.