K+N, DSV highlight complex logistics market in their quarterly updates, with higher freight rates, softening consumer demand & ongoing supply chain disruption
Kuehne+Nagel (K+N) and DSV highlighted a complex logistics market in their recent quarterly updates, with higher freight rates to stay, softening consumer demand and ongoing supply chain disruption.
K+N was the first to reveal its results, with revenues and profits continuing to surge on the back of acquisitions on higher prices in the market.
On the demand side, the firm’s chief executive Detlef Trefzger pointed out that GDP was now expected to grow at around 3.5%, down from more than 6% last year, as consumers are hit by a surge in the cost of living and uncertainty.
Meanwhile, the opening up of the service sector is expected to divert some consumer spending away from goods and onto services.
However, he stressed 3.5% growth was hardly a decline and that the move to services spending would also fuel some demand.
“[Last year] everybody was investing in refurbishing their homes, bathrooms, living rooms and so on,” he said.
“But that consumption has changed, there’s a slight opening up after the pandemic. Already, by middle of quarter three, we have seen a consumption pattern skewed towards service industries again and this is at the moment continuing.”
He added: “We are talking about a GDP growth of 3.5%, ladies and gentlemen. No we are not talking about a depression, we’re not talking about negative GDP growth.
“And I think that’s a very fair and reasonable assessment of the second semester at the moment, unless [there is] something more disruptive or more unpredictable.”
Trefzger said that pharma and aerospace demand had been growing at double-digit levels while there was bottlenecks in the automotive sector due to chip shortages.
DSV also saw its profits and revenues surge in the first quarter. Chief executive Jens Bjorn Andersen agreed that there had been a switch to service spending and that there was variations depending on the vertical.
He added: “It seems like world GDP will grow faster now this year, than what it did in 2019. So it’s not like it’s going in reverse or anything.”
Andersen felt the current market disruption – caused by ongoing ocean congestion, the Shanghai lockdown and the war in Ukraine amongst others – would continue.
Focusing on the Shanghai lockdown, Trefzger expected that when the lockdown is eased production would quickly ramp up – within weeks – and how quickly supply chains from the city returned to normal levels depended on how fast carriers could re-add capacity back into the market.
He added that a new lockdown could be coming in Beijing as cases are on the rise in the city, which could affect manufacturing in the greater Beijing area.
Inventory levels are a key indicator for future air cargo demand and Andersen said that there would be an element of re-stocking at some point, especially given an expected surge to meet the Shanghai backlog.
On overall freight rates across modes, both expect them to soften in the future, although not to pre-pandemic levels.
Trefzger said: “We all have to assume significantly higher average freight rates in this decade than during the previous decades because there is a lot of investments to be taken into port infrastructure, into railways, roads to the trucking infrastructure, digitalisation, connectivity, data, connectivity, airports and so on and this will require investments and costs that have to be covered.”
