Forwarders will see marginal growth in the second half of 2016 in both ocean and air markets following air freight growth of 2% and ocean growth of 1% in Q3, according to logistics investment analyst Stifel’s quarterly Freight Forwarding Earnings Preview.
In its analysis of major listed forwarders including DHL, UTi, Kuehne & Nagel, Expeditors, and Panalpina, Stifel predicted that on average third-quarter (3Q) air freight forwarding markets rose 2% year-on-year, while ocean volumes expanded by around 1%.
“The international trade market has been up and down year-to-date but generally sluggish, as major consumer economies of the US and EU struggle to grow,” said a note from David Ross, MD of the US-based analyst.
“We have seen better numbers come out of the air cargo indexes than container port data. We find this unusual due to the high inventories and low interest rates that usually depress air volumes but believe continued growth in healthcare/pharma and perishables are contributing to the tonnage increase.”
The bankruptcy of Korea’s Hanjin Shipping would “cause some noise around 3Q16 numbers” but ultimately should be a net positive for the containership industry, not least because the slump in new vessel orders to a 20-year low would eventually bring market balance.
“Overcapacity persists, but we seem to be moving slowly in the right direction to right-size supply-demand in the ocean shipping market,” he added. “Over the long run, we believe this will be good for freight forwarders but is not likely to have a significant impact in the near term.”
After speaking to several leading forwarders, Stifel also found that most US-bound freight affected by Hanjin’s demise was being offloaded at the correct port, minimising rerouting and transloading.
Some airfreight diversion was noted but “not on the scale of 1H15 West Coast port slowdown”, while “a lot of the freight will be offloaded in the next couple weeks, so supply chains will react to what they have at that point in choosing air, ocean or truck, intermodal”.
The note added: “For disrupted freight, customers [of forwarders] understand and will pay more to get rerouted, although admin costs of dealing with it will likely not be recovered.
“Since most freight is moved under contract, trans-Pacific rate spikes post-bankruptcy had no impact on that business and new spot business was priced at new spot rates. Spot rates jumped immediately when Hanjin’s bankruptcy was announced but have come lower in recent weeks.”
Stefel said most forwarders believed Hanjin’s “fairly new” vessels would remain in the market as many were leased and would eventually be re-leased.
Ross concluded the global supply of containerships remained too high and predicted further consolidation of lines. “For example, there are three Japanese carriers that probably don’t need to be three separate carriers,” he added.