Europe’s transportation market undergoing transformation

Mark your calendars. Come late September, the container shipping industry — and logistics in general — could be in for one of those landmark events that come along every several years. Like so many times before — dropping of inland intermodal point pricing, launching of ever-larger vessels, slow-steaming, customer service charters and manifestos — Maersk Group, owner of the world’s largest container shipping company, could turn the industry upside-down with a strategic review that has European and global transportation interests buzzing about a possible breakup of the Danish conglomerate.

The outcome of that review will come in the wake of a series of events that have decimated European transportation interests struggling with a mix of overcapacity and sluggish demand at sea, in the air, and on the road that is squeezing freight rates and savaging balance sheets. Even Maersk, a paragon of excellence in an otherwise sea of container shipping red over the past five years, has been swept under, reporting a second-quarter loss of $151 million after a $507 million profit in the same quarter last year. And that’s just the beginning of the ugliness sweeping transportation providers:

  • Lufthansa Cargo, which has generated more than $1 billion in profit over five years of consecutive growth, will close 2016 in the red.
  • German ocean carrier Hapag-Lloyd collapsed to a first-half loss of 142.1 million euros ($160.6 million) from a 157.2 million-euro profit in the same period last year.
  • Deutsche Bahn, the biggest pan-European rail cargo operator, blamed its domestic freight business for a 1.3 If this sounds worrying to shippers and other customers, it should, because Europe and the companies that support it are critical links in their supply chains — the continent’s domestic market alone comprises a single, 14 trillion-euro market of 28 nations connected to the global economy.

And while European importers and exporters are enjoying lower rates, they’re growing frustrated with a lack of reliability and the inability to forecast just where their budgets need to be. Facing broadly muted economic growth, warning signs coming from industry leaders only serve to further rattle logistics directors of major European importers and exporters. On the surface, the outlook for shippers and carriers appears pessimistic: The eurozone is growing at a snail’s pace, Italy is teetering on the verge of a banking crisis, and the U.K., Europe’s third-largest economy, is leaving the European Union.

Yet the domestic market is holding its own despite the uncertainty. Consider, for example, that:

  • Finnlines, the largest Baltic Sea roll-on, roll-off ship operator, posted its best-ever second quarter this year.
  • Copenhagen-based DSV Air & Sea had record second-quarter profit as it offset the losses at new acquisition UTi Worldwide and integrated the U.S. freight forwarder ahead of schedule.
  • Swiss global logistics giant Kuehne + Nagel’s ocean container volume jumped 5.8 percent, helped in part by European shipments and outpacing market growth of just 2 percent.
  • Denmark-based short-sea operator DFDS cited moderate growth in most parts of Europe as it boosted second-quarter operating profit by 31 percent and freight traffic by 33 percent.
  • Booming German online retail volume played a key role in Deutsche Post DHLís record quarterly earnings in the April-June period.
  • Increased intra-Europe volume was one of the few bright remarks by Maersk CEO Soren Skou as he labored over the group’s underperforming businesses in a downbeat mid-August teleconference.
  • More surprising, Europe was the fastest-growing air cargo region in May, according to the International Air Transport Association, with traffic up 4.5 percent, and second only to the Middle East, the long-standing growth leader, in June with volume 5.1 percent higher thanks to strong German exports.

Source: Bruce Barnard

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