“Another erratic quarter for our industry” is how Jeffrey S. Musser, President and Chief Executive Officer of Expeditors described the market for sea and air freight forwarding. In discussing the Seattle-based forwarders second quarter results, Mr Musser commented that there had been “rapid changes and imbalances in buy versus sell rates, particularly on exports out of Asia”. In addition, “air market capacity has been constrained by e-commerce demand, and ocean routing has been significantly disrupted by geopolitical events in the Red Sea, causing less frequent services due to blank sailings, longer transit times as well as port congestion”.
Indeed, Expeditors’ results are a good insight into the wider condition of both freight forwarders and air and sea freight asset owners. Overall Expeditors saw sales sustained but profits under pressure, with revenue falling by 4% year-on-year for the half-year, although the second quarter saw a rise of 9%. Operating income fell by 16% year-on-year for the half year and by 10% over the quarter.
For Expeditors’ air freight business, tonnage increased by 15% year-on-year in the second quarter with the volume of business improving over a slow first quarter helped by a shift away from sea to air freight. Expeditors also said that “buy rates outpaced increased sell rates” as Chinese e-retailers drove-up demand faster than carriers could increase capacity.
Sea freight forwarding volumes handled by Expeditors fell by 3% year-on-year over the quarter although they increased between the first and second quarter. Again, Expeditors said that “buy rates” had increased higher and faster than “sell rates”. The effect of the Red Sea crisis has more than compensated for the additional ship capacity that has entered the market not least due to operational difficulties encountered at ports.
Bearing in-mind the familiar difficulty of markets in both sea and air freight, Expeditors’ have probably not done too badly over the past quarter. The question is, like the whole of the freight forwarding sector, how will they respond as markets change. And they might change very quickly.
Source: Ti Insight
Author: Thomas Cullen
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