DHL positive about sea freight outlook

DHL Global Forwarding remains positive about the outlook for the ocean freight market despite the ongoing difficulties in the sector ranging from poor schedule reliability, capacity issues, port congestion and acute equipment shortages of maritime containers, with the company also expecting to turn in a strong ocean freight performance for the first quarter of this year.

In addition to the challenging operating conditions, the threat of a third wave of coronavirus in Europe and in other parts of the world, characterised by the spread of mutant strains, has raised fresh fears of an adverse knock-on effect on economic activity and global trade in the months to come and into next year. But in an interview this month with Lloyd’s Loading List, Dominique von Orelli, EVP and global head of ocean freight at DHL Global Forwarding (DGF), sounded an upbeat tone.

“While accepting that there is uncertainty about the evolution of COVID-19, based on the feedback we are getting from customers we remain positive about the outlook and a rebound in the economy,” he noted. “We see good ocean freight growth over the next few months and beyond. As the vaccines are rolled-out worldwide, we will gradually see a return to normality and, apart from COVID-19, I don’t see anything which would impact business. That’s why I’m very optimistic going forward.”

Continuation to strong end to 2020

DGF’s ocean freight unit finished 2020 on a high and von Orelli sees no reason why the positive performance won’t be sustained this year – even taking into account the challenging operating conditions which have been a feature of the ocean freight market for the past months.

“The fourth quarter of last year was very strong for us. We’ve worked diligently on improving our profitability – gross profit (GP) per unit was in the double-digit percentage range. We also had a very good GP to EBIT conversion ratio improvement in 2020 and we expect these profitability indicators to further improve this year.

“In terms of volume, this was down, year over year, but the decline (a low single-digit number) was inferior to that for 2020 as a whole (a decrease of almost 11%). This is something we’re not too concerned about because we don’t go after volume at any price.”

Volumes coming back to 2019 levels

He continued: “Partly because of the bullish market, partly through our own efforts, we are now seeing volumes coming back significantly, and for the first quarter expect them to more or less return to the levels of 2019 for the same period – any comparison with Q1 2020 being skewed by the fact that China was basically closed because of the pandemic. Overall, it’s an upbeat outlook for DGF in ocean freight.”

On the topical issue of COVID-19 vaccine distribution, although its contribution to reviving international economies was potentially huge, von Orelli dismissed any concerns that it risked aggravating the current capacity squeeze in ocean freight.

“We are a leading freight forwarder in the life sciences industry and have been shipping vaccines for many years. While the actual number of COVID-19 vaccines might appear to be high, when you put these batches into a maritime container, the space they take up, even in large quantities, is relatively small,” he explained.

“For vaccines that need to be kept at deep-freeze temperatures – minus 70/80 degrees Celsius – ocean freight is not an option anyway. But the mode can accommodate doses that can be stored at between 2-8 degrees Celsius; and while there is an important market opportunity here, it’s not one which is likely to add to the capacity strain we have at the moment, at least not to a significant degree.”