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EXCLUSIVE: AI and tech, the MSC way

The third MSC episode out at the end of last week, clearly outlined how the Italians are trying to put pressure on their rivals. The flip side of that narrative is how the leading ocean carrier worldwide is thinking about tech and AI, and what stands out for its management team in order to continue to gain market share across various modes in the supply chain. In this context, Aponte junior was quoted by the press at the end of July as ...

Airfreight leads the way for DHL Global Forwarding in Q2

DHL Global Forwarding reported improved revenues in the second quarter of the year as performance was boosted by growth in its airfreight business. The Bonn-headquartered forwarder saw revenues for the second quarter increase by 17.9% year on year to €5.4bn, while earnings before interest and tax (ebit) was up 21.9% to €240m. Revenue improvements in the division were led by airfreight, which was up 30.4% year on year to €1.9bn, while ocean was up by 8% and road 8.5%. The increase in air revenues outstripped a volume increase of 7% on last year to 473,000 tonnes, suggesting that the improvement in takings was driven by higher rates. Indeed, freight rates have been on the up this year as a result of higher fuel prices, the Middle East conflict's impact on bellyhold capacity and a demand surge for AI-related shipments. Airfreight revenues are at their highest level since the fourth quarter of 2022, while airfreight volumes are at their highest level since the second quarter of 2022. Kuehne+Nagel saw its second quarter volumes increase by 2.8%, while DSV was up 10%. The company said that in the first half, overall forwarding revenues had been boosted by volume growth and volatile freight rates. Airfreight volume growth came primarily on trade lanes from Asia and Latin America and was supported by resilient Asia-related trade lanes and hyperscaler demand, the company said. The express division also had a strong second quarter, with revenues increasing by 21.5% year on year to €7.1bn, while international volumes increased 9.4% on last year and domestic was up 5.2%. International express revenues in the quarter improved by 20%, while domestic was up 13.4%. Performance was boosted by constraints in air cargo. "In a persistently volatile market environment, DHL Express benefited from a gradual rise in weight transported throughout the network," the forwarder explained. "Capacity constraints in the air freight market also had a positive effect on earnings of around €150m." DHL Group chief executive Tobias Meyer said: "The strong revenue and earnings performance in the second quarter demonstrates that the consistent execution of our strategic measures is paying off. "Higher productivity and efficiency, combined with the strength of our global network, enable us to capitalise on growth opportunities and translate revenue growth into even stronger earnings growth. "In an environment that continues to be shaped by geopolitical tensions and shifting trade flows, our customers benefit from our global presence, local expertise, and operational flexibility. "This enables us to support them in adapting their supply chains to changing market conditions while ensuring reliable logistics, even in challenging environments."

Putzger perspective: Frothy skies for AI air cargo volumes?

The EU's customs duty on low-value imported parcels has seen e-commerce air cargo volumes dip, but likely not for long, while artificial intelligence (AI) shipments are rising, although opinions differ on the stability of this market. It didn't take long for the European Union's hit on e-commerce imports to show up in airfreight volumes. Following the implementation of a €3 customs duty on incoming parcels on 1 July, airfreight tonnage from Hong Kong to Europe slumped 12% week-on-week in the week ending 5 July, according to WorldACD. Industry observers expect the curve to reverse itself before long. Washington's end of de minimis exemption last year triggered a massive slump in parcel imports, but volumes climbed again to account for 13% of all US airborne imports in the first quarter of this year, down from 16% a year earlier. While e-commerce continues to generate substantial volumes, in terms of driving airfreight growth the baton has clearly passed to AI-related traffic, which fills freighters to the rafters, first and foremost across the Pacific. US high-tech imports by air surged 70% in the first quarter, which pushed the nation's overall airborne imports in the period 11% higher year-on-year. The ripple effect from this tsunami of servers and semiconductors and assorted equipment, notably the insatiable need for electricity, is powering a surge in project logistics manifesting itself in full order books and long wait times for some equipment. How long is this bonanza going to drive airfreight growth? According to a report by the UN Council for Trade and Economic Development published in April, the global AI market will soar to $4.8trn by 2033, a 25-fold increase over $189bn in 2023. It has to be noted that many predictions and valuations of AI firms are decidedly frothy, including numbers put out by Wall Street. In the run-up to the SpaceX IPO (which was re-branded as an AI company), major banks published eye-watering numbers, setting target prices for shares from $205 to $800, implying market caps up to $10.4trn, which would have SpaceX trading at a price-to-sales multiple between 139 and 542. Clearly these numbers were driven by banks' desire to get a chunk of the IPO, but they indicate that projections have soared wildly, suggesting that the party will have an encounter with reality at some point down the road. For the near future, AI looks set to drive airfreight growth further, widening the gap with capacity growth hobbled by supply chain issues. Adding to this the volatility and uncertainty that have come to define global trade conditions, rates seem unlikely to move down for some time.