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EDITORIAL


KAREN THUERMER -EDITOR karen.thuermer@fjna.com CONTRIBUTING EDITORS: PETER BUXBAUM JOHN JETER ALEXANDRA WALSH MARK CALDWELL MANIK MEHTA


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Issue 5 2021 - FBJNA From the Editor


CONTACTS 2021 SALES


///NEWS


Freight Business Journal North America - FBJNA reaches out to the decision makers and influencers involved in international freight transport and logistics. FBJNA boasts the most informative and authoritative source of information with unrivalled in depth knowledge of the rapidly changing freight business environment. Our complimentary website www.fbjna. com provides the most up to date news and analysis from within the international shipping industry.


By Karen E. Thuermer


The logistics industry and manufacturing appear to be in a crisis. I’m facing this personally as I continue to wait for delivery of a dishwasher we ordered in April 2020. When my two printers recently ran out of print cartridges, I found none were to be had at any retail outlets. Then there is lumber. My home needs new wood siding. Guess what. Lumber is


in short supply and backordered, and its cost has skyrocketed nearly 250% since April 2020. Covid-19 certainly has resulted in wild gyrations in supply and demand. Other industries seriously hit are semiconductors and auto parts. Facing a


supply shock caused by escalated purchases of high-tech goods (and consumers anxious to spend their stimulus checks), manufacturers are suddenly confronting a shortage of microprocessors. Automakers have been hit particularly hard by the global chip shortage aſter


many cancelled orders when auto plants were idled during the coronavirus pandemic. In fact, the Alliance for Automotive Innovation (AAI) recently told Industry Week that the shortfall in semiconduction availability could stall US vehicle production by as many as 1.27 million vehicles in 2021. “The chip shortage has forced a number of automakers to halt production and


cancel shiſts in the United States, with serious consequences for their workers and the communities in which they operate,” said AAI CEO John Bozzella. Workforce issues are having an impact. Take trucking for example. An aging


workforce, demanding and unsafe work, a less than competitive pay scale, and the continuing effects of the COVID-19 pandemic are making it increasingly difficult for the trucking industry to find and retain qualified drivers. And now many truck drivers are aging out. According to American Trucking Associations (ATA), nearly a quarter of the current trucking workforce will hit retirement age in the next 10 years, not including the nearly 8% of truckers who are currently working above retirement age. Then there are increasing logistics costs. Tight capacity in the air cargo is resulting in skyrocketing rates on certain routes.


For example, TAC Index reported that in April air cargo flown between China/Hong Kong to the United States averaged $8.56 per kilo, its highest rate. That’s up 60% over March 2021 rates; up 8% over April 2020 rates; and up 153% over April 2019 rates. The continued state of congestion in logistics led to a new round of rate increases


and surcharges from the steamship lines, including a risky move by CMA CGM to increase export charges from the United States. Most of the major logistics firms, including Maersk, K+N and DSV Panalpina, have said that congestion is likely to continue well into Q4’21. Panjiva reports that the increase in logistics and materials costs is affecting


companies across most industries including capital goods manufacturers, automakers and consumer goods companies. “The increase in costs has been sufficient that governments are getting involved,


including in China in relation to steel which is partly down to challenges in iron ore shipments,” Panjiva writes. Panjiva further states that increasingly firms in the consumer discretionary


sector and the building materials sector are resorting to price increases to pass supply chain inflation onto consumers. I can personally attest to that! Meanwhile, transportation services are realizing impressive profits. 3PLS,


for one, realized an estimated $246 billion in gross revenues in 2021, up 6.3% compared to $231.5 billion in 2020, according to Armstrong & Associates. Most of that growth came from international and domestic transportation management which responded to COVID-related demands for PPE and to restock inventories. Fourth quarter 2020 was particularly good for large freight forwarders who buy


bulk spaces from carriers yearly, then sell them to customers throughout the year. XPO Logistics revenues increased some 12.8% in 4Q 2020 to $4.67 billion compared to $4.14 billion for Q4 2019 -- the highest ever of any quarter in its history. Expeditors International reported record increase 55% to $3.2 billion in Q4 2020 compared to the same period 2019. Its airfreight tonnage volume increased 10% and ocean


container volume increased 19%. C.H. Robinson reported total revenues increased 19.9% to $4.5 billion. Steamship lines reported impressive earnings. Hapag-Lloyd has concluded


the first quarter of 2021 with earnings before interest, taxes, depreciation and amortization (EBITDA) of roughly $1.9 billion (approximately EUR 1.6 billion). Earnings before interest and taxes (EBIT) rose to roughly $1.5 billion (approximately EUR 1.3 billion). The Group net result improved to around $1.5 billion (EUR 1.2 billion). A.P. Moller – Maersk delivered strong results. Despite low volumes during


most of 2020, profitability grew throughout the first nine months and ended the year with record Q4 results in Logistics and Terminals, while Ocean delivered an exceptional quarter driven by the increased volumes and current, temporary supply chain disruptions. “2020 will forever be remembered for the COVID-19 pandemic that negatively


impacted our lives, jobs, businesses and the global economy. I am proud that we have accelerated our transformation and delivered earnings growth during every quarter of 2020, despite very different market conditions, beginning with negative COVID-19 impact in the first half to a rebound in Q4,” says Søren Skou, CEO of A.P. Moller – Maersk. The International Air Transport Association (IATA) expects net airline


industry losses of $47.7 billion in 2021, but air cargo revenues to hit historic profit highs around $152 billion, up from $128 billion in 2020 and $101 billion in 2019. Luſthansa Cargo achieved the best result in its 26-year history in the 2020


financial year. Revenue rose by 11% to 2.76 billion euros, while adjusted EBIT amounted to 772 million euros (previous year: 1 million euros). “We are pleased to close what was probably the most challenging year in our company’s history with a record result,” said Dorothea von Boxberg, Chairperson of the Executive Board and CEO of Luſthansa Cargo. But Ms. Boxberg said during a press conference that she does not expect this degree of financial achievements going forward. US rail freight revenues are forecast to advance 4.7% per year in nominal terms


through 2025, according to Freight by Rail: United States, report recently released by Freedonia Focus Reports. Continuing expansion in manufacturers’ shipments and growth in US trade activity will drive demand for rail freight transportation. Market analysts are calling for continued strength in the trucking markets.


Higher trucking costs for shippers, however, are expected to last at least through the end of the year.


If you have any stories or letters which should be of interest or any feedback on FBJNA, please contact our editor Karen Thuermer - karen.thuermer@fbjna.com


next issue >>


Our next issue includes features on MidWest Ports and Inland Connections,


Rail on the move, High Tech Warehouse/DC Development, Air Cargo - Pharma Industry, plus our regular IT section.


For further details contact: Matt Weidner - T: + 1 610 486 6525 E: matt.weidner@fbjna.com


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