Changing lanes and mixed economic progress – challenging times for logistics providers

With the first two months of 2015 in the books, the year is already shaping up to be another one of challenge for logistics providers. But, in the midst of this challenge, positive economic signs are finally emerging in Europe in particular. Thanks to falling oil prices and the lower euro, the Eurozone’s economy is on the upswing. For example, retail sales rose in January by 1.1%, the biggest increase since May 2013. In addition, the February purchasing managers’ index rose for the third month to 53.3 points up from 52.6 in January, with new factory orders increasing. The index further noted that economic activity increased across each of the four largest Eurozone economies — Germany, France, Italy and Spain — for the first time since April, 2014.

For logistics providers, the improving conditions in Europe are welcomed news for sure. In mid-February, DHL announced plans to invest in the construction of a new express hub at Brussels Airport in Belgium. The €114m investment is intended to further strengthen the position of Brussels within the European and worldwide DHL network. Meanwhile, TNT announced that it extended its international delivery service to Germany. As a result, TNT now offers guaranteed next-day delivery to all postal codes in the country as well as an optional delivery before 12:00 nationwide. Both services are available for parcels and heavier freight shipments.

Meanwhile, the economy continues to improve in the US. Unemployment has fallen to 5.5% and manufacturing activity remains above the all-important 50-level which denotes expansion. However, it is likely the US may have suffered a temporary setback thanks to the west coast port situation. In January, several of these ports noted double-digit declines in tonnage while the union and port officials attempted to come to an agreement. Finally, after nine months, one has been reached but at what price? Surveys from various publications suggest freight may have been lost to the east coast ports and possibly to Canadian ports as well as possible shifts in trade lanes favoring the Suez Canal. Meanwhile west coast ports have at least a three month back up of containers to work through. To assist businesses not quite ready to entrust freight through the west coast ports, CaroTrans, a global NVOCC and ocean freight consolidator, recently announced the launch of an all-water LCL import service from Shanghai, China, to Atlanta, US, via the Port of Savannah. The service will have a 32-day transit time.

While Europe and the US appear to be witnessing improving economic conditions, albeit at varying levels, China is facing further slowing. The Chinese government expects economic growth to be about 7% in 2015 compared with a 7.5% target last year. Despite the slowdown, China’s exports picked up in the first two months of 2015, increasing by 15%. However this increase was probably due to the timing of the Lunar New Year. Meanwhile, imports fell 20.2% in the first two months from a year earlier.

China remains an important market for logistics providers but many are moving further into Southeast Asia. For example, TASCO Berhad, a Yusen Logistics subsidiary in Malaysia, announced that it has opened and commenced operations of a warehouse in Tanjung Pelepas, a port in the south of Malaysia. Additionally, in late February, CEVA Logistics announced that it won a new contract with Xiaomi, a smartphone manufacturer, to run their warehouse and distribution operations in Malaysia.

For more on global trends, be sure to check out the latest Global Logistics Monitor available to all GSCi subscribers later this week. To learn more, please contact Michael Clover.