Press "Enter" to skip to content

Express, Air and Ocean Freight Revival Moving at Different Speeds

International air express, air freight and containerised ocean freight do not always move in sync – even though growth in all three is correlated to changes in economic activity. Part of this is due to how quickly each responds to changes in the inventory cycle or relative price differences, but also the underlying industry segments and customer profile that driven each segment. Consumer demand has performed better (or less worse) than manufacturing activity and as such containerised shipping and express have performed better than general airfreight. Air cargo traffic – which consists of a mix of express, cross border e-commerce and general air freight – has been strong, primarily because of e-commerce.

Different Customers, Different Verticals

The table below shows the importance of different industry verticals for DHL’s express, air freight and ocean forwarding businesses. Note that for express the share is based on revenue, for air and ocean freight it is based on tonnes and containers, respectively.

As cross border e-commerce traffic has grown in importance, the express business has experienced increasing B2C penetration. In DHL’s case the B2C share grew from 10% in 2013 to over 35% in 2019 and 46% today. During COVID these figures were even higher. Air and ocean freight forwarding remain almost 100% focused on B2B. Air freight itself – from a carrier perspective – has also been moving more business to consumer e-commerce consolidations. Most of this is moved by China based companies and as such it does not feature strongly in the business lines of the likes of DHL Global Forwarding and its main competitors Kuehne and Nagel, DSV or DB Schenker.

Figure 1 – DHL Industry Vertical Share in Express, Air Freight and Ocean Freight Forwarding

There is also a large difference in the exposure to different industry verticals. Air and ocean freight are primarily industrial tools, while express has more focus on finished goods – retail, fashion and services.

Consumer vs Intermediate Goods

Ocean freight has a higher share of end products moving than air trade, which consists primarily of intermediate components, parts and equipment.  The slide below shows the broad make up of US air and containerised ocean trade with Asia Pacific. Containerised import weight has consisted between 37-43% of goods for final consumption, whereas for airfreight the figure has ranged between 27-37%.

Figure 2 – US – APAC Air and Ocean Trade by Type of Goods

US Consumer demand has performed better than US manufacturing, and as such ocean trade performance was better than air trade. Of course, high inventory levels also contributed to dismal air trade performance. Containerised imports from Asia reached a turning point in September 2023, while air cargo imports have not.

Figure 3 – US – APAC Air And Ocean Trade Performance Jan 2013 – Jan 2024

We believe the weakness in air trade will continue until manufacturing picks up – most likely in the second half of the year.   

Express Market Outlook

International express volumes for the top three integrators DHL, FedEx and UPS were down between 2% and 5% in 2023, but the declines were mostly in the first three quarters of the year. DHL’s TDI shipment volumes and yields did not decline in the 4th quarter and FedEx international volumes actually increased by 5.7%. Per package yields were generally down as business-to-business traffic remained weak. B2C volumes have lower yields so increased B2C volumes lead to yield dilution.  

Figure 4 – Express Carrier Performance by Market 2023

Given that most cross-border e-commerce consists of low value goods, growth in international express is likely to track the recovery in general air freight. According to the most recent International Postal Corporation (IPC) cross border shopper survey, only about 6% of purchases are worth more than EUR 200 (about US$220). Over 80% of items are worth less than EUR 100 (US$110) – and are unlikely to be moved using DHL, FedEx or UPS.

Be First to Comment

Leave a Reply

All Rights Reserved © 2022-2025 by Trade and Transport Group PTY LTD