Seko Logistics cautiously optimistic for market recovery

Global logistics freight and delivery company Seko Logistics expressed “cautious optimism” that the market will recover in the second half of 2023. Q1 revenue was down due to increased capacity and reduced demand , Seko Chief Executive James Gagne said in a company webinar on Monday, and that trend is continuing in Q2. Nevertheless, Gagne said he is hopeful for improvement in Q3 and Q4, despite “VUCA — volatility, uncertainty, complexity and ambiguity.” Inflation is adding to uncertainty, he said. “Inflation obviously continued to move in the right direction in April, as most of us know, though overall levels remained elevated and the pace of improvement, yes, it’s been slow,” Gagne said. “Consumer expectations of year-ahead inflation started to tick down, while expectations for longer-term inflation, meaning five-plus-plus years, ticked up this past month … and that’s the highest in over a decade.” Gagne said that, while high inventory levels are beginning to decrease, the extent of a market recovery is unclear. “I really think there’s a huge question mark that still remains out there in terms of underlying demand, at least in the next … six to seven months,” Gagne said. “When we start to see more new products coming into the market, that is going to drive behavior with the consumer that we may not see manifested in today’s data, so we are holding out, expecting to see some of that.” New products would especially benefit the airfreight market, Gagne said. Airfreight market begins to recover Seko projects a modest increase in airfreight demand in the second half of 2023. “Airfreight demand is not following the same curve as ocean freight demand, that’s for sure,” said Brian Bourke , Seko’s chief commercial officer global. “They are running different paths. … After a solid eight months of decline, we’re seeing airfreight rates, especially from Asia into the U.S., start to go up. Some of that was based on fuel, but some of it was based on just this pent-up demand that was out there.” The airfreight market has not finished normalizing from the pandemic, Bourke said. “The situation is a lot better if you do ship airfreight today than it was this time last year,” he said. “But there is still this, you know, relative demand shift that does require preighter conversions to still operate. But, ultimately, that is still kind of winding down.” Airfreight has seen more market fluctuations than ocean freight, according to Bourke. “On the ocean side versus on air side, a lot of these shippers of airfreight never really migrated completely to a just-in-case supply chain,” Bourke said. “They kind of still rely on more of a just-in-time supply chain.” China remains a top producer Airfreight is also being impacted by nearshoring , which is when a company shifts some or all operations closer to its main market. The market has been showing significant recent interest in Thailand, Vietnam, Malaysia and India, according to Gagne. Still, he cautioned against believing that China is losing ground in the supply chain and manufacturing. “Customs data shows that imports from China at the end of ’22 were circa 30% of total U.S. imports — it’s not a small figure,” he said. “China is still today about 30-plus percent of global manufacturing.” Gagne rebuked those who say the growth in nearshoring is a “collapse of globalization.” “I really would argue vehemently against it,” he said. “I see it really more as a proper reshaping of the global economic ties that have shaped supply chains over several decades.”

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