DHL Express talks peak season projections, trade wars

CINCINNATI – This week, DHL Express hosted a tour of its facilities near Cincinnati/Northern Kentucky Airport (CVG) – the “super hub” of DHL Americas. Air Cargo World toured its sorting facilities and sat down with DHL Express’ CEO of Americas, Mike Parra, to talk about the current trade climate, including protectionist policy and the logistics juggernaut’s peak season forecasts.

Industry leaders have been somewhat divided in terms of expectations for the 2018 busy season – some saying cargo capacity will be overloaded, others suggesting that this may be an over-estimation. Parra said it will not be another case of “the mother of all peaks,” referring to the 2017 peak season.

“Based on the intel we are getting from our customers, it will be a base- to moderate/average growth… this will not be a similar peak to what we experienced last year,” Parra said. The reasons behind this moderate peak, he explained, referred to the pre-peak-season bubble in demand for trans-Pacific capacity that began this summer, caused by shippers hurrying to move products before tariffs on trans-Pacific shipments kicked in, which could be falsely engorging projections for potential volumes in coming months. We will have to wait and see if that bubble pops, he added.

DHL Express expects to see growth in Europe-to-U.S., Canada-to-U.S., and Mexico-to-U.S. trade lanes, but Parra added that it’s difficult to determine with certainty. “A lot of it will obviously have potential economic impact, depending on what the final outcome of the new trade agreement is,” he said.

As far as the demand driving growth in these trade lanes, clothing and apparel is a top commodity driver in all of the company’s markets, especially Canada. The company’s fashion industry customers are now in its top five biggest customers in Canada, which they were not 22 months ago, Parra said – one such customer being Canadian department store Holt Renfrew, which made a deal with the company’s forwarding arm to manage its global supply chain in July.

The company also believes that the Asia-Pacific trade lane is still growing, namely exports from Vietnam, Malaysia and China – even with changes in trade relationships. “There will always be a need in that market to be flying widebody aircraft,” Parra said, but said that the associated costs caused by tariffs on this trade lane will ultimately manifest in the “direct cost being passed on to the final consumer.”

The company has been busy investing in hubs and expanding its fleet, recently purchasing fourteen 777s which are intended to replace older aircraft, also working on conversions on 737s and 757s “constantly,” Parra said. Four of the new 777s will be introduced to the company’s network next year.