For major shipping companies dealing with trade wars and slowing global growth, conditions appear to have deteriorated for some as 2019 came to a close.
Global shipping and logistics provider Expeditors International said Friday that it expects fourth quarter operating income to fall between $177 million and $183 million.
CEO Jeffrey Musser cited trade disputes and slowing growth for a number of economies. The report comes a day after the commercial railroad CSX Corp. reported a 7 percent decline in the freight it hauled during the final months of the year.
“We’ve seen impacts throughout the year from these market conditions, but the pace at which these changes occurred accelerated dramatically in the fourth quarter,” Musser said. “We know this environment will change over time, as it always has in the past.”
Bruce Chan, an analyst at Stifel Nicolaus, said ocean-borne volumes and shipping rates have been weak for most of the past year but don’t appear to be getting dramatically worse now.
The drop-off at Expeditors may be isolated, Chan said.
“It’s a soft market and it has been, but I haven’t seen any major negative inflection” on volumes or rates for shipping and airfreight, Chan said. “What’s going on here is mostly related to how the company planned or budgeted for the fourth-quarter market environment and may have made a miscalculation” on how much capacity to lock down.
The slowdown hasn’t trickled down to the working waterfronts in the Southeast, at least not yet. The Port of Charleston, for instance, recently annocuned it handled a record number of containers in 2019, capping a decade of growth and breaking an annual record set the previous year. Likewise, the Port of Virginia said it finished 2019 ahead of 2018 and the Port of Georgia port is projecting a banner year.
But there are signs that transportation companies are struggling.
The freight and logistics group contained some of the worst performers across the market in trading late last week. Shares in trucking, railroad and ocean shipping companies sold off.
One example: JB Hunt Transport Services Inc., a trucking company, reported profits Friday that fell well short of what analysts had expected, according to a survey by Zacks Investment Research.
And last month, FedEx reported that its profit slid 40 percent, hurt by higher costs, a shorter holiday season and its move to cut ties with retail giant Amazon.com. It too, cut its profit expectations.
The Cass Freight Shipments Index report, which monitors truck shipments in North America, showed shipments dropping 6.4 percent in December, and 7.9 percent from the same period the previous year.
“Both the shipments and expenditures components of the Cass Freight Index marked their lowest reading of 2019 and took another step backwards in terms of (year-over-year growth,” wrote David G. Ross, also with Stifel. “There is lots of hope in the stock market and the freight market for a better 2020, but the trends have yet to turn. Maybe with the January index readings? Doubtful, as the index (both shipments and expenditures) normally falls off sequentially from December to January.”
The trade war between the U.S. and China — which has supplanted Germany as South Carolina’s biggest trading partner — has taken a toll. Government data showed Friday that China’s economy grew by 6.1 percent last year, down from 6.6 percent in 2018, and a multi-decade low. The Trump administration has agreed to cancel planned tariff hikes on additional Chinese imports as part of an interim deal announced last week, and Beijing promised to buy more American farm goods.
Factories have seen less activity in the current economic environment, meaning that they have pulled back on shipments.
The Institute for Supply Management reported this month that its manufacturing index dropped to 47.2 in December, from 48.1 in November. That’s the lowest level in more than a decade.
One of the industry’s next indicators will be UPS, which reports fourth quarter and full-year results in late January. Its shares have been falling over the past month.
The Post and Courier contributed to this report.
