European logistics firms face impact from falling freight rates

European shipping and logistics firms are under pressure heading into the third-quarter earnings season, as analysts trim profit forecasts to reflect falling freight rates and weaker demand.

Ocean container rates have plunged to their lowest since January 2024, hit by industry oversupply and weaker demand following new U.S. tariffs, which are threatening carrier profits.

Danish shipping company Maersk is seen as relatively shielded to the mounting challenges, analysts say, in part because it has long-term contracts with customers that are locked in at higher rates.

Although container volumes rose 4% in the January-August period, the increase was driven largely by front-loading during the pause in U.S. tariffs and thus offers only temporary rate support, Bernstein analysts said in a research note.

Demand remained muted in the third quarter, Bernstein said, with what is normally the peak season for carriers proving subdued. As supply continues to rise, rates are expected to remain weak, the broker added.

Bank of America analysts said they expected logistic companies "to present a cautious outlook".

BEARISH WINDS BLOW THROUGH SECTOR

Analysts expect companies to either revise their forecasts or report weaker third-quarter results, pressured by soft sea and air freight yields.

BofA Securities expects Denmark's DSV to shave off 1 billion Danish crowns ($156 million) from the top of its guidance range for operating profit before one-off items, bringing it to between 19.5 billion and 20.5 billion crowns, while HSBC expects Swiss Kuehne + Nagel's quarterly operating profit to drop by a third.

DSV's profitability appears more resilient than fellow freight forwarder K+N's, with Jefferies attributing this to the company shedding lower margin business following its merger with Schenker.

German logistics giant DHL will announce a 4% decline in its quarterly operating profit on weakness in express and forwarding segments, HSBC forecasts.

MAERSK KEEPS ANALYSTS BULLISH

More positively, some analysts expect Maersk to report strong third-quarter results and raise its full-year guidance, citing a favourable trend in freight rates through mid-August that likely boosted both revenue and volumes.

"For Maersk it turns out positive that the majority of the container rates clients pay are locked in term contracts (up to 72% this year)," said Rico Luman, senior economist for transport, logistics & automotive at ING Research.

These contracts typically run for up to a year or more, allowing Maersk to continue benefiting from previously elevated rates, he added.

Luman said that Maersk's Ocean segment will eventually face pressure as contracts roll over, though the decline will be more gradual compared to other container liners.

($1 = 6.4029 Danish crowns)

(Reporting by Amir Orusov and Anastasiia Kozlova in Gdansk; Editing by Matt Scuffham and Milla Nissi-Prussak)