![\"freight](\"https:\/\/wellmaxgroup.com\/wp-content\/uploads\/2022\/02\/freight-rates.jpg\")
<\/p>\nGerman logistics company Deutsche Post DHL does not expect freight costs to ease this year and is advising customers to agree longer-term contracts as a hedge, the head of the DHL freight business said in an interview.<\/p>\n
“The short-term rate will rise a little in air and ocean freight, the long-term rate will probably remain at the 2021 level,” Tim Scharwath told Reuters.<\/p>\n
“In air freight, the rate might even go up a little bit more in the short term, there is even tighter capacity there.”<\/p>\n
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The COVID-19 pandemic has severely disrupted global supply chains, slowing flows of raw materials, parts and consumer goods.<\/p>\n
Shortages of freight capacity – both ocean and air – have pushed up shipping costs globally, with the pandemic also extending port waiting times due to labour shortages and traffic disruptions.<\/p>\n
U.S. rival FedEx Corp (FDX.N) warned this month that rising cases of the Omicron coronavirus variant has caused staff shortages and delays in shipments transported on aircraft.<\/p>\n
“In sea freight, we will not return to the rates we had before the coronavirus crisis,” Scharwath said.<\/p>\n
“If you want to sell a stool for 10 euros from China, then this can become a problem due to the transport costs,” he said. “This will also force a review of some business models.”<\/p>\n
Scharwath recommended that customers sign contracts for two to three years to hedge against future price rises: “You buy stability through long-term commitment.”<\/p>\n
The DHL freight unit expects the high rates to continue to buoy profits in 2022: “Our goal is to keep the operating result at least at the high level we had in the first nine months of 2021,” Scharwath said.<\/p>\n
The division, which employs more than 42,000 people and was once the group’s problem child, has become a profit generator under Scharwath’s direction.<\/p>\n
He wants to keep the operating margin above 5.5% by 2025. The unit recorded a margin of 5.7% in the first nine months of 2021.<\/p>\n
DHL says its freight division is the market leader in the air freight market ahead of Kuehne+Nagel (KNIN.S), and number two in sea freight among logistics firms behind that company.<\/p>\n
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