Financial overview with Scandinavian logistics perspective - Demand was weaker in Q1 beginning, though the outlook of the economy becomes better.
Girteka Group
Responsible Logistics. The largest asset-based transport company in Europe.
In the first months of 2023, the European market experienced mixed trends in demand, pricing, and supply chain dynamics, significantly impacting the logistics industry. On the one hand, retail and electronics demand decreased in the largest European markets, resulting in lower supply in the early months of the year. However, quantities increased in the last month of Q1, just before the Easter period, potentially signaling a recovery in these sectors. This fluctuation in demand created challenges for logistics companies, as they needed to adapt their operations to accommodate shifting inventory levels and transportation requirements. And this is a situation where flexibility and stability in terms of the availability of fleet are needed.
On the other hand, fresh produce markets remained robust, with strong demand for vegetables and fruits across all main markets. Despite a delayed fruit season caused by cold weather in Spain and Portugal, the resilience of these markets demonstrates the continuous consumer preference for fresh products. Logistics companies played a crucial role in ensuring the timely delivery of perishable goods, managing temperature-controlled transportation, and adjusting to the delayed harvest season.
The fish harvesting season witnessed strong white fish production and demand, particularly from the North part of Norway. The robust supply chain extended from Holland to Portugal, which is one of the main importers of codfish. During that period logistics providers had efficiently managed the transportation of these perishable goods, ensuring optimal routing and with a proper refrigerator fleet maintaining the cold chain to guarantee quality and freshness.
Also what was seen is that producers faced challenges during January and February, as uncertainties in financial markets and increasing Euribor rates impacted their forecasting capabilities. Although the logistics industry remained flexible and adapted to potential fluctuations in demand, providing cost-effective and efficient transportation solutions for their clients.
Inflation remained high at around 9-10% on average in the main markets, placing pressure on logistics companies to optimize their operations and reduce costs. Elevated fuel prices, with diesel averaging between €1.70-1.75 per litre, further affected transportation costs, leading logistics companies to explore alternative fuels and more fuel-efficient vehicles.
The demand for HVO fuel and CO2 emissions reduction initiatives gained traction, with market leaders expanding their HVO and electric vehicle capacities. Logistics companies are increasingly investing in greener fleets to reduce their environmental impact, meet regulatory requirements, and cater to the sustainability demands of their clients.
Rising Euribor rates could limit smaller carriers' ability to refinance or renew their fleets, potentially leading to higher CO2 emissions, increased driven km costs, and decreased delivery quality. This challenge highlights the need for innovative solutions in the transportation sector, such as collaborations, consolidation, or digital platforms to optimize resources and improve efficiencies.
In the coming months, the main indicators of economic development will be the costs of money and the further demand for goods and services. Logistics companies are planning for the long term by investing in newer, expanding fleets (despite higher financing costs) and incorporating AI and digital tools for more efficient planning solutions. These investments aim to reduce empty km driven, lower CO2 emissions, and improve delivery times for customers' goods. Despite Q1's lower demands for logistics services, the outlook of the economy becomes better. The cost of money (interest rates) will define quite heavily the direction of further inflation and economic development in the next 6-12 months ahead.
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Justinas Mi?kinis
Head of Finance, Girteka Nordic
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