Contract logistics market to bounce back from a painful 2020

Ti’s latest market forecasts show that the global contract logistics market is expected to grow at a real compound annual growth rate (CAGR) of 5.4% between 2020-2024. The forecast paints a positive picture of a market set to grow impressively over the period, but it should be noted that 2020 will be a painful year for contract logistics providers, with a contraction of 4.1% expected.

  • Global contract logistics market to shrink by 4.1% in 2020
  • Global contract logistics market to expand at a CAGR of 5.4% between 2020-2024
  • Asia Pacific market set to grow fastest with a CAGR of 8.0% 2020-2024
  • Europe’s contract logistics market is set to bounce back after a 5.9% contraction in 2020, with a CAGR of 3.8% 2020-2024
  • North America’s contract logistics market suffers a less severe 2020 fall than Europe, with a contraction of 3.7%, but will have a more subdued recovery with a CAGR of 3.1%

Underpinning the contract logistics markets forecast is a relatively healthy outlook for the global economy. The IMF expects real GDP growth to be down 4.4% in 2020, but the expectation is that 2021 will see something of a bounce back with a 5.2% expansion anticipated. Growth is set to continue after that as the impact of the pandemic fades, but it will be more subdued than the 2021 bounces back.

The pace and timing of the wider economic recovery is important for contract logistics providers. Manufacturing shutdowns, the closure of non-essential retail and stay-at-home orders across Europe, North America and Asia Pacific greatly hindered key contract logistics sectors during 2020. However, the picture has improved as the year has progressed with gradual reopening of manufacturing and retail, even with a wave of new lockdowns in Europe.

Contract logistics prospects are further buoyed over the forecast period by improving prospects in the retail sector after a tumultuous 2020. Store closures, inventory shortages and the rapid expansion of online sales in many markets heavily impacted by the COVID-19 pandemic look set to fundamentally change the retail landscape globally. Retail analysts expect sales to rebound between  5.7% to 9.6% in 2021 as consumer confidence is rebuilt, but the nature of this growth will raise questions for contract logistics providers which must grapple with an accelerated shift to e-commerce and an uncertain future of high streets, particularly across Europe and in North America.

Andy Ralls, a Quantitative Analyst at Ti said: “The contract logistics market looks set for a sound post-Covid recovery. This had been a consistent growth market over the past decade, with 3PLs commonly able to deliver strong results for their customers. Outsourcing logistics requirements is a good way of taking assets off the balance sheet, whilst potentially cutting costs too. This will be a key focus for companies that have suffered financially due to the pandemic, providing strong sales opportunities for 3PLs.”

Breaking the market down by region and country shows a diverse picture that reflects how countries have been affected differently by the pandemic, although all markets have been subdued to some degree by Covid-19. Asia Pacific’s contract logistics market is set to expand at a 2020-2024 CAGR of 8.0%, giving it the fastest expansion rate of any region globally. Though shutdowns prompted by Covid-19 meant huge disruption during the opening months of 2020, manufacturing across key sectors like chemical, automotive, high-tech and consumer goods have recovered. The momentum is expected to continue as the global economy recovers, fuelling demand for contract logistics services in the region.

In Europe, the market is forecast to grow at a real CAGR of 3.8% for the 2020-2024 period. The region’s contract logistics providers faced challenging conditions in 2020 with Europe one of the markets most severely hit by the Covid-19 pandemic. The European contract logistics market is set to end the year 5.9% smaller than at the end of 2019. Whilst the 2020-2024 CAGR shows contract logistics as a growth market over the next four years, weak economic fundamentals remain a threat with other downside risks like Brexit threatening to constrain the recovery.  

North America’s contract logistics market is forecast to expand at a CAGR of 3.1% over the 2020-2024 period, but the region’s economy will see its contract logistics market shrink by 3.7% in 2020. Growth on a regional level over the forecast period is dominated by the US economy which is expected to perform reasonably well, supported by economic stimulus from the incoming Biden administration.  

Source: Transport Intelligence, December 1, 2020.

Author: Transport Intelligence

Ti’s full market forecasts for the contract logistics market with all breakdowns by segment, region and country are available on the Global Supply Chain intelligence (GSCi) database.

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