The resurgent global economy led to a substantial expansion of the freight forwarding market in 2017. Buoyed by significant international trade growth, the market grew by 8.0% in real terms (holding prices and exchange rates constant).
In 2017, the rapid acceleration in global demand – at least compared against the last five or six years – meant air freight forwarders felt the effects more profoundly. The air freight forwarding market grew by 10.2% in real terms in 2017.
This was largely down to the need to re-stock inventories. The acceleration in growth, which was largely unanticipated at the beginning of the year, meant shippers needed to get products to market more rapidly. Faced with higher than expected demand, shippers utilised more expensive, but faster air freight services over sea. Growth in the air freight forwarding market was also led by strength in key vertical sectors, such as pharmaceuticals and e-commerce.
This is not to say that the sea freight forwarding market had a poor year by any stretch. Growth of 5.6% was twice as fast as the year previous and the strongest since 2011. Its market is more closely aligned with international trade volume growth than the air freight market. The IMF’s estimate for international trade volume growth was between 5.2% and 5.5% in 2017.
Overall, forwarding growth was broad-based, but increased demand and manufacturing output from North America and Europe was pivotal to the resurgence. China’s market also experienced strong growth, as its economy reversed the downward growth trend of the past six years. Its shift towards consumer spending is significantly altering trade patterns. During the year, Lloyd’s Loading List reported that eastbound air freight volumes (Europe-Asia) in certain key markets had begun to exceed westbound volumes for the first time.
There were also stark turnarounds in South America, Sub-Saharan Africa and Russia, Caucasus and Central Asia. Growing Chinese influence is playing a big part in each region’s development. Growing demand for fresh agricultural produce from Brazil, increased infrastructure investment in Ethiopia and growing trade links with Russia related to the Belt and Road programme are all examples of positive contributing factors to the countries’ respective forwarding markets.
Looking ahead, the market faces significant downside risks in the short to medium term. The growing prominence of regional trade blocs will tend to favour road-based transport, and particularly in Asia, low value, low margin shipping. Near-sourcing induced by smarter manufacturing techniques and rising wages could lead to a shift from inter- to intra-regional trade. China’s Belt and Road ambitions make the possibility of East-West modal shifts to rail a genuine option for some shippers. Protectionism could be detrimental to volumes on key trade lanes.
Even so, the market is expected to grow at a real 2017-2022 compound annual growth rate (CAGR) of 4.7%. This would prove to be stronger than the CAGR of the previous five years (3.7%), indicating that growth in 2017, although exceptional, is a sign of good things to come.
Source: Transport Intelligence August 2, 2018
Author: Andy Ralls
Ti’s new Global Freight Forwarding 2018 report contains market sizing and forecasting of the air and sea freight forwarding markets. In addition it provides information on the threat and transformation posed by tech forwarders, further analysis of the benefits of introducing new technologies into forwarding processes, the opportunities and challenges of serving SME shippers and the potential of African markets. Click here to download today.
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