Market conditions in the global freight forwarding industry look set for a year of substantial change in 2017.
With significant consolidation, scrapping of ships and the bankruptcy of Hanjin, container shipping is likely to witness significant changes from 2017. The Loadstar recently reported that Asia-North Europe freight rates for container shipping have hit 20-month highs in the build up to Chinese New Year, with Drewry’s World Container Index (WCI), exhibiting spot rates of $2,210 per forty-foot unit on the Shanghai-Rotterdam trade lane.
During 2016, 700,000 TEU was removed from global capacity as a result of ship scrapping. Moreover, the orderbook for new vessels has been reduced, though 1.7m TEU of new capacity is slated for delivery this year.
The industry is also dominated by fewer companies at the start of 2017 than one year ago, with the merger of UASC and Hapag-Lloyd, the takeover of Hamburg Süd by Maersk and the disappearance of Hanjin Shipping representing just three instances of this during the year.
Meanwhile, the data on air cargo suggests a revival in volumes within that sector. According to WorldACD, November 2016 demonstrated the strongest year-on-year volume growth since 2009. This comes off the back of strong cargo growth in September and October, despite IATA citing the weakness of global trade as a concern.
Furthermore, despite OPEC member states coming to an agreement on an oil output freeze, it appears likely that the rise of US domestic production will have a deflationary effect on prices. Moreover, the divergent interests of states such as Russia and Iran could result in the breakup of current agreements.
An additional issue to consider for the year ahead is the progression of emerging technologies, as denoted in our most recent whitepaper, Influential Technology Trends in 2017. Two notable areas of discussion in the paper that directly relate to the freight forwarding industry are the proliferation of mobile devices, and the rise of cloud computing; which Ti has covered for some time.
As we have written before, these technologies have impacted the business of freight forwarders by improving online customer user interfaces. Taking advantage of this, start-up companies such as Freightos and Xeneta have been able to carve out substantial niche businesses on the spot market, whilst others, such as FlexPort, have sought to leverage cloud computing to augment conventional freight forwarding. We can expect more of the same going forward.
Will 2017 be a positive year for freight forwarding, or a negative one? To have your say, please take a moment to participate in our latest Logistics Confidence Index survey here.
Source: Transport Intelligence, January 10th, 2017
Author: Alex Le Roy
GLOBAL SUPPLY CHAIN INTELLIGENCE (GSCi)