Global contract logistics market size and growth 2020-2025

After a decade of growth, the global contract logistics market contracted by 3.3% in 2020, as a strong H2 prevented worse outcomes.

After a decade of growth, the global contract logistics market contracted by 3.3% in 2020. A positive ending to the year helped prevent growth being any weaker. Despite new waves of the pandemic becoming apparent in Europe and North America, the hits to the market have been much less severe than during the first wave in Spring 2020.

Firstly, countries have developed lockdown strategies to reduce health risks whilst still maintaining large elements of economic activity. For instance, the majority of factory closures seen during the first half of 2020 were not repeated towards the end of the year. As a result, 3PLs have continued to provide the warehousing, distribution and value-added services, such as sequencing or CKD operations, that were disrupted in the Spring. Secondly, pent-up demand has continued to drive economic growth, producing further demand for contract logistics services. Through early lockdowns, even at the height of economic difficulties, household savings increased amid the shutdown of large parts of retail, with government support keeping unemployment at low levels.

2021 forecast

Although the turnaround towards the end of the year was not strong enough to prevent a sharp contraction in the market in 2020, stronger levels of consumer spending bode well for the year ahead. As vaccination efforts gather pace and economic growth returns, the global contract logistics market looks set to benefit. The potential for spending to re-orientate away from goods expenditure and towards the services sector weakens prospects slightly, but nevertheless, the economic rebound will be sufficient to drive strong contract logistics growth in 2021 of 6.5%.

In fact, Ti projects that the global market will have recovered lost revenues by the end of 2021, with our COVID Recovery Tracker (CRT) indicating that the market will be 2.9% larger compared with pre-COVID-19 levels (the market size in 2019 at prices and exchange rates constant at 2020 levels).

However, not every region is expected to see such a recovery. Europe, the region hit hardest by the economic consequences of the pandemic is still projected to lag behind 2019 levels. Conversely, Asia Pacific looks set for a strong recovery. 2021 forecasts for Europe signal signs of recovery with a growth rate of 4.8%, after an unprecedented contraction in the first half of 2020. Europe’s economy began to improve beginning in Q3 yet has fallen well short of a full recovery. Resumption of retail activity is largely contingent on its ability to halt new COVID-19 waves and avoid further economic disruption. General expectations are for a weak first half of the year, followed by the EU economy gaining momentum with vaccinations taking place and restrictions lifted. This will release pent-up demand, with sheltered household income fuelling private consumption in the latter half of 2021. However, because of the anticipated disruption from COVID-19 in H1, the CRT for 2021 (CRT21) shows Europe will still be 0.5% smaller than it was in 2019.

North America’s contract logistics market is forecast to grow at 6.2% in 2021. As its largest economy, the US is projected to grow at 6.4% and is expected to see its retail sector driving much of its contract logistics activity, which will be partially fuelled by a strong stimulus package. The region is projected to expand by 3.1% according to its CRT21, compared to 2019 levels. Projections for Asia Pacific’s contract logistics market show a growth rate of 8.2% for 2021. China’s recovery is forecast to continue into 2021, at a rate of 11.1%, ahead of its regional forecast, with strong domestic retail growth as well as accelerating global demand for its goods. Its CRT21 shows the market will be 6.0% larger than it was in 2019.

2020-2025 forecast

The global contract logistics market is projected to grow at a real 2020-2025 CAGR of 5.1%. Meanwhile the CRT for 2025 shows the market will be 24.0% larger when compared with 2019, signifying a robust rebound from the economic effects of the pandemic. The consequences of the COVID-19 shock to the global economy are difficult to predict, due to its unprecedented nature. However, global and regional developments will create varying degrees of recoveries. The US-China tensions are set to disrupt established supply chains in those regions. Meanwhile, Europe is still grappling with an effective rollout of its vaccine program, which curbs a rapid recovery, though comprehensive recovery funds will likely provide a lifeline to several economies.

Source: Transport Intelligence, March 25, 2021

Author: Transport Intelligence

Ti’s latest Contract Logistics Market Sizing data for all regions and countries is now available on the Global Supply Chain intelligence (GSCi) platform, available exclusively to GSCi subscribers. This includes global, historical growth rates, market sizes, 1-year growth projections and 5-year forecasts. To read more about the growth of the market please download Ti’s latest whitepaper: Post Covid-19 Forecasts: Global Contract Logistics growth 2020-2025.

Or, for more detailed market forecast data, please contact Ti’s Head of Commercial Development, Michael Clover about GSCi at [email protected]