Survey findings highlight revival of the freight forwarding market

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Air, road and sea freight volumes have continued to rise this year despite the logistics industry entering a post-downturn phase in 2010, according to a recent survey conducted by Transport Intelligence (TI) and Kewill, provider of solutions that are designed to simplify global trade and logistics.

At the beginning of the year the upturn was intense, with CEVA, in particular, seeing air cargo volumes grow at 45% in the first quarter. Whilst this growth fell off as the year went on, many metrics suggested that the industry had recovered to pre-recession levels. The upturn in freight volumes and the measures which air cargo carriers and shipping lines took to reduce capacity had a dramatic effect on freight forwarders' gross profit. Upward pressure on rates meant that although revenues soared across the board, margins were squeezed.

The industry was buoyed by economic expansion in China and South East Asia, whilst the shipping sector was amongst the biggest beneficiaries of the recovery. Whereas a year previously the sector had been close to meltdown, the surge in volumes and rates meant that revenues and profits soared. For instance, in the first nine months of the year, market leader Maersk turned around a comparative loss of $300m to a profit of $3.6bn.

Growth in world trade remains strong at around 5%, which augurs well for the sectors such air and sea freight, yet optimism in the freight forwarding sector seems to have waned as the year has progressed. Global trends suggest demand is capable of supporting the sort of growth seen in the global logistics over the past six months, and problems of over-capacity may loom in certain markets - notably shipping - but as ever, this will be a two-edged sword with freight forwarders likely to benefit from lower prices.

Sea and air freight
By early 2010 it appeared that there would be extensive bankruptcy and re-structuring amongst even the largest shipping companies, but the vigour of the recovery and the ability of the shipping companies to re-establish their margins led to a stabilisation in the sector. Volumes fell markedly in the early months of 2009, yet the 'bounce-back' was reasonably rapid. Initially driven by rapid driving-down of inventory followed by rapid rebuilding of inventory, underlying demand has seen what appears as a fairly stable recovery in high single figure percentages.

The air freight market has seen a similar recovery; the picture of a strong early recovery followed by levelling-off has been broadly similar. Demand has continued to trend upwards from the lows seen in the recession during late 2008 and the early quarters of 2009. The recovery of early 2010 was interesting. Quite violent in nature, international freight saw a recovery driven by re-stocking and an element of supply distress as shippers struggled to rectify the mislocation of inventory.

Market growth
The global freight forwarding market, which was severely impacted by the economic downturn in 2009, saw a major rebound as the economy - and in particular, trade - recovered in 2010. Western retailers and manufacturers began replenishing stock, and orders from suppliers resumed. Increasing volumes meant higher capacity utilisation leading to increased rates. This strong volume increase coupled with rising rates led to high double digit growth of 33%, and consequently, the overall size of the sector increased to above the pre-recession level recorded in 2008.

Looking ahead, the freight forwarding market is expected to see moderate, single digit growth over the next five years. Volumes, which have experienced extreme fluctuations during the downturn and recovery period should stabilise. Lower levels of growth are anticipated from 2011, with Ti forecasting that the market will grow at a Compound Annual Growth Rate (CAGR) of 8.9%.


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