Freight Forwarding market recovery

Freight Forwarding market recovery

30.6.2021 | Forwarding

Freight Forwarding Market Recovery

Good news at last – the market is expected to grow by 11.6% this year.

Transport Intelligence’s (Ti) latest report, Global Freight Forwarding 2021, shows the post-Covid-19 global forwarding market is settling into its recovery phase after dramatic contractions in 2020.

However, market dynamics remain skewed with limited capacity available and sky-high freight rates presenting a challenging market for shippers and opportunities for forwarders to secure high margins.

The Global Freight Forwarding market contracted by 8.7 per cent in 2020, recording its worst year since the financial crisis as a result of the pandemic. The sea freight forwarding market contracted by 3.8 per cent in 2020, but air freight forwarding suffered worse with a decline of 12.3 per cent. However, the freight forwarding market is expected to bounce back strongly with a growth of 11.6 per cent in 2021 and a CAGR of 5 per cent from 2020-2025 as volumes recover.

The sea freight forwarding market is set to grow at 7.6 per cent in 2021 and at a CAGR of 4.5 per cent from 2020-2025. Growth in 2021 will largely be driven by the bounce back in volumes from 2020, particularly in Q2 2021 vs Q2 2020. Sea freight forwarding growth out to 2025 will be driven by the ongoing recovery in volumes, modal switches from air to sea and new trade agreements generating more trade.

Airfreight forwarding is set to grow at 14.9 per cent in 2021 and at a CAGR of 5.4 per cent from 2020-2025. Growth in 2021 is largely driven by a recovery of volumes from 2020 and very high freight rates. Longer-term growth out to 2025 will be driven by a recovery in global trade and strong growth in air freight intensive sectors like high tech, pharmaceuticals, and cross-border e-commerce.

The new report also shows that amid all the disruption to the air freight market the top 20 freight forwarders have significantly increased their share of overall volumes, from 65.05 per cent in 2019 to 74.89 per cent in 2020. The top 20 increased the air freight volumes they handled in 2020, despite market volumes declining by 12.50 per cent. Coupled with the high air freight rates that persisted through 2020, this led to a good year for large forwarders.

The sea freight market also saw volumes decline from 2019, with 9.95 per cent fewer containers handled in 2020. Nevertheless, capacity constraints and high freight rates enabled the top 20 forwarders to broadly maintain their revenues, even though they carried 7.49 per cent fewer containers than in 2019.

“A tumultuous 2020 saw major disruptions in supply chains the world over with the ability of forwarders’ to keep goods moving severely tested by shocks to supply and demand, carriers greatly reducing capacity, and congestion at logistics gateways, amongst other forces,” said Nick Bailey, Ti’s head of research. “Although the market saw one of the sharpest contractions in recent memory in real terms, sky-high rates resulted in record-breaking top-line performance for many forwarders. The pandemic also accelerated digitisation and digitalisation efforts across the market as speed, agility and responsiveness proved highly valuable capabilities during the crisis.”

Forwarding set for sharp uptick in volumes in 2021

Forwarding set for sharp uptick in volumes in 2021

18.5.2021 | Forwarding

Forwarding set for sharp uptick in volumes in 2021

Following a year in which volumes tumbled, the market is expected to see strong real growth. 

Ti (Transport Intelligence) projects the market will grow by 11.6% in real terms (holding prices and exchange rates constant).

The fast rebound is in part a reaction to the decline in volumes last year. The air freight forwarding market experienced a severe contraction after air travel plummeted and procuring belly-hold space became extremely challenging. The initial economic downturn also had an outsized effect on air freight volumes. With manufacturing coming to a halt, the demand for air freight in just-in-time supply chains fell drastically. Despite being an early casualty of the crisis, the sea freight forwarding market experienced a less severe decline. The impact of lockdowns and other public health restrictions on consumer behaviours provided some respite for the market. It led to a shift towards goods purchases and away from services, which helped the market retain volumes. Recovery was seen during the second half of the year, as consumer demand, on the back of various country-specific fiscal support packages, bounced back.

The year ahead is instead likely to see much stronger volumes. With the vaccine roll-out starting to take effect in developed markets, the more favourable macroeconomic conditions are likely to allow for a strong recovery in the market. According to Ti’s COVID Recovery Tracker (CRT), the market is projected to be 1.9% larger in real terms than in 2019. The air freight market, projected to grow by 14.9% in 2021, has a less certain recovery, with the CRT indicating the market is expected to be just 0.7% larger than pre-Covid levels. The market will benefit from an inventory re-stocking cycle, where sales growth exceeds the rate of replenishment of inventories. This tends to lead to high growth in the air freight market as shippers use the mode to rapidly re-stock inventories to meet demand. With a 7.6% growth expected, the sea freight forwarding market is projected to be 3.5% larger than it was pre-Covid. The market has already seen signs of rapid recovery in some areas, notably on Asia-US trade lanes. The sky-high freight rates and extreme congestion that have recently characterised the market could hinder the recovery. However, in part, at least, these conditions indicate the strong underlying demand recovery in the market.

Over the medium term, the market is projected to grow at a real 2020-2025 CAGR of 5.0%. The air freight forwarding market (CAGR: 5.4%) is expected to see higher growth than the sea freight forwarding market (CAGR: 4.5%). Air will benefit from the inventory restocking cycle that started in late 2020 and continued strong demand in the high tech and e-commerce sectors. Typically, in ‘normal’ economic conditions, sea freight tends to grow at a faster rate than air freight. This is because there is more certainty around likely demand levels, enabling shippers to opt for less expensive sea freight services. However, the inventory re-stocking cycle due to take place in 2021 gives air freight a stronger 5-year growth rate projection.

The CRTs for 2025 show a slightly different take on the market segments. Given the depth of the decline in air freight in 2020, the CRTs for 2025 reveal that the sea freight forwarding market will look stronger relative to its pre-Covid position. The tracker shows the air forwarding market is projected to be 14.1% larger in 2025 in real terms versus the market size in 2019. Meanwhile, sea forwarding is projected to be 20.1% larger. Overall, this means the market is expected to be 16.7% larger than pre-Covid levels, showing a convincing recovery for the freight forwarding market.

Source: Transport Intelligence.