Freight forwarding market recovering, expected growth of 11.6% in 2021
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 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.
Air freight 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 actually 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."