According to experts from TI, the value of the global forwarding market is projected to reach EUR 352.7 billion in 2023. This represents a 5 percent decrease year-on-year in real values but a substantial 46.6 percent decrease at current prices.
The significant drop in nominal values is attributed to reduced transport rates, especially in the air and sea freight segments. Sea freight is anticipated to experience a 5.3% decline this year, while air freight, though still 4.5% below last year’s figures, is performing slightly better.
However, these declines are not solely due to lower rates. The concluding year was marked by a notable economic slowdown, which only began to be felt in the last quarter of 2022. The International Monetary Fund predicts a global economic growth rate of 3% for this year, down from 3.5 percent in 2022.
The condition of the forwarding sector is intricately tied to global trade. The World Trade Organization (WTO) recently revised its forecast for international trade volume growth to a meager 0.8%, down from the 1.7% expected in April. The slowdown is particularly pronounced in Europe, impacting sectors heavily reliant on imports from other parts of the world.
Warehouse stocks accumulated during the pandemic and supply chain congestion are still not fully depleted, leading to a low level of new orders and subsequently lower imports.
Rates are a significant factor dragging down the market. The global air forwarding market is expected to reach EUR 136 billion in 2023, a 4.5% decrease compared to the previous year. In the first half of 2023, there was a year-on-year decline of 5.8%, possibly indicating that the trough in economic activity is behind us.
In nominal terms, turnover dropped by a staggering 40.5%, primarily due to collapsing rates in the air transport segment. The increased supply of transport capacity, coupled with the easing of pandemic restrictions on passenger air traffic, further contributed to the rate decline.
Sea freight forwarding is facing a more significant year-on-year decline in value in 2023 compared to air freight forwarding. The market value is expected to reach EUR 216.7 billion, influenced by a reduction in container rates and a weakening of global trade.
Container rates were not only affected by weak demand but also by an increase in the supply of container ships ordered during the 2021-22 maritime transport boom. At current prices, the market value decreased by 50.4%, a consequence of the aforementioned price armageddon.
The entire logistics industry is pondering when the slowdown will end and when the rebound will occur. It appears that the trough is already behind us, with the expectation of an acceleration in economic growth next year.
However, a note of caution is warranted. The rebound in 2024 is predicted to be relatively weak. Despite falling inflation and potential interest rate reductions, geopolitical risks, such as conflicts in Ukraine and Israel, persist, keeping interest rates and inflation high.
Analysts from Transport Intelligence suggest that the level of inventories among European and American importers remains high. They estimate that the disposal of warehouse resources will last until the second half of 2024, delaying a more robust rebound in the logistics market. The first half of the coming year is still anticipated to have a relatively low level of new orders.
While growth on the forwarding market is expected, it will be minimal. The sea freight market is projected to grow by 0.4% year on year, reaching EUR 217.5 billion. Air freight is expected to grow slightly slower at only 0.2% (up to EUR 136.3 billion), with greater dependence on geopolitical conflicts.
An economic boom is not expected in the coming years. The IMF forecasts that the global economy will grow at an average annual rate of approximately 3.1% from 2025 to 2028. Inflation is not expected to return to the target level until 2025.
The logistics sector’s rebound is anticipated to be weaker than desired, with estimates suggesting an average annual growth rate of 1.5% in the years 2023-2027, reaching EUR 399.1 billion by the end of the five-year period. The air forwarding market is expected to develop faster, at a rate of 1.8% each year compared to 1.2% for sea freight.
Factors that may hinder the development of maritime forwarding and logistics in the coming years include concerns about weaker economic growth in China and the ongoing trend of focusing on service expenses rather than material goods.
On the other hand, the ambitious Saudi project of the Neom smart supercity in the north-west of the country could stimulate growth. Supported by companies like DSV and Kuehne + Nagel, the project is expected to generate multi-billion orders for forwarding and logistics companies worldwide in the coming years.
Photo by Paul Teysen on Unsplash