While the economic downturn has, for the most part, receded into the background and business everywhere is starting to pick up, forwarders around the globe are still sorting out the effects of a lackluster few years.
Business in Europe and North America was subdued in 2010, while the Asia-Pacific region, as has been frequently reported, experienced an air cargo boom period. In preparation for Transport Intelligence’s Global Freight Forwarding 2011 report, CEO John Manners-Bell found that activity will also start to pick up elsewhere this year.
“Recent trends suggest a changing picture, with exports out of North America and European economies, such as Germany, showing some buoyancy,” he says.
The Asia-Pacific markets are also slowing down a bit, Manners-Bell points out. Any cooling off the region experiences, however, is relative to the vast activity it experienced during its initial boom. So compared to other regions, the Asia-Pacific market is still moving right along.
“The weakening dollar against the RMB and the restructuring of the Chinese economy toward consumer rather than manufacturing will have a beneficial impact on load factors into China,” Manners-Bell says. “Air cargo flows will become more China-centric rather than U.S.-centric.”
Work in the Asia-Pacific region and the general reboot of the worldwide economy helped a number of freight forwarders to successful years in 2010. According to data by the Wisconsin-based research firm Armstrong & Associates, the vast majority of the Top 25 global freight forwarders experienced year-over-year growth.
DHL Global Supply Chain & Global Forwarding leads the list of the most successful firms last year in terms of airfreight tonnage, with more than 4.43 million tonnes moved in 2010. DB Schenker Logistics, Kuehne + Nagel, Panalpina and Kintetsu World Express round out the top five.
Last year’s recovery in the airfreight industry is mirrored in the growth experienced on the ocean side. Instead of one industry growing at the detriment of the other, the two have seen a “strong early recovery followed by leveling-off,” Manners-Bell says.
“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 mis-location of inventory,” he says. “Anecdotal evidence suggests that this was a particular problem in the electronics sector.”
Manners-Bell believes that the market is returning to normal; traditional growth patterns — organic increases instead of growth driven by re-stocking warehouses — have re-emerged. But he warns that fragility still exists in the freight forwarding industry.
“It is also worth noting that the sector has returned to its seasonality, with big increases in volume prior to Christmas,” he says. “The issue of underlying volatility remains, underpinned by the uncertainties of the wider macro-economic picture.”
DB Schenker was one of the most successful airfreight forwarders in 2010, moving 1.22 million tonnes of air cargo. This number is a significant increase over its 2009 total of 1.03 million tonnes.
For Thomas Mack, senior vice president in charge of air products, the company’s focus moving forward is on integrating services, combining air, land, ocean and rail services in a complete package. This will give clients more value while also reducing costs for the company, he says. Regionally, the company’s main growth targets are Asia, Latin America and the near Middle East.
“We focus on a more efficient integration of our products to offer our customers a seamless service portfolio,” Mack says. “Growth in the future will not only happen on one product side, but will be the result of offering our customers global integrated solutions.”
One main issue that needs a bit of sorting out is the current fuel-pricing model. Mack says that airlines end up passing down risk when pricing fuel to the forwarders, and this, in turn, tickles down to customers. Rates are variable, which creates a problem when protracting business.
“[The model] is in not transparent,” he says. “We have more and more customers demanding more transparency and less fluctuating rates. We are discussing now with some of our carriers alternatives to the current model.” Also of concern to Mack is the shifting regulatory landscape. New rules concerning security and the screening of cargo always come with increased costs to the forwarder.
Another big issue, says Michael Blaufuss, senior vice president of air freight at Agility, centers around sustainability regulations. Hemming and hawing over the European Union’s Emission Trading Scheme is dominating industry chatter. Blaufuss is worried about the increased costs of such infrastructure changes and the commercial feasibility of sustainable processes. He also wonders if consumers are ultimately willing to pay for an increased environmental sensitivity.
“The logistics and transportation industry is a polluting industry,” Blaufuss says. “Change is possible — and happening — but there is not going to be an overnight revolution.”
Keeping changing regulations and the push toward sustainability in mind, Blaufuss says his company has begun upgrading infrastructure in what it believes will be key growth markets. Agility is targeting the Middle East, South Asia and China, Africa and South America.
Agility ranked 13 in the Top 25 list, with no movement in its airfreight tonnage from 2009 to 2010. Blaufuss says the company is content to grow organically and doesn’t foresee any big acquisitions anytime soon. It seems Agility is content to ride the slow wave of growth into 2012.
“We will see a recovery, although at a slower pace than initially expected,” he says. “Asia Pacific and the Middle East have shown better signs of recovery than other regions.”