The global freight forwarding market experienced one of its most challenging years in 2020 contracting by 8.7 percent in real terms, according to Transport Intelligence (Ti). IMF data suggests that global GDP contracted by 3.3 percent year-on-year in 2020, while world trade growth slowed to -5.2 percent.
Brighter times are in store, however, with the IMF projecting that global trade will grow at a compound annual growth rate (CAGR) of 5.2 percent between 2020 and 2025. Supply chain disruption is expected to subside and, so long as the pandemic is brought under control, the freight forwarding market should achieve a 5 percent CAGR during that forecast period.
2021 is shaping up to be a good year, with the freight forwarding sector growing at a rate of 11.6 percent in real terms and global trade increasing by 9.5 percent year-on-year. Still, this improvement is emerging from the nadir of 2020 and the market will be just 1.9 percent larger than it was in 2019 prior to the outbreak.
According to Ti, North America will rally quickest, with its freight forwarding market growing at a rate of 15.9 percent in 2021. Consumer demand and inventory restocking is buoying the market, although growth is being curtailed somewhat due to a slow recovery within the Mexican and Canadian automotive industries. The Asia-Pacific freight forwarding market follows closely behind, projected to grow by 13.2 percent in real terms in 2021 led by stronger airfreight forwarding growth.
The European freight forwarding market is forecast to bounce back in 2021, growing at a rate of 8.3 percent. However, the fallout of the Covid-19 crisis continues to weigh heavily on the region’s economic prospects with the IMF announcing that the Eurozone is unlikely to return to pre-Covid-19 levels until 2022, said Ti.
Longer-term, the airfreight forwarding market will grow at 5.4 percent CAGR between 2020-2025, benefiting from the immediate need to swiftly distribute Covid-19 vaccines across the globe. Additionally, the airfreight market will benefit from an inventory restocking cycle that started in late 2020, as well as continued strong demand in the high tech and e-commerce sectors. The ocean freight forwarding market is forecast to grow at a 4.5 percent CAGR in that time.
Ti expects the Asia-Pacific region to be the fastest-growing regional freight forwarding market over the next five years, growing at a real 2020-2025 CAGR of 6 percent, followed by North America at 5 percent and Europe at 4.3 percent.
Asia Pacific has vast potential for growth. Its Regional Comprehensive Economic Partnership (RCEP) will boost regional as well as global exports and imports. Other trade deals, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), could strengthen intra-Asian supply chains especially in countries, such as Vietnam, benefitting from industries relocating manufacturing outside of China, said Ti.
Europe’s recovery will take more time and its freight forwarding market will grow at a CAGR of 4.3 percent, making it 10.4 percent larger than it was in 2019.
Ti said: “The economy looks set for a return to modest economic growth, which will enable solid but unexceptional levels of trade volume growth. The automotive industry is forecast to stabilise over the forecast horizon and should also provide some relief for the forwarding market. However, growth may be hindered by increased geopolitical tensions with China.”