By Charlotte Goldstone, 25 July 2024
The global freight forwarding market contracted by a staggering 45.6% in 2023, according to Transport Intelligence's (Ti) latest Global Freight Forwarding Market Report. This decline, attributed to a fall in freight rates from their peak levels in 2021 and 2022, has impacted the airfreight forwarding sector more significantly than its ocean counterpart.
Despite the substantial drop in nominal terms, Michael Clover, head of commercial development at Ti, highlights that the real terms growth, reflecting underlying volume, paints a less bleak picture. The market saw a 1.3% contraction in real terms, bringing the market value to â¬192.7bn ($209bn).
Ti attributes the market contraction to a combination of factors: a global economic downturn, shifts in consumer behaviour, an oversupply exceeding demand, and the impact of geopolitical risks, including the ongoing conflicts in Ukraine and Israel. The rise in inflation and fuel prices, coupled with weakened consumer demand, further exacerbated the situation.
The report points to a more pronounced weakness in the air freight forwarding sector, which shrank by 2.1% in 2023. Ocean freight forwarding, while showing a less desirable performance, experienced a smaller contraction of 0.6%.
The overall health of the freight forwarding market is closely tied to the strength of international trade. According to UN Trade and Development (UNCTAD), the value of international trade declined moderately to around $31trn in 2023, driven by lower global demand, particularly for goods.
Looking ahead, Ti forecasts a more fragmented global economy driven by geopolitical events, leading to increased financial instability. Consequently, the global freight forwarding market is expected to grow at a 3.3% compound annual growth rate (CAGR) over the next five years, reaching a market value of â¬226.7bn ($245.9bn) by 2028. Air freight forwarding is projected to expand at a 3.6% CAGR, while ocean forwarding is expected to grow at a 3% CAGR.
Despite this gloomy outlook, the report highlights a degree of optimism among freight forwarders. A significant portion of respondents in Ti's freight volume survey anticipate continued volume increases, with 31% expecting air freight volumes to increase by more than 10%.
To sustain profit margins over the next five years, Ti suggests forwarders focus on strategies such as targeting higher-margin clients, offering new or more value-added services, and investing in new technology.