Mid-year Forwarding Forecast

Pangea Logistics Network, an international group of independent freight forwarders based in London, recently presented a cautionary economic forecast for the industry through the remainder of the year.

“The World Trade Organization expects international trade to grow 3.9% in 2016, which is slightly higher than the 2.8% reported for 2015, but still below the average of 5% we've witnessed over the past two decades,” say Pangea analysts.

Although recovery seems to be stabilized in the United States and, to a lesser extent, in Europe, there is still some concern about the behavior of some emerging markets, especially in China, even though Asia will continue leading global growth. According to Pangea analysts, these five areas will shape market developments in the freight forwarding sector in 2016.

1) Free trade agreements will accelerate international trade: The trans-Pacific Partnership Agreement (TPP) has been signed and will facilitate free trade among 12 Pacific Rim countries (from the U.S. to Vietnam or Australia), which together amount for 40% of the world's GDP. Analysts also expected to close the agreement of the Transatlantic Trade and Investment Partnership (TTIP) between the European Union and the United States.

2) Freight transport rates will remain low: The weak growth in demand expected for 2016 will not be able to absorb the existing overcapacity, especially in maritime transport and also, to a lesser extent, in the airfreight transport area. Shippers will continue managing very tight budgets, meaning margins will be reduced and freight forwarding companies will need stringent cost control and greater efficiency.

3) The change from the globalization to the regionalization of transport will be highlighted: Global cargo volumes will continue losing ground in favor of the regional flow of goods. This is due to the rise of emerging countries and nearshoring, which brings production closer to the consumer to reduce transport costs. Small and medium-sized freight forwarders have a significant role to play in this new scenario where customer proximity is more important than size.

4) The cloud will continue reducing the technological divide: Cloud-based tracking and management solutions are now providing small- and medium-sized freight forwarders with access to services that, until very recently, were only available to the big players. This trend will continue in 2016 and extend to next generation technologies, providing improvements in managing transport and logistics such as Big Data, cloud computing and the Internet of Things.

5) Merging will continue, along with collaboration among independent freight forwarders: After a relatively calm period in the last few months, the major operators will start searching for new opportunities to acquire competitors. And in response to them, shippers will see more small and medium-sized freight forwarders who will continue to develop collaborative approaches to make better use of the existing capacities. This will include strategies to reduce costs and target large accounts through the global networks of freight forwarders.

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