The ocean freight forwarding market posted double-digit growth in 2012 while the air cargo sector declined amid ongoing modal shifts, according to a new report.
The overall global freight forwarding market grew by 3.1 percent to $125.85 billion last year, almost entirely due to an 11.5 percent increase in the sea sector to $63.23 billion, industry analyst Transport Intelligence said.
In contrast, the air freight forwarding market shrank by 4.2 percent to $62.62 billion as a result of overcapacity, rising fuel prices and other operational costs, according to the UK firm’s Global Freight Forwarding 2013 report.
Despite its strong growth, the ocean market is still vulnerable to long-term overcapacity and erratic freight rates, Cathy Roberson, lead author of the report, cautioned:
“Forwarders have benefited from the modal shifts experienced in 2012, but there could be serious problems if these issues are not addressed. Although the air freight market was weaker in 2012, airlines are removing capacity around the world. If it wishes to continue its impressive growth, the sea freight sector should not continue to ignore these problems.”
The sea and air forwarding sectors have adopted contrasting strategies to increase volumes and profits in response to the new market dynamics, the report said.
Air freight forwarders are responding to significant declines in volumes as shippers shift to ocean transport by focusing on higher margin commodities such as pharmaceuticals and other temperature-controlled products.
Sea freight forwarders, by contrast, are expanding their less-than-containerload (LCL) offerings, particularly on Asia-Pacific trade lanes.
The services offer reduced shipping costs, increased flexibility and improved transit times over full-containerload (FCL) services. Companies have also developed multimodal offerings such as sea and road transport to provide door-to-door service and a combined air and sea service that reduces costs but still provides the faster transit time of air freight.
The report predicted the overall freight forwarding market will grow by 6.8 percent between 2012 and 2016.
“Although we expect the sea freight forwarding market to develop more rapidly, we also anticipate the air freight forwarding market will recover over the next five years as shifting trade lanes result in new opportunities in emerging markets,” Roberson said.
The Asia-Pacific region is the largest for freight forwarding, with a 32 percent global market share that is set to grow to 37 percent by 2016. Although the region is heavily dependent on exports, domestic demand is growing, which is boosting intra-Asia services.