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Forwarders expect margin pressure to intensify over next 5 years

THE global freight forwarding sector is estimated to have grown by 2.7 per cent in 2016, with robust air freight growth in China, while maritime cargo growth was far weaker, according to analyst Transport Intelligence's (Ti) Global Freight Forwarding 2017 report.

The US market experienced the reverse outcome with moderate expansion in sea freight as air freight growth faltered, reported London's Air Cargo News.

The report also found that collapsing air and sea freight rates - on the back of excess capacity and lower oil prices - caused revenues to "fall significantly."

While revenues fell, gross profits rose as the decrease in forwarders' buy rates was greater than that of the sell rates they offered to customers.

A survey contained within the report also showed that forwarders anticipate margin pressure - excluding rate and volume effects - will worsen over the next five years.

Investment in technology and offering new/more value-added services is seen to be the most effective way to try and sustain margins, the survey found.

The report also looks at technologies that are changing the industry and the impact of digitalisation.

Ti analyst Alex Le Roy was quoted as saying: "The research we have conducted indicates that there is substantial demand for online interfaces which allow forwarders to better serve shippers.

"Nonetheless, it is clear that the scope of these solutions, in terms of geographic coverage for example, needs to broaden in order for them to deliver value."

In a foreword to the report, Ti chief executive Professor John Manners-Bell, asserted that the forwarding sector is facing a challenging time, not least because the global economic environment has remained volatile and difficult to anticipate.

He cautioned that structural challenges such as trends towards regionalisation and near-sourcing coupled with greater technological demands will prove harder to deal with.

"Political, economic and technological pressure will continue to shape the industry in the coming year," he said.

"One thing is certain, whether large or small, freight forwarders will need to remain agile if they are to flourish in an uncertain and complex world."