The global freight forwarding market is continuing to normalise, with demand for air and sea freight forwarding services remaining soft, according to the Global Freight Forwarding 2024 Report from Ti Insight. The report attributes the market contraction to challenges arising from a global economic downturn, shifts in consumer behaviour, and an oversupply surpassing demand, which have led to a 1.3 per cent contraction in real terms (holding prices and exchange rates constant) in 2023.

The performance of the market can be largely attributed to the weakness in air freight forwarding, which shrank by 2.1 per cent in 2023. Sea freight forwarding also underperformed, contracting by 0.6 per cent. The global economic downturn is cited as the main underlying reason for these disappointing results in the forwarding market.

In nominal terms (holding exchange rates constant only), the global freight forwarding market contracted by a significant 45.6 per cent in 2023. This substantial drop is attributed to reduced freight rates for air and sea compared to the previous year. However, the global forwarding market is expected to expand slightly in 2024, with a projected growth of 1.7 per cent in real terms, as per the report.

The Asia Pacific freight forwarding market experienced the third-largest market contraction compared to other regions. Despite this, it remains the largest region, accounting for 35 per cent of the global freight forwarding market. Ti data indicates that the global freight forwarding market will see a real compound annual growth rate (CAGR) of 3.3 per cent over the five years to 2028.

Ti’s State of Logistics Air and Sea Freight Forwarding Survey 2024 reveals that 91.1 per cent of freight forwarders are currently experiencing increased pressure on margins. Rising competition and stronger negotiation by clients are identified as the main reasons for this increased pressure. To combat margin erosion, targeting higher-margin clients and offering more value-added services are likely to be the most successful strategies in the next 12 months.

The report also notes that the exceptional market conditions of the past two years have ended, with markets now on a new trajectory. This shift has led to a significant downturn in revenue and profits among freight forwarders in 2023, with results falling back to what might be called normality. All of the top 20 forwarders saw revenue declines in 2023. Despite these challenges, Kuehne + Nagel maintained its position as the leader in the global freight forwarding market, with revenues of €15.988 billion (approximate $17.36 billion) in 2023.

“The market for freight forwarding has reflected the volatility of the wider market for air and sea freight over the past four years. For large freight forwarders especially, the years 2020-22 were a boom, with revenues increasing by half and profits doubling. However, 2023 saw results falling ‘back-to-earth’ with profits and revenues falling as the markets returned to what might be called some sort of normality. However, the market remains complex with exceptional events, such as the effective obstruction of the Suez Canal exerting effects on the market that have specific effects on different types of providers,” said Thomas Cullen, chief analyst at Ti.

Fibre2Fashion News Desk (DP)