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Asia Pacific forwarding market to see fastest growth over five years

  • The regional freight forwarding market contracted by 8.5% last year
  • Projected growth this year is 13.2%, led by stronger air freight forwarding growth
  • Compared to 2019, the region’s freight forwarding market will be 3.6% larger
  • Over the next five years, the market is forecast to expand at 6.0% in real terms, the fastest among all regions

After contracting in 2020, the Asia Pacific freight forwarding market is projected to grow by over 13% in real terms in 2021, and to become the fastest growing regional market over the next five years, according to a new report from Transport Intelligence (Ti).

The transport and logistics analyst said the regional freight forwarding market contracted by 8.5% in real terms last year. Lockdown measures in response to Covid-19 led to the shutdown of entire sectors, which led to a fall in demand for freight forwarding services.

The region experienced a moderate recovery during the second half of the year, thanks to its comparatively swift easing of lockdown measures and buoyant consumer demand for Asian manufactured goods from Western Europe and North America.

This year, the region’s freight forwarding market is projected to grow by 13.2% in real terms compared to 2020, led by stronger air freight forwarding growth. According to Ti’s COVID Recovery Tracker (CRT), compared to 2019, the region’s freight forwarding market will be 3.6% larger.

Market growth will continue to be led by China as demand for Chinese goods from US consumers continues to grow. However, the Indian and Indonesian freight forwarding markets are forecast to rebound after a disappointing 2020.

“The Indian market, for example, looks set to benefit from pharmaceutical export growth and from businesses looking to diversify their supply chains away from China,” said the whitepaper entitled “Post Covid-19: global freight forwarding market forecasts 2020-2025.”

Over the next five years, the freight forwarding market in Asia Pacific is forecast to be the fastest growing of all regions, expanding at a real 2020-2025 compound annual growth rate (CAGR) of 6.0%.

The region has vast potential for growth, said Ti. The Regional Comprehensive Economic Partnership (RCEP) will boost regional as well as global exports and imports. Other trade deals, including the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), could strengthen intra-Asian supply chains especially in countries such as Vietnam, which will benefit from industries relocating manufacturing outside of China.

Vast room for growth within the freight forwarding market is also reflected in the region’s CRT25, which at 22.3%, shows a greater recovery than all other regions, said Ti.

Global forwarding bounces back

Meanwhile, globally, the freight forwarding market is expected to bounce back from a difficult 2020 with 11.6% growth in real terms in 2021.

The fast rebound is in part a reaction to the decline in volumes last year, noted the whitepaper. “The year ahead is likely to see much stronger volumes. With the vaccine roll-out starting to take effect in developed markets, the more favorable macroeconomic conditions are likely to allow for a strong recovery in the market.”

According to CRT, the global freight forwarding market is projected to be 1.9% larger in 2021 in real terms than in 2019.

The air freight market, projected to grow by 14.9% in 2021, has a less certain recovery, as the market expected to be just 0.7% larger than pre-Covid levels.

The market will benefit from an inventory re-stocking cycle, where sales growth exceeds the rate of replenishment of inventories as shippers use air freight to rapidly re-stock inventories to meet demand.

The sea freight forwarding market, with 7.6% growth expected, is projected to be 3.5% larger than it was pre-Covid. The market has already seen signs of rapid recovery in some areas, notably on Asia-US trade lanes.

The sky-high freight rates and extreme congestion that have come to characterize the market recently could hinder the recovery. However, these conditions are, in part at least, indicative of the strong underlying demand recovery in the market, the report said.

Over the medium term, the global market is projected to grow at a real 2020-2025 CAGR of 5.0%. The air freight forwarding market is expected to see higher CAGR of 5.4% than the sea freight forwarding market, which is forecast to grow at a real 4.5%. Air freight will benefit from the inventory restocking cycle that started in late 2020, as well as continued strong demand in the high-tech and e-commerce sectors.

The CRT25 reveals that over the five-year forecast horizon, air freight will be 14.1% larger compared to 2019, while sea freight will be 20.1% larger. This is a reversal from the CAGR rates and is due to the sharper decline in air freight forwarding in 2020.

Photo by Cameron Venti on Unsplash

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