X

Thank you for sharing!

Your article was successfully shared with the contacts you provided.

BRINKWORTH, UK-Despite recent improvement in the global economic situation, the international logistics market may face further deterioration, claims a leading logistics researcher. The outcome could significantly reduce the number of tenants competing for logistics space.

“To a large degree the logistics industry’s future is very much at the mercy of the administrators and bankers who brought about the present economic crisis,” explains John Manners Bell, CEO of Transport Intelligence (TI), a UK-based logistics research and analysis firm. “If they are able to navigate the global economy out of the present recession without making things worse, carriers and forwarders can probably look forward to [a period that is] difficult but manageable. However, a meltdown cannot totally be ruled out.”

According to Bell, to this point the market has reacted the way classical transport market economics theory predicts, with rates in freefall as freight capacity outstrips demand, hurting carriers but allowing freight forwarders take a larger slice of a diminishing pie. But he says enough capacity has now been removed to allow carriers to gradually increase rates, and from this point forward, the future is less predictable.

TI has identified three possible scenarios for near-term change. Each all has very different implications for the global logistics industry.

Scenario 1: There will be a return to growth following the bust, with volumes increases in line with consumer confidence and rates firming until capacity matches demand. Low interest rates and fuel costs will enable carriers to reduce costs and increase profits.

Scenario 2: Freight volumes increase, but instead of lowered fuel costs, fuel prices rise as demand for oil grows, resulting in higher inflation. As central bankers attempt to control inflation by raising interest rates, both carriers and forwarders are forced to pass the difference to clients, who begin to look for cheaper alternatives. Some inevitably go out of business. TI characterizes the resulting market as “difficult, but manageable.”

Scenario 3: Volumes remain flat, but inflation becomes ingrained, as government stimulus packages pump more and more money into the economy. Banks raise interest rates to control inflation, suppressing economic growth.

In Bell’s opinion, the third scenario would be worse than the present downturn and lead to a structural transformation of the industry as capacity is driven very quickly out of the market. While the carriers that survive might regard the change as positive because it puts them in a much stronger bargaining position with both landlords and clients, forwarders, which work best with a large pool of high-quality but low-cost suppliers, would suffer, as would suppliers and manufacturers.

Want to continue reading?
Become a Free ALM Digital Reader.

Once you are an ALM digital member, you’ll receive:

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

*May exclude premium content
Already have an account?

Dig Deeper

GlobeSt

Join GlobeSt

Don't miss crucial news and insights you need to make informed commercial real estate decisions. Join GlobeSt.com now!

  • Free unlimited access to GlobeSt.com's trusted and independent team of experts who provide commercial real estate owners, investors, developers, brokers and finance professionals with comprehensive coverage, analysis and best practices necessary to innovate and build business.
  • Exclusive discounts on ALM and GlobeSt events.
  • Access to other award-winning ALM websites including ThinkAdvisor.com and Law.com.

Already have an account? Sign In Now
Join GlobeSt

Copyright © 2021 ALM Media Properties, LLC. All Rights Reserved.