Sea freight forwarders take care of commodity handling from the point of production to the point of distribution. They use consolidation of freight from various customers and bulk load discounts to reduce the costs of freight to destination markets. Sea freight forwarders are logistics and supply chain experts that take care of packaging, documentation, transporting and warehousing as well as value-add services, to maximise the trade benefit for commodity producers.
The global sea freight market is forecast to grow by more than three percent per annum over the next five to seven years from USD 66.3 billion in 2018 to USD 80.7 billion by 2025. Australia is a key player in this market, with a value of approximately USD 6.8 billion in 2018 which might grow to around USD 8.3 billion over the same time period – about ten percent of the international sea freight forwarding market. That growth is expected to be dominated by the Asia Pacific, specifically China and India where significant manufacturing occurs, and Japan which continues to maintain massive trade volume. Right on Australia’s doorstep.
Australia is a key player in the sea freight market; with value near USD 7 billion.
The growth in sea freight forwarding has benefited particularly from the proliferation of bilateral and multilateral trade agreements over the past five years which has resulted in continued increase in global trade volumes. These agreements serve to remove traditional supply chain constraints such as complex customs procedures and trade tariffs, consequently improving transit times and increasing the efficiency of business operations.
However, there are also some challenges in the market. First, it is highly fragmented with 29 providers globally comprising 67% of the sea freight forwarding market – an average of about 2.3% market share each. Competition is fierce among these providers. Second, the emergence of tech forwarders including digital forwarders and spot platforms is placing price pressure on existing players and is a considerable efficiency driver. The question must be asked, though, whether these digital service providers are capable of providing the full level of service that commodity exporters can expect from a more hands-on freight forwarder – particularly when something goes wrong!
In the future of sea freight forwarding, success will be driven by:
- Focussing on customer needs and delivering more in the value add space;
- Smart take up of technology that improves the quality and competitiveness of freight forwarding services;
- Capitalising on competitive sea freight costs, particularly with subdued oil prices continuing.
The growth of the freight forwarding market, the associated positive impacts on freight and logistics costs from increased competition and the emergence of efficiencies through new technology and opening up of markets all bode well for Australian commodity exporters.