In economic terms, 2007 will be remembered for a shift from a China-fuelled boom to a property-focussed bust. The present crisis in the global banking and credit system is so acute that some more cautious commentators are already describing it as a "blow to the Anglo-Saxon economic model".
Behind the scenes, one of the underlying trends is an 'unwinding' of trading patterns that have been established for several decades. The worrying thing for those in the logistics industry is that such developments are almost certain to affect them during 2008.
The past year has marked a zenith in the boom for logistics services. Freight forwarders, in particular, have seen continued double digit growth during 2007. That trend has been largely fuelled by the demand for container shipping out of China into the US and Europe.
The prosperity in the freight forwarding sector, which has been apparent for over a decade, has both attracted new players into the market such as Geodis and CEVA and underpinned the growth of established major players like Kuehne + Nagel into other segments of logistics.
Contract logistics has continued to perform in a modest way but that market is cautious, emphasising the complexity of the market for outsourcing.
German companies have remained high profile throughout 2007. Deutsche Post World Net has had a quiet crisis in its strategic direction, with the appointment of John Allan as chief financial officer indicating a shift away from 'size at any cost'. Meanwhile, the other German logistics giant, Deutsche Bahn, is stuck in a tunnel of the politicians making, with its privatisation stalled, at least for the moment.
The same forces that have stalled Deutsche Bahn's private sector ambitions have also skewered mail deregulation in Europe. Rail may also be suffering from similar resistance to the consequences of open markets in Europe despite a healthy number of private sector entrants hoping to exploit the potential of that mode – a potential well demonstrated in the US where rail has attracted long-term investment on the back of the promise of sustained high growth in container and energy sector traffic.
Volumes in the container shipping sector have also remained strong but as is so often the case the shipping companies have responded with the purchase of huge new capacity. Maersk, in particular, has suffered badly from its failure to properly manage expansion, illustrating that as in so many transport markets it is remarkably difficult to profit from market dominance.
Air freight is another sector where over-capacity is a traditional weakness. However, in 2007, many airlines could not indulge in their usual habits of creating too much capacity due to so many of them emerging from Chapter 11. This is already set to change in 2008.
Road freight in the US was hit by lower volumes in 2007 as that sector felt the effects of a major downturn. In Europe, growth rates remained flat, with even the biggest network road freight companies returning meagre figures. However, the market for acquisitions in Europe was strong with the UK and Germany seeing big purchases by DPWN, K+N and Norbert Dentressangle.
One sector for which 2007 turned out to be a great year was container ports, which saw their value shoot through the roof as financial investors realised the potential of those businesses for stable yet strong returns.
This year also saw the return of oil prices as a major cost pressure for the logistics industry as a whole. Yet so far it has appeared not to be a constraint on economic activity, in part because many transport providers have increased productivity and improved their fuel efficiency. Higher oil prices have, however, depressed profits in a fewer weaker markets.
In summary, 2007 was a quite good year for the logistics industry despite slower US growth. Volumes remained strong and many logistics providers were able to pass higher costs on to customers. What might be suggested with some degree of confidence is that 2008 will be worse.
Source: Transport Intelligence.
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