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The global logistics industry saw a strong bounce-back in 2010 as it emerged from recession, whilst the feared double-dip failed to materialize. Air, road and sea freight sectors recovered dramatically. Although this growth moderated as the year went on, many metrics suggested that the industry had recovered to pre-recession levels.
The upturn in freight volumes and the measures which carriers had taken to reduce capacity had a significant effect on freight forwarders' gross profits although the extent to which this occurred varied from sector to sector. Air freight capacity was particularly tight and rates have continued to rise throughout the year whilst sea and road transport markets have been much softer.
The industry was buoyed by economic expansion in China and South East Asia and if it hadn't been for concern about the ailing economies of the eurozone (in particular Portugal, Italy, Spain and Greece) and the massive deficits of other Western powerhouses, such as the USA and UK, confidence surely would have been higher still.
The shipping sector was amongst the biggest beneficiaries of the recovery. Whereas a year previously the sector had been close to meltdown, the surge in volumes and rates meant that revenues and profits soared. That no major liner company went bust is remarkable.
Security once again forced itself onto the agenda, when terrorists managed to smuggle bombs onto a number of integrators' and commercial airlines' aircraft. The USA and countries in Europe immediately announced tighter security measures such as banning air cargo from Yemen and the re-screening of air cargo on arrival. However there were also calls in the US to go further and a bill to force 100% screening of all air cargo is on the cards. Many industry bodies warned against knee-jerk reactions to the crisis, as this could be counter-productive and costly.
Supply chain resilience was also called into question when the Eyjafjallajökull volcano in Iceland erupted. This natural disaster had an extraordinary effect on the air transport system of northern Europe. The air space of first Britain, Norway, the Netherlands and then Germany, Austria, Belgium, France, and most of Europe was shut to all commercial traffic. This forced air cargo and international express parcels operators to implement contingency plans (where they had them) and utilize gateways in Southern Europe. Despite this, there were severe implications for many exporters of perishable goods especially in East Africa.
In terms of mergers and acquisitions there were few mega-deals, although there were numerous smaller purchases. Perhaps the most notable acquisition was that of UK-based logistics company TDG by French rival Norbert Dentressangle which had earlier acquired Schneider's forwarding business. UPS ruled out buying the re-structured TNT in favour of a 'fill-in' strategy which would see it purchasing smaller European players. DP-DHL and DB Schenker, for many years the driving forces behind consolidation in the industry, were very quiet signaling a period of focus on profitability rather than growth.
Perhaps one of the biggest surprises of the year, particularly for many financial analysts, was that giant US trucking company YRC Worldwide survived. Saddled with huge debts, its failure had long been trailed, and this would have led to a scramble for its market share by competitors and an increase in rates. Although it is by no means completely out of the woods, its future is much more secure than a year ago.
Price fixing was also a dominant theme in the year. In November, the European Commission fined ten airlines a combined €800m for their role in a global cartel that colluded to fix air cargo rates. Other administrations from the US to New Zealand have also issued fines. Freight forwarders were not immune with several global players fined by the US Department of Justice. Others are still being investigated by the European Commission concerning their alleged participation in price-fixing cartels in the air freight forwarding business in violation of antitrust rules.
In summary, we can say that world trade and the global economy has grown strongly in 2010 and this has underpinned the growth of those logistics companies exposed to global markets. The threat of a world slump has eased yet it is obvious that uncertainty is still the spirit of the age. The US economy faces big hurdles, whilst Europe suffers from self-inflicted financial wounds. The world has benefitted from the boom of emerging markets, yet the appearance of inflation in China may be the beginning of even more cause for nerves.
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