Bleak outlook will force more mergers and buy-outs

The immediate prospects

for the freight industry in

all its formats are globally

considered to be pretty

bleak.

And this is likely to lead

to a rationalisation process

– with more mergers, buyouts

and takeovers just one

of the predictions of what

the future holds, according

to a selection of industry

executives questioned by

FTW.

Globally, both air and

sea freight modalities have

been hard-hit by the sudden

drop in volumes created

by lower-than-expected

levels of consumer demand

following the downturn – a

situation that looks set to

continue into the uncertain

future. So those involved in

these modes are having to

find innovative ways to stay

ahead of the competition.

“It’s a mixed bag,” Garry

Marshall, MD of Bidair

Cargo, told FTW. “A lot

depends on which trade

lanes and countries you are

focusing on. The UK, for

example, is looking good

at the present time, and

airfreight with that country

is expected to be strong.

“The world economy is

never static,” he added,

“some growing and some

taking a beating. So it’s a

tough choice.”

But on the converse side,

he bemoaned the current

rand exchange rates, which

were adversely impacting

the cost of foreign goods

and simultaneously

pushing down airfreight

imports.

On the ‘more mergers

etc’ side of things, Marshall

pointed to this being a

distinct trend in the air

express industry.

His overall feeling was

that it was all governed by

things are up, airfreight is

up. If they’re down, then

airfreight is down.”

While admitting that

seafreight volumes had

dropped off, Glenn Delve,

SA marketing director

of MSC, still expressed

optimism about the shortand

medium-term future.

“We’re holding our own,”

he said, attributing much

of this to the fact that MSC

was following the dictum

that your success depends

on the service you are

offering, both on the ocean

and the land side. “I’m also

optimistic about growing

volumes,” he added.

The key future issue

on the agenda for freight

forwarders, said a

forwarding executive, was

the impact that China now

exerted on the world trade

scene.

Pointing to a recent

international report, he

highlighted that as long

ago as 2013 this country

had overtaken the US in

annual trade in goods,

according to official

figures.

“This,” he said, “now

means that Chinese

ports and hub-and-spoke

networks are of primary

importance to global

freight forwarders, and

shipping schedules are

developed around them.”

Added to that, China

had improved supply

chain links with emerging

economies in Africa, Latin

America and the Middle

East, he said. Rising

costs were also forcing

Chinese companies to

outsource some low-skilled

and labour-intensive

production to these,

amongst other, lower-cost

countries.

And it was therefore

leveraging its alliances

with those regions and

increasing its imports from

these trading partners

to support its own

infrastructure projects.

“Logistics service

providers (LSPs),” he said,

“have begun to gear up

for increases in future

shipment volumes going

the other way.”

On the road freight

side, it has to be

recognised that it is almost

impossible for the supply

chain to keep moving,

either domestically or

internationally, without

using the road network,

according to Carl Webb,

specialist in abnormal

road transport and MD

of Project Logistics

Management (PLM).

“But business is down for

sure,” he said. “However,

while the markets are bad,

the signals are good.

“Guys in the likes of

Zambia and Zimbabwe

were shipping through

Walvis Bay, Maputo and

Beira before, but are now

coming back to Durban.

The reason is probably

because these other ports

charge in the US dollar –

which is strong. So they’re

turning to Durban, which

charges in rands.”

Webb also highlighted

the growing age of SA’s

road transport f leets as

a contrary factor. Road

equipment has a certain

lifespan, he pointed out,

and eventually it gets to the

stage where maintenance

and repair is not feasible

any longer. “So you get hit

with a double whammy.

You either find the capex to

replace your fleet, or go out 

of business."