Small freight forwarders face uncertain future

Further consolidation on the cards as smaller companies find it hard to compete in current economic climate

The freight forwarding sector faces significant consolidation as smaller companies collapse because clients delay payments or change routes.

Hermann Ude, Chief Executive of DHL’s freight forwarding arm, told the Financial Times that the industry was particularly fragmented in Asia. In Hong Kong alone, the local association of freight forwarders has about 350 members.
Mr Ude forecast that exporters, besides facing payment delays, would ditch smaller competitors that did not have a sufficient network to divert their goods shipments to the Middle East and other more buoyant consumer markets than the US and Europe.

Mr Ude forecast that DHL’s freight forwarding business would not only gain market share but also “at least hold our profitability next year” despite anticipating a slump in Asian technology exports in the first quarter.
In a separate interview, Wolfgang Lehmacher, Chief Executive of GeoPost Intercontinental, the parcel courier subsidiary of La Poste, the French post office, agreed that the downturn would force exporters to rely more on global transport operators.

Mr Lehmacher said that GeoPost, a relative newcomer to the Asian market, was increasing its business by 10% a month in volume terms. “We don’t see any impact yet from the [economic] downturn.”

“In a place like Korea, a lot of companies are still operating their own logistics, so there is a real potential for them to run things more efficiently.”

However, overall air and sea freight has slumped recently, particularly on some of the main routes out of Asia.

In October, the freight volume passing through Hong Kong’s main air cargo terminal fell 9.9% from a year earlier after dropping 8.1% in September.

Volume there had risen at an average annual rate of 6.9% from 2001 to 2007.

Robert Bruce, Transport Analyst at CLSA, said air freight forwarders were particularly vulnerable.