Forwarder Consolidation Still Needed After Record 2017 Volumes — Panjiva
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Forwarder Consolidation Still Needed After Record 2017 Volumes

Corp - Forwarders 160 Mergers 202 Mode - Seaborne 1286 U.S. 3362

The freight forwarders operating on U.S. inbound, seaborne lines had a slower end to a year of rapid growth after volumes of shipments in December rose by 3.9% on a year earlier, Panjiva data shows.

The top two forwarders by volume both experienced a slowdown, with Expeditors falling 0.8% and K+N by 1.8%. They likely lost market share to their closest competitors CH Robinson (which gained 1.8%) and Orient Express (15.5% higher). A rapid acceleration in traffic from Asia, as outlined in Panjiva research of January 8, likely helped the latter as well as other Asia specialists.

THE WEIGHT OF SCALE

Chart segments U.S.-inbound, seaborne volumes by NVOCC for most recent month. Bubble size indicates total volumes handled. Source: Panjiva

As a result of the rebound Orient Express jumped three places in the ranking of forwarders by volume to fourth place from seventh a year ago, displacing UPS which fell to six from five despite a 4.0% rise in volumes. That would suggest that UPS has been less aggressive in gaining market share at the end of the fourth quarter than it had been earlier in the quarter.  Among the European-based shippers Deutsche Post DHL did the worst, with a four place drop in the rankings to eighth reflecting a 0.6% drop in volumes.

ORIENT STEPS UP AS UPS AND DP-DHL STRUGGLE

Chart shows overall ranking on U.S.-inbound lanes for the most recent month vs. the rank a year earlier. Source: Panjiva

For 2017 overall volumes handled increased by 4.1% on a year earlier to reach a new record. That doesn’t obviate the need for consolidation among the forwarders, however, with the top 10 having a 16.3% market share in December vs. 16.6% a year earlier. While financial analysts expect a recovery in profitability (measured by EBITDA margin) to 11.5% in 2018 from 11.0% in 2017, that requires a degree of discipline on price competition and cost control. Both areas would benefit from consolidation in the sector.

The European operators, including K+N, Panalpina and DSV, have all highlighted a willingness to take part in “bolt-on” acquisitions, though larger scale deals shouldn’t be ruled out. Analysis of the major U.S.-inbound trade lanes in 2017 overall shows even Expeditors and K+N have top three positions in only 18 and 16 of the top 50 routes into the U.S. respectively.

Potential challengers to their position would include a combination of the European second tier – DB-Schenker or DP-DHL which have four top three places each – with Asia leaders Orient Express or Kerry’s Apex with four and seven respectively.

LANE-BY-LANE COMPETITION SHOWS FEW “EVERYWHERE WINNERS”

Chart shows ranking of NVOCCs by U.S.-inbound trade lane. Source: Panjiva

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