Logistics Market

The global Logistics Market is expected to witness sustainable growth in the next five years. The demand for Logistics is poised to be driven with the growth of seaborne trade and the growth of e-commerce. However, stagnation in global economic growth acts as a challenge for the market growth during the forecast period.

Seaborne trade continues to expand internationally as shipping has substantial contribution in the global economy. The bulk transport of raw materials, the international trade, and the import/export of food and manufactured goods are essential in any economy. According to the International Chamber of Shipping, the international shipping industry is responsible for carrying out around 90% of the world trade. Fast-paced industrialization and the economic liberalization have boosted the demand for iron ore and coal, which is primarily met by industries through seaborne trading. The rise in import and export of goods and dry bulk commodities and the growth of e-commerce and three-dimensional printing have increased the demand for dry bulk shipping, leading to the growth of the logistics market across the globe. According to the United Nations Conference on Trade and Development (UNCTAD), in 2018, merchant ship operations contributed close to USD 380 billion in the global economy in terms of freight, which accounted for 5% of total world trade. An increase in merchandise export has led to the need for seaborne trading. According to the World Trade Statistical Review 2018, merchandise exports reached USD 17.73 trillion in 2017, from USD 16.03 trillion in 2016. The growing seaborne trade has resulted in the demand for dry bulk shipping across the globe. The below figure depicts the growth of seaborne trade commodities between 2014 and 2017.

Emerging economies play an important role in the global logistics market owing to the increasing population, rising standard of living, and an increasing per capita income as such conditions have created lucrative opportunities for the players in the market. For instance, the UAE is considered the most dynamic country for e-commerce and logistics in the Middle East & Africa. Online shopping is rapidly growing in the UAE, owing to the increasing per capita income and the surging Internet use primarily among the young population. Such factors along with the development of logistic infrastructure are the reasons that will lead to the growth of the e-commerce industry.

Postal services that are the primary e-commerce delivery option in most developed markets, are usually underdeveloped in the Middle East. Many UAE-based service providers such as DHL and FedEx seldom offer the benefit of delivering without securing payments, which create challenges in the distribution of parcel services by reducing the cost-effectiveness and the speed of delivery. Such hindrances drive several large multicategory regional e-commerce players to shape their own last-mile delivery courier, express, and parcel infrastructure. One such company, Aramex is the leading regional courier, express, & parcel service (CEP) provider that has expanded across markets offering third-party courier services. According to MRFR analysis, the UAE courier, express, & parcel industry is growing with a substantial rate owing to the heavy investments in physical infrastructure worth USD 30 billion. In the UAE, huge investments are being made for big ticket infrastructure such as the construction of 1200 Km rail network and Al Mafraq-Al Ghuwaifat road renovation. This will strengthen the logistics network in the country. The UAE market is also commissioning the expansion of the existing air and seaports, which will also support the growth of transportation and logistics in the UAE. Jebel Ali, which is a multi-modal hub and free zone, facilitates regional, domestic, and UAE trade flows, connecting the UAE with 140 ports, globally. The port is undergoing expansion to increase handling capacity to 22.1 million TEU. The authorities in the UAE are trying to strengthen the position of the country as the e-commerce hub in the Middle East by increasing the number of new start-ups and businesses such as Shipa.com and attracting UAE investment and talent through prominent projects such as CommerCity in Dubai. Moreover, the Dh 3.2 billion-worth structure is spread over 2.1 million square feet. Such factors are expected to drive the growth of the courier, express, & parcel service (CEP) industry in UAE, which adds to the growth of the logistics operations during the forecast period.

Moreover, in India, the logistic market plays an important role in the country’s economic growth as it strengthens exports and creates employment along the supply chains. According to a report by NITI AYOG, India’s freight and passenger mobility sectors are expected to be lucrative and the logistics sector in Asia-Pacific is growing at CAGR of 10.5% and expected to reach about USD 215 billion in 2020. Thus, the scope for growth in emerging economies is expected to create opportunities for the market players while creating employment and strengthening the economic growth.

Shipping plays a vital role in the transport of raw materials, consumer goods, food products, and finished goods. The growth of the global economy and the shipping and logistics industry are interrelated as economic growth creates the demand for maritime transport with imports of raw materials for production. Political disturbances, revolutions, local wars, and strikes would affect the macroeconomic stability, and inflation rate, leading to the stagnated economic scenario leading to the slowdown of trade and in various nations. The below table shows stagnation in the economic conditions in various countries and regions between 2017 and 2019.

Less investments in physical capital and the upgrade of technology affect the GDP of a country, often leading to stagnant economic conditions, which would affect the growth of bulk shipping and transport in certain developing countries. This would further lead to a minimized rate of employment and poverty cycle for rural demographics. Thus, stagnation in the global economic scenario is expected to challenge the growth of the global logistics market during the forecast period.