Shifting in the lower ranks
Also in the lower tier of the Power 25, many other forwarders with ambitions of growing into full-scale integrators are also jockeying for position. For example, Taiwan-based Dimerco Express is one of the leading forwarders on the list, not in revenue, but in freight growth, Armstrong said. The $560 million in gross revenues for 2014 was relatively small, compared to most of the other billion-dollar companies on the list. But the revenue figure represents a remarkable 16.4 percent increase over 2013.
Currently listed No. 21 overall, Dimerco, specializing in high-tech customers, such as ACC TECH and Foxconn, earns about 80 percent of its revenue comes from Asia and about 18 percent from North America. “Their success is tied to high-tech trends,” Armstrong said. “Even at the slower growth rates we’ve seen in China, manufacturing activity there is still fast for the rest of the world.”
Andy Hsu, vice president of Dimerco Express Group, said the company’s various integrated, intermodal logistics and warehousing services will help connect mainland China to the rest of the world more cost-effectively than any single mode of transport. Dimerco has 139 offices in 17 countries, including 70 offices in China, which contribute to more than 70 percent of the firm’s airfreight revenues in 2014.
Hsu said he expects to see continuous demand for LED panels, cell phones, solar panels and wearable consumer electronics for the next few years in China, noting that “the product life cycle of most electronics become shorter and shorter nowadays.”
Besides Southeast Asia, Hsu said South and Central Asia and Eastern Europe markets are “growing sharply.” Regarding the recent problems stemming from the West Coast port crisis, Hsu said Dimerco’s ties to the railroads had provided an alternative solution by developing “modern-day silk roads.” Utilizing bonded rail transportation between China (Suzhou/Chongqing/Man-Zhou-Li) and Central Europe (Warsaw/Duiburg), he said Dimerco can ship goods securely and with temperature control via rail that is 70 percent cheaper than airfreight and arrives 20 days faster than seafreight.
From Denmark, DSV A/S, is another fast riser that is expanding globally. “It used to be a Eurocentric firm, but has recently branched out, especially with contract logistics, warehousing and other integrated solutions,” Armstrong said. Some of its clients include automotive and high-tech firms, such as HP, Hitachi, Philips, Porsche, Pirelli and Volvo. Currently ranked No. 16, DSV had a 10.9 percent increase in 2014 in airfreight to 288,000 tonnes. Besides the obvious Asian and U.S. markets, DSV is looking to expand in South Africa and South America. DSV had acquired several smaller companies in 2012 and 2013, and also opened new offices in the U.S., Mexico, Brazil, Peru and Colombia. Last year, the company completed its integration of the Swift Freight Group in South Africa.
“Following several years of low growth rates, the global airfreight market picked up speed with an estimated growth rate of 3 to 5 percent in 2014,” said Jørgen Møller, managing director of DSV’s Air and Sea Division. Jens Bjørn Andersen, DSV’s CEO, said the freight volume growth rate for 2014 was considerably above the average market growth rate, which led to an increase in operating profit by more than 11 percent.
Kintetsu World Express (KWE), ranked No. 5, saw its airfreight tonnage fall by 5.6 percent in 2014, but it recently announced that it was purchasing forwarder APL Logistics from Neptune Orient Lines for $1.2 billion. While Armstrong said the merger wouldn’t add many airfreight tonnes to KWE’s total, it would significantly expand the company’s 543,000 twenty-foot equivalent units (TEUs) of oceanfreight by 133,000 TEUs. Kintetsu also has a good warehousing operation in the U.S. and can supply lead logistics for high-tech firms like Lenovo, as well as companies in the automotive sector.
KWE, a wholly-owned subsidiary of Kintetsu Railway, has developed its logistics network to support consumer electronics from Japan – a market that is “somewhat limited” now, said Tom Smith, Kintetsu’s senior executive officer, administration and procurement. Many Japanese companies have moved their manufacturing overseas after the 2011 earthquake and tsunami, he said. “Electronics is still an important vertical market for us, but it’s stagnant, so we are utilizing our existing network to promote automobile manufacturing, aerospace and healthcare business,” Smith said.
APL’s core business is different than KWE’s, with strength in finished automobiles, retail and industrials, which Smith said will bring a great deal of synergy to the company. APL is Singapore-based but Smith said its largest customer base is in the U.S., while KWE’s is Japan. Although he considers APL to be a full-range logistics service, it is APL’s strong intermodal network, trucking, contract logistics and buyer’s consolidation services that will have the most impact. With this acquisition, Smith said he expects KWE will become a truly global, well diversified logistics leader.
India on the horizon
As for the rest of 2015 and 2016, the analysts at Armstrong & Associates are fairly positive that the gains of 2014 will continue in most regions. “We expect the 2014 to 2016 rate of growth to be 5.6 percent,” said Evan Armstrong. “We’re seeing better growth in India and China and North America. Europe and South America, however, continue to have slow growth.”
Kintetsu’s Smith agreed with Armstrong that India is a key market of the future. KWE has created a joint venture with Gati, which Smith calls “the FedEx of India,” to form Gati-Kintetsu Express. Gati has 4,000 trucks in India. KWE has bincreasing its focus on Asia, while expanding its network with cross-border trucking services, while expanding into new markets such as Mexico, Brazil, Bangladesh, Cambodia, Myanmar and Turkey.
Dimerco’s Hsu said he sees a promising future for the forwarding market in 2015, especially in China and its e-commerce boom. But he said he also will place more emphasis on new investment in South Asia, including setting up new office in Mumbai, India, and expanding operations in Vietnam, Indonesia and Cambodia.
That doesn’t mean Asia is the only region with opportunity, Hsu said. Because of the depreciation of the euro, Dimerco will focus on export shipments from Europe and set up a new office in Rotterdam. In that location, he will be able to cooperate more closely with Dimerco’s strategic partners in Germany, France, U.K., Italy, Czech Republic and United Arab Emirates.
The forwarding industry, Armstrong said, has evolved from a fragmented business to a more consolidated industry in the last few years. “Europe has a more mature market, so there may not be much more M&A activity there, but we’ve seen quite a bit of it in the U.S. and Asia,” he said. “There will probably be more mergers and acquisitions if the economy stays hot.”
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