Contract logistics industry grows 9%

The worldwide contract logistics industry grew by nine per cent to just over $220 billion (Dh808bn) in 2007, according to figures published yesterday.

The Middle East is one of the regions that will continue to witness high growth in contract logistics despite worries that a worldwide economic slowdown would have a serious impact on volumes and revenues.

The logistics sector was helped in Europe by strong low double-digit growth in the UK, Europe's largest market, according to research group Transport Intelligence's latest benchmark report, Global Contract Logistics 2008. Finland, benefitting from its strategic location as a gateway to Russia, was also one of the fastest growing markets.

All the markets in the Central and Eastern European expanded significantly faster than their western counterparts, as foreign investment in manufacturing facilities and the trend towards "near-sourcing" continued.

Growth rates in Germany and France were "solid" as the manufacturing and retailing sectors in both countries held up well.

So far, the slowdown seems only to have affected the US market to any degree. That country's contract logistics market grew by just under seven per cent in 2007 which represents a significant drop from its 10 per cent plus growth in 2006.

A slump in the construction industry, the "credit crunch" and lower retail sales all contributed to that slower growth, with the sector related to the distribution of import volumes from Asia Pacific particularly affected.

Asia Pacific, however, was the real growth driver in the global contract logistics market. Overall, that regional sector grew by in excess of 11 per cent. China's contract logistics sector continued its extraordinary growth, aided by the run-up to the Olympic Games.

"The world economy might be struggling but huge volumes in the region will continue to drive growth in the Middle East's logistics Industry," Bengt Ekstrond, CEO of GAC, Middle East told Emirates Business.

The region's logistics industry is estimated to be growing at between 16 and 18 per cent, ahead of the global growth rate.

Analysts say although 2007 was another good year for the global contract logistics market, the next few years will be challenging.

"So far, the contract logistics industry has shrugged off talk of the economic downturn and even in the US, where the transport industry is struggling, growth rates are remarkably good. However, we believe that markets around the world will inevitably be affected by the "credit crunch" and a loss of consumer confidence. Consequently, we are downgrading our forecasts for the industry accordingly," said James Clarke, a senior transport analyst based in Kuwait.