Are freight forwarders threatened by shipping lines’ road and air freight moves?

In recent years, the world's largest shipowners have been consolidating the logistics market. Companies such as Denmark's Maersk, France's CMA CGM, and the Italian-Swiss MSC are increasingly expanding into various logistics segments. This development comes after the pandemic years of 2020-2021, which saw a dramatic increase in container rates, skyrocketing from approximately £2,000 for a 20-foot container to over £12,000 on some routes, resulting in astronomical profits for shipowners.

As a result, the last three to four years have witnessed numerous acquisitions by the aforementioned companies in complementary business segments. For instance, in August 2023, MSC purchased the cargo airline Alis Cargo Airlines, expanding its aviation activities (MSC Cargo Air was established in 2022). In the past few years, MSC also acquired major logistics operators such as Bollore Logistics and the French forwarder Clasquin.

In September 2023, the company bought 49% of the shares in the port of Hamburg's managing entity. MSC also ventured into the railway segment, acquiring the Spanish cargo carrier Renfe Mercancias last year. CMA CGM has been equally active.

In 2022, the company signed an alliance with Air France-KLM, purchasing 9% of the airline's shares. A year ago, the French shipowner acquired terminals in the ports of Bayonne and New York and established a joint-venture company, European Container Network, with the Italian railway operator GTS Rail. Additionally, CMA CGM purchased Gefco, a leading logistics company in the automotive sector.

Maersk, on the other hand, made significant acquisitions in the American market by acquiring the e-commerce business of Ingram Micro. In Asia, the company took over LF Logistics, which operates in the electronic sales market. In Europe, Maersk also acquired the B2C Europe courier company.

Even without acquisitions, Maersk has been expanding into new logistics areas, such as aviation and railway connections between Europe and Asia. Although their business models differ--Maersk integrated its forwarder Damco with the rest of the group, while CMA CGM maintains Ceva Logistics as a separate entity--the trend of expansion is evident.

Are they still shipping lines?

The expansion of these shipping lines has blurred the lines, making it difficult to categorise companies like Maersk, MSC, or CMA CGM as typical shipping companies, given the increasing share of onshore operations in their revenues. However, sea freight activities still dominate, just as sea freight dominates global supply chains.

By acquiring entities outside their core business, shipowners can offer services at all stages of the supply chain. This includes collecting goods from Asian factories, transporting them to ports, shipping them worldwide, storing them, and finally distributing them to the customer's door. Soon, a single entity could manage all means of transport and stages of cargo travel.

Moreover, by becoming logistics operators, companies like Maersk also provide customs services and other added values. "Our customers can relax, focus on the development of their business, and leave the logistics problem to Maersk," says Maersk spokesperson Rainer Horn.

Safe and fast

Horn also emphasises that owning logistics assets in the supply chain makes Maersk's operations more resilient in disruptive times. "By controlling these assets, our customers' supply chains become much more resilient," adds Horn.

This ownership simplifies, speeds up, and enhances the efficiency of load tracking and adjustments during crises.

Monopoly threat

However, not everyone is enthusiastic about this concentration of power. Shipping companies, responsible for organizing transport and creating supply chains, may feel the most threatened. When entities under one flag manage warehouses, ships, planes, trucks, trains, or barges, forwarders could be seriously affected.

The consequences could extend beyond shippers. Juliusz Skurewicz, secretary of the Polish Chamber of Forwarding and Logistics (PISiL), notes that this trend could lead to a situation where shippers are entirely dependent on a single service provider, potentially monopolizing global supply chains. "This is dangerous not only for exporters and importers but for the entire economy," warns Skurewicz. "No monopoly has ever benefited anyone, including the monopolists themselves."

The end of forwarding?

The question arises: could the consolidation of various logistics activities in the hands of a few entities mean the end of the forwarding industry?

The ongoing digitization of supply chain and logistics processes exacerbates this concern. Customers might bypass forwarders, arranging transport directly with carriers online. "Small forwarding companies, which make up the vast majority, may find it difficult to compete with large shipowners," says Skurewicz. "Especially those specializing in container forwarding with little else to offer."

Other forwarders will need to fight hard for survival. Skurewicz believes that representing the client's interests to the carrier is key. This includes selecting the right carrier, negotiating transport rates and conditions, and defending the client's interests in disputes.

Skurewicz concludes, "It's hard to imagine a carrier representing the client's interest in a dispute with itself.

This is the forwarder's power--knowing how to use it properly."