Unlocking global value

GLOBAL INVESTOR 2.07 Basics — 27
The world economy is being transformed by the global expansion of
trade flows: since 2003, global goods export growth has reached
an average of +8% per annum (p.a.), far above global economic
growth of +4.5% p.a. Trade volume growth has thus significantly
accelerated. Figure 1 shows world exports of goods and services in
real terms as a proxy for global trade volumes. In this new worldwide
market, emerging markets (EMs) play an ever increasing role:
since 2000 they have accounted for roughly two-thirds of world
economic growth compared to 55% in the 1990s and less than 50%
in the 1980s. The emerging markets’ share in global trade has increased
significantly, as many countries have capitalized on competitive
advantages to boost exports. Parallel to EMs’ rising share
of global production, some Western countries, like Germany or
Switzerland, have benefited from their specialization in production
infrastructure, advanced machine tools, and logistics management
to increase their exports to new rising EM industrial stars. As a
result, demand for infrastructure and Western demand for logistics
to cope with rising imports has surged.
While global trade has created increased demand for logistics
services, the internationalization of production processes has had
a profound impact on logistics management. The complexity of global
distribution networks call for ever more sophisticated logistics
services, embracing a variety of transportation forms (such as rail,
road, air or sea freight transport channels) and a multitude of production
interfaces. Looking to the future, we see further robust
demand growth for logistics services. In Asia, we expect continued
strong growth in China, increasingly a manufacturing hub for the
world. China has become the world’s third largest exporter, accounting
for 8% of global exports, and we expect its share to continue
rising. China is also increasingly focusing on purely domestic
infrastructure, which is still in its infancy, and requires significant
logistics support. In many less developed countries only starting to
participate in world trade, such as Vietnam, the very low infrastructure
and service bases usually translate into full outsourcing of the
logistics process to foreign corporations. Emerging markets are
not the only drivers for logistics. In Europe too, export growth of
machinery and production devices to EMs also increases the need
for logistics. Another significant factor of change in the logistics
landscape is the enlargement of the European Union towards the
East. With Bulgaria and Romania’s entrance into the European Unio n
(EU), the economic integration of the Eastern European states brings
an extension of the existing distribution networks and increases
demand for warehousing. New strategic locations are emerging, competing
with the established ones, as Western companies relocate
their production to those parts of Europe with low labor costs.
segments: the service providers, the executers, and the providers
of warehousing property. The service providers coordinate the logistics
process, while the executers transport the goods from location
A to B. As production chains start to spread globally, in-house
as well as external logistics become ever more complex. With their
focus on cost-efficient production, companies therefore tend to
outsource logistics to third-party providers. There exists a full range
of logistics operators from companies focusing on freight forwarding
brokerage only, such as Panalpina, to fully integrated logistics
providers such as Deutsche Post. The advantage of asset-light
logis tics providers such as Panalpina is their flexibility. By using
third-party resources, they are very flexible in adding destinations
to their portfolio according to customer needs. In some regions like
Eastern Europe, access to third-party resources might become
challenging. Kuehne + Nagel therefore decided to acquire some
land, including assets, which was perceived as a strategy change
by some investors. The third segment, the emerging warehousing
market, is benefiting from a trend towards outsourcing logistics
property. A.P. Møller-Maersk is a global leader in fully integrated
Figure 1
Surge in global trade
The aggregated value of global export activity has surged in real terms
in recent years. The growth of real global exports can be used as
a proxy for global trade volumes and indicates the growth of global trade.
Source: Datastream, Credit Suisse
USD bn
3,000
2,800
2,600
2,400
2,200
2,000
1,800
1,600
1,400
1,200
1,000
03/96 03/97 03/98 03/99 03/00 03/01 03/02 03/03 03/04 03/05 03/06
World export of goods and services in constant prices (2000 prices)
Growing logistics demand drives specialization
The transportation industry is heavily fragmented with only a few
global players but many regional and domestic operators. Growing
logistics demand has led to both specialization and consolidation.
Overall, the logistics industry has developed into the following sub-