transportation and logistics 2030 new hubs, new spokes, new industry leaders? key findings for the...

Transportation and Logistics 2030New Hubs, New Spokes, New Industry Leaders? Key Findings for the Road Freight Industry

www.pwc.com

Dr Andrew Shaw

Presentation to Road Freight Association

20 May 2013

PwC

1 Changes in global trade and logistics patterns 3

2 Emerging economies driving growth 11

3 China as an investment destination 17

4 Outlook 26

PageSection Overview

Table of Contents

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1Changes in global trade and logistics patterns

PwC

1990 distribution of world merchandise exports by exporting

country/region

Canada and United

States 15.4%

Western Hemisphere

3.8%

Europe 50.5%

MENA 4.7%

Sub Saharan Africa 1.1%

Japan 8.5%

Developing Asia 5.5%

Rest of World 10.5%

Donut

Canada and United States 11.0%

Western Hemisphere

5.6%

Europe 47.7%MENA 5.7%

Sub Sa-haran Africa 1.7%

Japan 4.7%

Developing Asia 15.9%

Rest of World 7.7%

Donut

2009 distribution of world exports by exporting country/region

Change in exports by region

• North America’s and Japan’s decline in export market share is significantly greater than that of Europe,

• Africa’s export share of global exports has increased by more than 50%, albeit from a low base, and

• Developing Asia’s export share has increased three foldSource: PwC Economic Views, Future of World Trade – Top 25 sea and air freight routes (March 2011)

PwC

Important sales and supply markets evolve in which emerging and least developed countries play a major role.

New transport corridors will emerge, especially between Asia and Africa, Asia and South America as well as intra-Asian.

Globalisation

May 2013

PwC

Top 25 bilateral trade pairs in 2009 (sea and air freight)

Source: PwC Economic Views, Future of World Trade – Top 25 sea and air freight routes (March 2011)

PwC

Top 25 bilateral trade pairs in 2030(sea and air freight)


PwC

China will dominate global trade in 2030, featuring in 17 of the top 25 bilateral sea and air freight trade routes.


PwC

Evolution of 2030’s largest bilateral pairs

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

0

100000

200000

300000

400000

500000

600000

700000

China-United States China-Japan

China-Korea China-India

China-Germany Japan-United States

Bil

ate

ral

Tra

de

(U

S$

bil

lio

ns

in 2

00

9 p

rice

s) Line

2010

2012

2014

2016

2018

2020

2022

2024

2026

2028

2030

0

50000

100000

150000

200000

250000

300000

China-India China-Indonesia

China-Nigeria China-Saudi Arabia

China-UAE

Bil

ate

ral

Tra

de

(U

S$

bil

lio

ns

in 2

00

9 p

rice

s)Line

Evolution of the five fastest growing bilateral pairs


PwC

Trade between China and Africa

Bilateral trade between China and Africa has risen from US$8bn to US$73bn in current prices between 2000 and 2009.

Headline

Trade

China - Nigeria

Investments and agreements for natural resources have been struck across Africa, including those for oil in Sudan, Angola and Algeria, copper and agriculture agreements in Zambia and mining in South Africa.

China has also invested heavily in transport infrastructure (e.g. Kenya). Trade flows from China to Africa mainly consist of Chinese consumer goods. In the next twenty years the flows of merchandise exports between China and Africa is expected to be a key growth area for global trade.

Infrastructure

Trade flow forecast to increase nearly eight times by 2030.

In 2010 the China State Construction Engineering Corp agreed a $23bn deal to build 3 refineries in Nigeria.


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2Emerging economies driving growth

PwC

• China: by far the highest GDP, but relatively low per capita

• GDP per capita seems to correlate with urbanisation rate

• Only India has lower GDP per capita and urbanisation rate than China

• Smaller economies show higher GDP per capita and urbanisation rate – Brazil – Mexico – Russia – Turkey

• Urbanisation facilitates centralised distribution strategies

The structure of ‘emerging’ economies differ substantially

Turkey

South Africa

Russia

Mexico

India

China

Brazil

72,9%

61,2%

73,1%

77,5%

29,8%

46,6%

85,4%

US$ 8,427

US$ 5,635

US$ 8,874

US$ 8,040

US$ 1,033

US$ 3,566

US$ 7,737

US$ 594 bn

US$ 277 bn

US$ 1,255 bn

US$ 866 bn

US$ 1,243 bn

US$ 4,758 bn

US$ 1,482 bn

GDP GDP per capita Urbanisation

Source: PwC T&L 2030, Volume 3: Emerging Markets – New hubs, new spokes, new industry leaders? (Dec 2010)

PwC

• Logistics Performance Index (World Bank) summarises logistics performance of countries in six areas: – customs – infrastructure – international shipments – logistics competence – tracking & tracing – timeliness

• China leads the group of seven (ranked 27th among 155 countries covered), mainly due to the high quality of transport infrastructure

• South Africa (ranked 28th) leads in competence and quality of logistics services

Logistics performance of ‘emerging’ economies

Turkey

South Africa

Russia

Mexico

India

China

Brazil

US$ 59 bn

US$ 46 bn

US$ 49 bn

US$ 50 bn

US$ 125 bn

US$ 506 bn

US$ 150 bn

3,22

3,46

2,61

3,05

3,12

3,49

3,20

Logistics Performance Index Size of logistics market


PwC

Territory insights – Seven routes to one goal: growth.


PwC

• Customs union ‘Mercosur’ – trigger for logistics activities

• 2014 FIFA World Cup, 2016 Olympics – trigger for FDI and upgrading of transport infrastructure

• Domestic demand for logistics services will grow strongly, relevance of FDI may decrease

• CEP market promising double-digit growth

• Opportunities for the private sector envisaged, following continued privatisation of T&L operations

• Gradual policy reforms should encourage FDI in the T&L industry

• Multinationals dominate the logistics demand

• Growth in international trade will depend on the effectiveness of regulatory reforms

• Special economic zones will stimulate trade flows between Asia, Europe and North America

• The level of competition of multinational logistics service providers is expected to grow

• Starting point of a new transport corridor to Asia; investments in transport infrastructure needed

• Ports, railways, pipelines – public; road transport and logistics – private

• Continued growth and new opportunities in 3PL and CEP

• Wave of privatisation – ports first; highways, maritime operations, bridges, railways to follow

•

Territory insights – key findings


PwC

8 assertions about the future of emerging markets

The establishment of free trade zones and resulting increases in foreign direct investment will lead to above-average growth of the transportation and logistics industry in emerging markets.

The degree and pace of privatisation of state-owned T&L organisations will strongly differ among emerging markets; while governments in some cases become watchdogs, they are still the game makers in others.

Important sales and supply markets evolve in which emerging and least developed countries play a major role. New transport corridors will emerge, especially between Asia and Africa, Asia and South America as well as Intra-Asian.

After a period of tremendous market growth and continuous market entrance of multinational LSPs, the T&L industry in emerging markets will face fierce competition followed by consolidation.

The T&L industry in emerging markets will increase its level of professionalism, partly driven by strong commitment, technology and know-how transfer of multinationals in their markets.

LSPs from emerging markets will not gain significant market share in developed countries, even low-tech logistics solutions are not perceived as a viable route to win market share.

LSP from developed countries will heavily engage in emerging markets, however emerging markets will not become the new centres of gravity in logistics as regards standard setting, innovation and technology transfer.

Transport corridors Consolidation CompetitionRegulation

It’s all about money ─ the importance of barter trade diminishes.


PwC

Logistics Service Providers (LSPs) from developed countries will heavily engage in emerging markets. Emerging markets will not become the new centres of gravity in logistics as regards standard setting, innovation and technology.

Competition

• Seven of twenty most important ports are located in China

• Innovations, standard settings and headquarters will remain in developed countries representing the centres of gravity in logistics

• Some emerging economies demonstrate low-tech low-cost innovative domestic logistics solutions

• PwC (2010) Delphi panel: does not see a shift before 2030

World Port ranking in container traffic in 2008Source: Institute of Shipping Economics and Logistics

LSPs from emerging markets should focus on their more attractive domestic markets and seize opportunities to enhance their service level and logistics capabilities.

The future for Logistics Service Providers

PwC

Percentage modal share for domestic freight (2007), as measured by ton kilometre

Source: Source: McKinsey and PwC Research, Van Eeden & Havenga (2011), National Department of Transport South African Maritime Study (July 2011)

0%

50%

100%

China USA India SA

Air

Water

Rail

Road

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3China as an investment destination

PwC

China remains the top investment destination

China56%

Brazil52%

India37%

Turkey25%

Russia19%

Indonesia

12%

South Africa11%

US34%

Mexico26%

Source: PwC Choosing China: Insights from multinationals on the investment environment (2013)

PwC

Areas global CEOs want China’s Government to focus on

Improving government transparency and

anti-corruption

73%Reducing intervention in the

economy and allowing an increase in private competition

53%


PwC

China’s reform measures investors find attractive

Economic development driven by domestic demand

48%

Financial reform, steady liberalisation of foreign exchange controls and interest rate policy

43%

Doubling residents’ per capita income by 2020

41%

PwC

China could overtake US as world’s largest market in PPP terms by 2017

China could overtake the US in PPP terms

2017

China could overtakethe US in MER terms

2027

PPP: purchasing power paritiesMER: market exchange rates

Source: World in 2050 -- The BRICs and beyond: prospects, challenges and opportunities. Published by PwC, January 2013


PwC

Parts of the value chain carried out in China by German companies

Source: PwC Logistics in China: An All-inclusive Market? (Jan 2012)

PwC

12%

Of PwC survey participants only 12% rated logistics providers’ in China average level of development as “high”

Source: PwC Logistics in China: An All-inclusive Market? (Jan 2012)

Level of development of logistics services providers in China

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4Outlook

PwC

Outlook

• Growth in China will continue to dominate world trade:

- China will continue to be an attractive investment location

- Largest growth in trade lanes will be between China and other

emerging economies

- The practices of logistics service providers in China will lag those of

the developed world

- Africa, with Nigeria and SA in the lead, will build closer trade links

to China

• Logistics performance in South Africa is ahead of many emerging

economies

• A period of growth in the logistics industry to support rapid changes in

trade patterns and growth in emerging economies is likely to be followed

by a period of consolidation

transportation and logistics 2030 new hubs, new spokes, new industry leaders? key findings for the...

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