Logistics Firms Buoyed By Rise In Demand For Goods And Services 

Rebecca Anastasi - 9th February 2019

However, the increase in property prices and human resources shortfall continue to preoccupy operators in the sector.

Malta’s healthy domestic economy has been credited for an appreciable increase in revenue registered by leading companies in the logistics and shipping sector in 2018. The rise in the demand for goods and services, as a result of booming industries and greater spending power, has intensified the need for imports and exports, according to industry stakeholders, who expressed optimism these trends would be maintained in the year ahead.

Matthew Sullivan, the Director of Strategy, Development and Finance at Sullivan Shipping Agencies Ltd, underlined the concrete results experienced by the industry as a whole. “2018 was, overall, a positive year. The increase in cargo was specifically due to the booming building industry, which required the shipment of materials such as bathrooms, tiles, furniture and fittings.” Furthermore, the importation of food and general household consumables was driven by the increase in  population in recent years and the rise in the export of waste material.

“There was also an increased interest in the outsourcing of logistics services including warehousing, distribution and forwarding, commonly known as 3PL services,” he said. While the container market saw a general rise of “approximately 10 per cent from that of the previous year (compared to an average annual increase of 3 per cent over the past five years),” there was an equivalent decrease in the number of trailers imported and exported to the island, Mr Sullivan noted. “This shift from trailer to container cargo was mainly attributed to new and faster container services from Southern Europe and an increase in cargo from regions not directly connected by RORO services,” he said.

However, the increase in property prices and human resources shortfall continue to preoccupy operators in the sector.

This includes shipments of tractors, buses and trucks, or oversized cargo loaded on special flatbeds or lowboy trailers. Mr Sullivan also highlighted the surge in revenues in airfreight which saw a rise “amounting to approximately 8 per cent (with an average annual increase of 3 per cent over the past five years) when compared to 2017.”

This buoyancy resulted in larger profit margins for many firms, Jimmy Cutajar, Managing Director of Global Freight Solutions (GFS) noted, saying that the firm experienced a “considerable increase in queries which landed more clients in our portfolio” in 2018. Indeed, the company’s preliminary figures for the past 12 months, according to the Managing Director, show an approximate rise of 60 per cent compared to 2017 figures.

“The healthy economy Malta is experiencing means that more people have access to a better lifestyle, thus increasing the demand for goods and services. Malta, being a country with no natural resources, has to import the majority of its goods from overseas, hence the rise in demand for logistical services,” Mr Cutajar explained.

This was echoed by Edward Hili, Executive Director of Hili Company Ltd, which started operating in the Maltese market in late 2017 through its subsidiary, Mariner Shipping. The firm saw “a strong demand for transport services from our clients throughout the year,” Mr Hili said, noting the increase in the import market as a result of “the high level of economic activity and growth registered in recent years” which has “driven domestic consumption and investment.”

Positive results were also reported by Simon Mifsud, Managing Director of S Mifsud & Sons Ltd, the shipping arm of SMS Group of Companies, who gave credit to the re-introduction of a ferry service operated by Italian shipping company Tirrenia linking Malta to Sicily and the mainland, after a 30-year absence, to the success of 2018. “The superior service offered by the firm, with our client focus, helped us achieve and beat very ambitious targets, carrying over 13,000 trailers over the past 12 months alone.”

However, the increase in property prices and human resources shortfall continue to preoccupy operators in the sector.

Moreover, the increased efficiency of the logistics industry – with reduced transit times and the consolidation of a reliable service – has also led to peace of mind for many importers, according to Mr Mifsud, who explained that this has led to suppliers being able to purchase in smaller quantities and still meet their targets. As a result, groupage – a cheaper and faster form of freight which sees cargo for different consignees grouped in one container or truck – has gained traction against more traditional modes of shipment, the Managing Director said.

While the outlook for 2019 is highly positive, with individual firms shoring up operations, and the development of more commercial centres and retail outlets expected to push figures up even further, this year will not be without its challenges, the company leaders warned. The increase in property prices is a particular cause for concern.

Indeed, property, Sullivan Shipping’s Mr Sullivan noted, “has risen to such an extent that, at current market prices, it would be difficult to get adequate returns from the investment in land for warehousing services.” Higher property prices push rates up across the board, meaning that “although there is an increase in the demand for freight or warehousing services, we are not always able to meet our customers’ requirements with feasible solutions. This increase in costs is also further reducing our competitiveness in offering international logistics solutions,” Mr Sullivan stressed.

GFS’s Managing Director Mr Cutajar said that the human resources shortfall, which is being experienced across a number of sectors, required urgent addressing. “Malta’s employment supply market is saturated across most of the economy sectors. This has resulted in some increased stress for the local industry as one would have to look for foreign employees to sustain the growth,” he said. Adding to this, Hili Company Ltd’s Mr Hili pointed to the consequent rise in salaries, calling it “the biggest challenge in our industry”, though he noted the encouraging impetus by those commanding higher wages to push the envelope, “to become more efficient and create additional services for clients.”

Mr Hili also noted that Malta’s strong economic performance was a double-edged sword since “the solid performance of our economy over the last few years was driven primarily by iGaming and financial services,” which, in turn, helped to drive real estate speculation. “Naturally, there are question marks as to how sustainable this state of affairs is and whether it should remain the way forward. It would be wise if the development of new economic activities in the near future builds on the positive trend experienced in recent years,” he concluded.

This article originally appeared in The Malta Business Observer

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