One of the world’s largest third party logistics companies, CH Robinson Worldwide Inc. (CHRW - Analyst Report) has recently announced that it will launch a new division called ChemSolutions. The new division will be responsible for providing logistics solutions to chemical manufacturing and distribution to customers worldwide.
Services of ChemSolutions would involve providing multi modal transport solution to chemical shippers along with ensuring safety and sustainability of shipments. Further, the division will also undertake activities related to customs brokerage, global trade management and vendor and supplier compliance.
The company’s ChemSolutions division is also certified under RC14001 and Responsible Care and ISO 14001. The certification enables the company to serve the chemical market effectively and efficiently and follow the logistics standards that are accepted by global chemical manufacturers.
We believe the demand of 3PL services is rapidly growing as shippers seek cost effective one stop solutions for their freight forwarding requirements. Given the vulnerability involved in chemical shipment, it is important for the shipper to seek logistics services from companies that have expertise in handling chemicals shipments. Given CH Robinson’s network and service capabilities in freight services, we believe the company will be able to tap potential opportunities in the new business and foster its presence in the global freight market.
The company is offering transportation solutions globally and has mostly benefited from European Expansions. Developments in Eastern European manufacturing units have accelerated the demand for transportation solutions.
Most of the shipping is taking place in countries stretching from East to West Europe or on a transcontinental basis. However, given the lack of service capabilities within the European truck industry, 3PL carriers like C.H. Robinson are benefiting from this new business opportunity. Additionally, growth in the emerging markets like China continues to aid C.H. Robinson’s global freight forwarding business, providing long-term growth opportunities.
However, we believe freight forwarding and customs brokerage are intensively competitive and are expected to remain so in the foreseeable future. There are a large number of entities competing in the international logistics industry like Expeditors International of Washington Inc. (EXPD - Analyst Report) , which could weigh on the company’s future growth prospects. In addition, the current trend of road freight conversion to rail intermodal is also likely to have a negative impact on the Trucking business.
We are currently maintaining our long-term Neutral recommendation on C.H. Robinson. For the short term, the company holds a Zacks #2 Rank (Buy).