As the Covid-induced shipping boom subsides, many customers, forced into high-cost contracts during the up-cycle, will come for revenge in the down cycle, says Ruben Huber, founder and director of sea freight specialist OceanX.
“And regulatory pressures, following excessive profits, might appear on top of that, be it through bodies like the FMC, EU or China’s MOC, as they each review alliance exemptions, new taxation regulations, or precedence cases from several complaints raised by shippers at different institutions,’’ he says.
It’s a turnaround motivated in part by the gloomy global economic outlook, which is examined in detail in a report prepared by container logistics platform Container xChange – ‘Container LogTech predictions report for 2023’.
“The overall outlook for the year,” says the report, “remains gloomy. Europe is hit hard with all-time high inflation; China struggles to cope with the virus; and the US continues to witness hinterland transportation challenges and labour unrest. Most of these challenges will stay in 2023. Consumer confidence will pick up, but it really depends on whether we witness more disruptions in the coming times,” says Christian Roeloffs, cofounder and CEO of Container xChange.
“Most of the experts surveyed foresee that inflation and recession will have a greater impact this year and will be the biggest drivers of disruptions.”
‘‘Due to inflation increasing, there’ll be more unrest in the labour market which will certainly lead to more strikes, specifically in Europe, the UK and North America. And as we have seen before, strikes result in slow operations within the port, which can exacerbate supply issues,’’ says Aamir S Mir, chief operating officer, Caspian Container Company.
The report further predicts that long-term shipping contract rates will see an uptick in 2023, though gradually. This slow increase applies to all modes of transport. With negotiations ongoing to bring contract rates in line with spot rates, a reset is expected.
“On the other hand, until there is a balance reached between supply and demand, forwarders will favour short-term contracts until the rates stabilise,” the report predicts.
“Freight forwarders will employ a ‘wait-and-see’ approach before making any long-term air cargo capacity commitments particularly.”
Trucking rates for both dry and reefer cargo are expected to continue to drop in 2023. “Freight tonnage will continue to contract as market conditions and volumes return to pre-pandemic numbers.”
The unresolved worker strikes of 2022 are predicted to spill over in 2023. “Furthermore, the chances of new strikes coming up are high due to inflation-related rises in prices putting pressure on workers’ disposable incomes,” says the report. “Labour dissatisfaction might grow in European and North American economies. In that case, it will cause disruptions in global supply chains.”
As has been widely reported, two, almost three exceptional years for carriers are definitely coming to an end. They will have to adapt to lower margins due to a different supply and demand balance.
