2023 Freight Expectations

After a record-breaking year in 2021, there were major changes to shipping prices and expectations. 2021 showed steady growth and an increase in cargo demand as freight rates began to take on that familiar shape reminiscent of 2020 prices. The year marked the highest-grossing quarter ever (Q1 2021) according to the FTR TranStats Report, showing that investors might finally be believers in the freight economy after quite some time. Having various players invested in the transportation industry should instil more confidence in carriers to allow them to employ sufficient capacity for cargo ships by year-end 2021. Hiring has already begun, with companies putting their people back on the payroll, providing much-needed impetus for growth, though at a high cost to many capital projects created by Millennials who have entered this job market during this time of recession.

Here are some key areas in which we expect a lot from 2023.

1.            Transportation costs

As 2022 draws closer, it becomes more difficult to forecast freight levels, due to several unknown factors. We do, nevertheless, believe a strong freight market will continue through at least the first half of 2022, as evidenced by service order books, current backlogs, and expectations from major importers.

While the market circumstances improve significantly and space becomes more plentiful, the enhanced discipline of the carriers in managing space through blank sailings will remain. This strategy worked well for carriers before the pandemic.

Based upon data from another product of JOC.com within IHS Markit, ocean freight companies have placed new orders for over 1.5 million TEUs of container fleet limit in the first half of 2021, the highest level since the 2.6 million TEUs of orders placed in all of 2015. The in-service fleet will have orders for 17.4 percent of its parts by 2021, which is the highest number since 2016. By the end of the next two to three years, there will be another 4,17 million TEUs to replace the twenty-four million TEUs now on the road.

Most new vessels will be delivered by the end of 2022 and the beginning of 2023. Accordingly, the level of interest rates is expected to stay high through the first half of 2022, but it is hard to predict what will happen in the second half, as it depends on demand and inflation.

2.            Procurement negotiations

In 2022, Carriers are trying to secure longer-term deals, particularly with BCOs as the season of contracts continues. Despite this not being a new practice, it is expected to gain popularity, especially for large importers looking for space and a sense of assurance. Various carriers have offered three-year contracts. One-year contracts have the highest annual rate, two-year contracts have a lower annual rate, and three-year contracts have the least annual rate. We believe, extending contracts is not a good idea until rates stabilize in 2023.

3.            Inventory management

Many importers will go to extreme lengths to ensure they have the products in stock when there is a demand for the product. It is over to order from China and get the shipment in three weeks in a Long Beach warehouse. As ocean shipping has become less reliable, importers are shipping earlier and reducing the expensive items they used to import. Using this method, we save warehouse space, which is increasingly scarce. We can use the space for items with better sales and open space for better-selling items.

4.            Streamlining the freight and supply chain process

The chaos within supply chains means people are less likely to spend time with different vendors. The process of receiving a shipment from overseas, having drayage from the terminal, and managing last-mile delivery involves various parties. In the past few years, more and more companies have integrated most of these services under one roof, saving importers time so they can focus on what they do best.

Moving forward, sourcing from overseas, digitization, sustainability, and regulatory involvement will continue to grow in importance.

Oil prices will rise, and carbon emissions expectations will decrease, so carriers will have to deal with increased expectations about environmental aspects of their businesses. They will be a focal point for attention from within the industry as well as from the public as their profits grow, resulting in an impact on decisions in the future.

Speedshift | Pallet Shipping  call 0845 519 0270