Expect the unexpected: what’s in store for logistics in 2023

Author’s note: I was asked by Transporeon to look at what is happening in the European transportation market and they provided me with access to their Transporeon Insights market data for additional insights and perspective. This post is an excerpt of my comments from the October 2022 Transporeon Journal video commentary. I encourage you to watch the full video commentary for more insights about the European transportation market.

From a supply chain and logistics perspective, 2022 has proven itself to be as challenging and volatile as the previous two years. It feels like a long time since we started the year with yet another Covid-19 variant (Omicron), but not so long time since the tragic news of war breaking out between Russia and Ukraine. As the war continues today, levels of risk and uncertainty remain high.

In tandem, supply chain and logistics professionals find themselves wrestling with a weak economic environment in which growth has slowed and record inflation is impossible to escape.

Nonetheless, companies must continue to look ahead regardless of how difficult things are right now – and as they set their strategies and budgets for the next 12 months, they’re all asking the same question: “What do you think will happen next year?”

No one knows with certainty – even without global crises, the transportation market can still surprise us. However, today’s circumstances demand change as legacy inefficiencies simply become more and more expensive to hold on to.

With greater access to real-time data and information than ever, it’s easier to stay informed about what’s going on – from regulations, economic conditions, geopolitical activities, transportation and labor markets, to the competitive landscape, emerging technologies and more. So, now is a great time to make sure you’re following the sources you consider the most reliable and most informative as big decisions loom. 

Top 2023 predictions

The Russia-Ukraine war, monetary policy tightening, and continued Covid-19 outbreaks (particularly in China) contribute to predictions like these: 

“World trade is expected to…remain subdued in 2023 as multiple shocks weigh on the global economy. WTO economists now predict global merchandise trade volumes will [increase only 1.0% in 2023] — down sharply from the previous estimate of 3.4%.” Source: World Trade Organisation.

Earlier in October, CNBC reported that the International Monetary Fund predicts global growth will slow to 2.7% next year, a decrease of 0.2 percentage points compared to its July forecast.

Meanwhile, IMF Managing Director Kristalina Georgieva said, "We are experiencing a fundamental shift in the global economy, from a world of relative predictability...to a world with more fragility — greater uncertainty, higher economic volatility, geopolitical confrontations, and more frequent and devastating natural disasters."
As more scheduled sailings from Asia to the US and Europe are cancelled, Transporeon analysts summarized the impact of the slowdown in global trade growth on ocean shipping: “While contract rates on all Ex-China trades are trending downward, the battle to establish the rate level for the upcoming tender season is still ongoing and we will likely see further downward corrections.”

Experts shared the latest insights into spot and contract rates at the Transporeon Ocean Annual Conference: 

• China-to-North Europe spot rates are below contract rates for the first time in two years
• Spot rates from China-to-North America West Coast ports are down 85% from peak
• Contract rates (based on Transporeon Market Intelligence) are currently down 20%

And if tough economic conditions weren’t enough to contend with, labor unrest around the world is on the rise:

• In the US, the risk of a labor strike at the West Coast ports remains. 
• Strikes at UK ports, Felixstowe and Liverpool, threaten imports and exports across industries during a critical ramp up in the holiday shipping season – likely to result in increased travel time of up to 14 days plus five days of ground or rail transport as Hamburg and Rotterdam pick up the fall out. 

Finally, through December 31 2022, companies from all EU countries, Norway, Ukraine, and the UK will no longer be able to transport goods through Russia by road. This regulation compounds existing delays as further time will be needed to match up European vehicles with Russian trucks and the ongoing transfer of containers between them.