Projection 2023 : Our vice-president Sébastien Suicco shares with us what to expect
The year 2022 is now behind us, and it sure left a few scars along the way, didn't it? Filled with unforeseen events, 2022 has forced us to recognize the fragility of the logistics chain, which now leaves us wondering if the just-in-time strategy is still the best solution.
What does 2023 hold for us?
No one can predict the future with a crystal ball, but economists seem to be unanimous: the first six months of the year will be tough, and we can already feel it as sea freight rates are approaching pre-pandemic levels, and truck freight shipments are declining.
Why a drastic price drop?
The answer is easy: supply and demand! Ships are leaving Asia at 70% capacity, orders are down, geopolitical instability strains the supply chain and interest rates are high, which are all factors that contribute to the slowdown we are going to experience in the coming months.
While our freight rates exploded in 2022, they are expected to significantly drop this year, but with an important decrease in orders, is this really good news for the industry?
We should see the return of the just-in-time strategy in our supply chain as congestion in North America becomes less and less prevalent. The chart below shows that ship schedule reliability is close to the 2020 level but is still far from what it was in 2018 and 2019.
https://www.sea-intelligence.com/press-room/176-schedule-reliability-continues-on-its-upwards-trend#:~:text=Global%20 schedule%20 reliability%20 improved%20by,M%2FM%20to%205.56%20days.
With more and more blank sailing and shipment cancellations, which aim to stabilize shipping rates, increases in transit times are to be expected.
That said, China's ZERO Covid policy ended on January 8, which could have a positive impact on the supply chain.
In the air sector, IATA expects a 4.3% decline in 2023, on top of the 8.1% decline reported in 2022. Airlines will most probably do what shipping lines have been doing, which is reducing capacity to avoid drop prices, as has been the case in the ocean sector in recent months.
We believe Q1 will be stable for OTR transport, as the inventory in North America will have to move. However, as is the case for the air and ocean sectors, the OTR sector will not be spared from the economic slowdown. As such, we expect Spot rates to decline, and trucking companies will face difficult times as inflation and the cost of fuel have been rising in 2022. Hopefully, this sector won’t be further aggravated by the driver shortage.
A word about the environment; more and more companies are taking ESG (Environment, Social, and Governance) issues very seriously. A study published by KPMG in December 2022 shows that 80% of Canadian companies are making their carbon reduction targets public.
Accordingly, the IMO 2023 regulation was passed on November 1, 2022. Its objective is to accelerate the decarbonization of the sea freight industry.
On the technology front, IoT (Internet of Things) devices will continue their expansion within our industry. Real-time visibility is now a major consideration when selecting partnerships.
Overall, 2023 will bring its share of challenges, but on a more positive note, the logistics industry will focus on technology advancements and decarbonization.
The Synergie Canada team is always available to offer advice regarding your logistics solutions for a seamless shipping experience.