In the aftermath of the pandemic, we found ourselves in a somewhat chaotic situation, characterised by demand far outstripping supply, due to container shortages, port congestion and soaring freight rates.
Today, the picture is much more reassuring. We are witnessing an increase in speed (albeit threatened by regulatory pressure, as we shall see) and a gradual decongesting. Both factors have already led to a visible drop in freight rates in the last months of 2022.
This is mainly due to a reversal of the supply-demand relationship. We have cargo space available and lower demand among importing companies. But this year, new factors will come to the fore, causing some tensions in activity.
Cost overruns arising from maritime freight regulation
We are facing profound regulatory changes. As IMO 2023 and other regulations come into force, shipping emissions face increased regulatory scrutiny.
In 2023, companies will have to comply with certain emissions control regulations, including the IMO’s Carbon Intensity Index (CII) and the European Union’s Emissions Trading Scheme (ETS).
The CII will oblige shipping lines to modify or even replace a significant part of the fleet, either by switching to lower sulphur fuels, adopting slower sailing tactics, undertaking structural modifications or acquiring new ships. The ETS introduces the trading of CO2 emission allowances.
In short, shippers will see their costs increase and, of course, will try to pass them on to the customer.
Uncertainty in the maritime freight supply chain
The years 2020, 2021 and 2022 have taught us valuable and costly lessons. Lockouts in China, due to Covid, and congestion in maritime traffic may be repeated in 2023, either because of a resurgence of the pandemic or because of labour tensions in major ports, such as those on the US West Coast.
For this reason, we have already seen more cancellations than usual in the preceding months, in a very likely attempt by shipping lines to increase freight rates. This situation is likely to continue at least through 2023.
China has new rivals in international shipping
Two of the lasting consequences of Covid are the return of protectionism and the fear that similar phenomena will affect supply in importing countries.
This has led companies to diversify sourcing strategies. Importers have embarked on strategies such as China+1, looking for complementary and alternative suppliers in other countries, such as Thailand, Vietnam or the Philippines, Near-Shoring, delocalising to closer countries, or Friend-Shoring, diverting production to friendly countries to minimise exposure to trade wars.
Just in Case takes over from Just in Time
Inventory shortages have taken their toll on manufacturers. The supply chain has become unreliable and manufacturers have reverted to more conservative inventory management techniques. Lost profits from production outages are more expensive than keeping stocks reasonably high, so 2023 will see a return to full warehouses and, therefore, a new relationship model with freight forwarders, carriers and exporters.
This new – but not so new – stock management reduces the dependence on the punctuality of maritime traffic. Forecasts will no longer have to be as precise and, in short, companies will no longer have to pay for time.
Carriers mutate into integrated logistics service providers
Carriers reaped record profits in 2021 and 2022. According to various estimates, the industry’s aggregate profits in the last two years exceed the combined profits of the last two decades.
Carriers are using surplus profits to create alternative revenue streams, moving into the logistics business and mutating into door-to-door agents. They are also acquiring port assets to ensure that their vessels and cargoes have priority port calls.
Our response: more technology, more proactivity
Faced with a changing landscape, the temptation is to follow a classic tactic of cost control. At eGlobe, as a freight forwarder in Barcelona, we believe this is a mistake that can be costly. Instead, we adopt a proactive and anticipatory strategy. We put the use of data at the centre, we continuously analyse information and we value collaboration between agents.
The answer to these challenges will come from technology. Collaboration between sectors, data interoperability, even more precise monitoring, digital security, standardisation and, above all, the ongoing training of professionals will be the keys to turning dangers into opportunities for growth.
This is eGlobe’s commitment as a forwarding company in Barcelona for 2023. To intensify the application of technologies capable of accelerating the development and profitability of our activity and the optimisation of service to our customers. In addition, and as a company certified as an Authorised Economic Operator for Safety and Security (AEOS), we guarantee maximum security and fiscal flexibility for the goods we transport.