Inflation and recession seen as biggest threats in 2023

A vast majority of supply chain leaders believe that inflation and recession are the biggest threats they will face in 2023.

Online container logistics platform Container xChange has released its Container LogTech predictions report for 2023 which highlights important global trends that the shipping and supply chain industry will witness in 2023.

“The overall outlook for the year 2023 remains gloomy. Europe is hit hard with an all-time high inflation; China struggles to cope with the virus and the US continues to witness hinterland transportation challenges and labour unrest,” said Christian Roeloffs, co-founder and CEO, Container xChange.

“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.”

Almost 90 percent of the experts surveyed foresee that inflation and recession will have a greater impact this year and will be the biggest driver of disruptions. The ‘implications of war’ most concerned 57 percent, while the impact of COVID in China was top of mind for 53 percent, and worker strikes were the top concern for 23 percent.

‘‘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,’’ said Aamir Mir, chief operating officer at Caspian Container Company SA, as part of the study’s interviews. 

Nearshoring and reducing reliance on China is also top of mind, with 67 percent considering India and Vietnam as attractive alternatives.

The report further predicts that long-term shipping contract rates will see a gradual uptick in 2023. This slow increase applies to all modes of transport.

On the other hand, until there is a balance reached between supply and demand, forwarders will favour short-term contracts until the rates stabilize. “Freight forwarders will employ a ‘wait and see’ approach before making any long-term air cargo capacity commitments particularly,” the report said.

Trucking rates for both dry and reefer cargo will continue to drop in 2023. Freight tonnage will continue to contract as market conditions and volumes return to pre-pandemic numbers. 

‘‘Two, almost three exceptional years for carriers are definitely coming to an end. They will have to adapt back to lower margins due to a different supply and demand balance. Many customers, forced into high-cost contracts during the up-cycle, will come for revenge in the down cycle. And regulatory pressures, following excessive profits might appear on top of that, be it through bodies like FMC, EU or China’s MOC, as they each reviewing alliance exemptions, new taxation regulations, or precedence cases from several complaints raised by shippers at different institutions,’’ said Ruben Huber, founder and director of OceanX.

Unresolved worker strikes of 2022 will spill over in 2023. Furthermore, the chances of new strikes coming up are high due to inflation-related rise in prices putting pressure on workers’ disposable incomes. Labour dissatisfaction might grow in European and North American economies, causing disruptions in global supply chains. 

The report also covers the growing expectation that the third party logistics market will solidify in 2023. It’s projected to reach US$1,789.74 billion by 2027.

Another key trend is the digital transformation of the industry. In the years to come, the adoption of digital technologies in shipping will focus on vessel schedules, intuitive booking interfaces, instant slot booking, and capacity confirmations.