It’s pretty popular to make predictions for the new year, as astrologists do. So we thought to share our thoughts on what will happen with the logistics market in 2023. Do not be harsh if that prognosis will not come true it’s not an easy thing to do these days. Our first prognosis for the year 2021, which you find here, worked out well; let’s see if this one will succeed.
1st.Sea freight from China to Europe will drop to 1500 EUR per 40 containers.
We have witnessed a steady container index decline from this March. Although indexes have stopped dropping, we believe the bottom isn’t reached. Because this year’s drop in freight was related to overstocking, this was the first round, and next year we will see the second round, which will be connected to the recession. Although the prices will go down compared to the pre-pandemic levels, this decline will not be long-term. We will see a jump back in the second half of the year, which will be related to the fast recovery of the economy and growth coming from Southeast Asian countries, India, and maybe even Ukraine (in case the war ends).
2nd. New ocean tigers will emerge.
The two previous years will be called the years of container lines because of their enormous profits, leaving other shipping industry participants in the shadows. However, next year we will see liquid and bulk cargo ship owners taking the stage. There will be a massive need for those types of cargo because of the commodities and Russian ships ban, the energy crisis, and the reshoring and nearshoring initiatives that started earlier. This will increase the need for tanker and bulker vessels.
3rd. Some digital freight forwarders will go out of business.
Customers of digital freight forwarders have started to notice that digital freight forwarders aren’t different from traditional freight forwarders’ needs. The ability to book cargo via the portal or see shipments on the computer screen doesn’t bring any real-life benefits. When companies realize this, they will shift back to traditional freight forwarders. And from the other hand, investors will cut new finance rounds because they are starting to understand that many of those companies have burned much cash and haven’t created anything new, plus the increased cost of financing will force them to search for new investment opportunities. This will conclude in crashing companies; even companies with big names aren’t secure.
4th DB Schenker will be acquired my Maersk.
In December board of DB Schenker confirmed that they are ready for acquisition. There are rumors that there are a few potential buyers, with DSV and Maersk among the top ones. Having in mind that Maersk may have more funny money now, and this merger would help them in their vertical integration plans, I think they will be the one who will get DB.
5th. New logistics startups will emerge.
VC funds will stop putting money into the existing startups and look for other startups to put their money in instead. And this strategy is brilliant, as those new arrivals will have more chances to beat prominent players as they can learn from the mistakes of the existing players and choose different strategies. Hopefully, they will understand that fighting with current players is not an option, and they will spend more wisely on marketing and public relationships. A penthouse, Ferrari, or constant ads will bring in new customers, but company leaders need to ask themselves at what cost and think if it is worth doing this.
6th. About freight prices generally.
Regarding freight prices for Air, Rail, Ocean, and Land, prices will go down in the first half of the year, but in the last quarter, the prices should start growing again. We believe shippers need to forget the cheap freight era because of employers’ shortages in the logistics industry and sustainability requirements. Moreover, I would suggest (and this may be an idea for Logitech) thinking of how to reach price and profitability equilibrium within the value chain participants. History taught us that each power game between channel partners had brought market abnormalities in the future.
7th. Container lines that invested in freight forwarding companies and planes will realize that they made a big mistake; the far better investment would be into ports.
The vertical integration strategy looks great on paper but is it feasible? I have significant doubts because of the enormous complexities of the industry. Each shipper has different needs, and serving them is a challenging task for a huge company that operates on a call center basis. This move mainly relates to who will gain more significance in the value chain, but having in mind the complexity of the market, I have doubts if one player can manage it all. Therefore, acquiring ports is a far better way for container lines to secure the turf because, in such a way, liners would increase control but would eliminate complexity.
8th. New nearshoring initiatives will be put on pause.
When the pandemic started, companies understood that extended supply chains were a pain in the ass and started looking for new locations. But this year, we have a completely different perspective as the freight prices from Asia are decreasing, the schedules are becoming predictable again, and pandemic-related issues are easing; the need to switch isn’t so obvious anymore. Moreover, we need not forget that the increased interest rates decrease the ROI of every investment.
9th. Just in time, will re-emerge.
Previously companies reacting to supply chain disruption have shifted from Just in time supply chain strategies towards resilient supply chains. But now, when predictability is almost back to regular and recession forces companies to save funds to secure the bottom line, the just-in-time and other logistics cost-saving initiatives will be back.
10th. Changing import and export maps will create possibilities for logistics companies.
If the enormous opportunities followed logistics companies that were able to provide capacity during the two previous years, now all possibilities will be found in the ability to react fast to the import and export map changes. The import and export map is changing quickly because of customer buying behaviors, geopolitics, and increased energy prices. Some countries that before were importing became exporting and vice versa. Therefore, those logistics players that will be able to spot those changes and provide service offerings to shippers will be the ones who will win the most.
11th. The shipper is the king again.
The previous logistics service providers market is starting to shift back to the shippers market in the second half of 2022. This trend will be seen during 2023 as well. Nevertheless, the prices at some point will come back, but shippers will still have the upper hand. And those companies who previously invested in new business development and increased customer experience will be far better than those who haven’t.
To conclude, although the 2023 year will provide some challenges, it will also offer some opportunities. The consequences will be short, and the future of logistics industry companies will be bright, not as good as the previous years, but everyone will be able to earn a healthy profit margin.
About the Author:
Thomas Ananjevas is a supply chain professional with 15 years of experience purchasing and selling Logistic services and building a supply chain from scratch. He founded a consulting, training, and staffing company that works exclusively with the logistics industry. Tomas is helping logistics companies implement the necessary changes to ensure business growth and continuity. You can set up a time to talk with Thomas about possible synergies by clicking here.