The outlook for supply chains in 2023
Supply chain disruptions in 2023 should be nowhere near the scale of the past two years, because the global macroeconomic situation means volumes will be muted into the 3rd and possible 4th quarters. But geopolitical conflicts, macroeconomic changes, weather events and other issues may yet to emerge to impact access to raw materials, manufacturing and product flow to destination – creating port congestion, reduce freight capacity and surge prices.
Consumer demand in the UK is likely to be impacted through the first half go the year, with the earliest possible economic recovery unlikely to materialise before the 3rd and probably 4th quarter.
Global GDP growth is projected to slow from 5.8% in 2021 to 2.8% in 2022 and 1.4% in 2023, and while the World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, it warned that risks of new supply disruptions were high.
As we move into 2023, high jet fuel price is likely to affect rates and fuel surcharges are likely to fluctuate amidst oil price fluctuations.
Overall airfreight volumes remain low and with global inflation levels likely to remain elevated into 2023, demand is likely to decrease even further.
Chinese factory activity fell again in December as the spike in Covid-19 cases disrupted production after Beijing started dismantling its pandemic curbs.
The manufacturing purchasing managers’ index (PMI) fell to 45.3 in December from 46.5 in November. The index has registered below the 50- point mark dividing growth from contraction for five straight months.
Slowing demand, excess capacity and falling rates all negatively impact shipping line profits, with carriers implementing measures to limit rate decreases, by reducing capacity in many trades and announcing General Rate Increases.
With the equivalent of 2.3m TEU due to be delivered over the course of next year, the container shipping lines are trying to defer new-build deliveries, to limit the amount of additional capacity and stabilise weakened rate levels.
About half of all shipping congestion has been resolved, which means that vessel schedule reliability will increase further, providing there are no unexpected disruptions, with suggestions that a full reversal to normality may come by March 2023.
The first impacts of the new IMO environmental regulations will be noticed leading to longer lead times and increased costs.
IMO 2023 took effect on the 1st January, with three new compliance measures being introduced, to reduce carbon emissions by 40% by 2030 and 70% by 2050 compared to 2008 levels.
The new measures impact available shipping capacity, by requiring vessels to lay idle for modifications and incentivising carriers to slow steam, to make poorly rated ships compliant, with estimates that the lines could lose between 5 and 15% capacity by lowering speed.
Despite the lack of the traditional peak season, there has been a return to seasonality in shipping and it is reassuring to see volume changes, that were typical pre-pandemic.
Lower demand will allow global supply chains to progressively improve, even if some bottlenecks remain in some regions.
Our network partners in China and across Asia use their local knowledge to keep us informed, with the situation ‘on the ground’ and expedite our customers’ orders and upcoming shipments, for fastest lead times.
EMAIL Colin Redman for more information, advice and guidance