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Market Update, February 2023
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03/15/2023 | 12 min

February 2023 Takeway

Better News for Shippers on Costs – and Use Your ‘Spot Muscle’ 

Transporeon’s modal experts: 

Road: Christian Dolderer, Head of Market Intelligence, Europe Road and Intermodal 

Ocean: Clemens Schapeler, Head of Ocean Market Intelligence 

Air Freight: Christoph Bruns, Head of Market Intelligence, Air Cargo 

Nick Poels, Tribe Lead Transport Operations 

Moderator: Eric Johnson (Director at S&P Global and Senior Technology Editor) 

Road Transport Market

Christian Dolderer 

  • Marked rates uplifts in both the contract and spot markets in 2022. 

  • Signs of decreasing rates in the spot market in H2/2022, indicating the possibility that the worst may have passed (because spot usually increases heavily towards the end of the year). 

  • Capacity growth in H2/2022 (like the spot market, this bucks the typical annual seasonal trend). 

  • Outlook for 2023/24: on the plus side, capacity is now much more balanced for shippers, but demand pressures associated with regulatory and sustainability goals will maintain the costs challenge. 

Road Market Summary and Outlook

The impact of geopolitical events in 2022 has almost been as strong as the pandemic. Both procurement and operations have been made more challenging by multiple headwinds. Therefore, road freight transport remains in a difficult situation. 

The good news for shippers is that there is more balance in terms of capacity, than there was two years ago. Shippers will also be pleased to hear that capacity is on an upward path, although this benefit is significantly offset by the continuing shortage of drivers. High global inflation is certain to affect driver wages in 2023, maintaining cost pressures. 

World economic volatility affects the demand for transportation. While it is not yet clear what the full result of the gas shortage might be, it’s possible we may see a bullwhip effect on supply chains in H2/2023, as we did the year after Covid. 

Costs reductions in the short term do not seem likely. Emissions reduction requirements need to be added to the mix, and distance-based toll systems favouring EVs are coming into force this year in the EU, as part of that effort. Meanwhile, the EU Mobility Package (aimed at improving social conditions for drivers) may well increase in scope, which would be likely in the short term to affect costs adversely more than positively. 

Trends to watch this year: “The pressing concerns for most players in 2023/24 will be to stabilise processes and build resilience into supply chains. This will lead to strategic adjustments in how shippers go to market and take steps to mitigate risk, perhaps by engaging a wider range of suppliers to support operations. On the positive side, as mentioned above, there will be balance in terms of capacity.”

Ocean Transport Market

Clemens Schapeler 

  • A more positive picture for shippers 

  • Spot rates down; China-North America down by 80-90% from peak. 

  • Contract rates down, though more slowly than spot. 

  • Service and schedule reliability improving for all major carriers, thanks to a more regular supply and demand environment. Less demand in the system means fewer disruptions and better utilisation of effective capacity. 

  • Outlook 2023/24: Reduced demand for ocean freight, led by fewer consumer imports to Europe and North America, suggests an improving market for shippers. Conversely, this could be tough for carriers, with profit margins decreasing. 

Ocean Market Summary and Outlook

The ocean freight sector faces several challenges. In the short-to-medium term, labour disputes all over the world seem likely to continue. These are driven by global inflation, combined with poorer financial numbers for port owners.

Over the next decade the drive to sustainability will require the industry to transition to greener fuels, perhaps also to a possible growth in reshoring and near-shoring. These needs are likely to see the biggest changes in practices since the invention of the container ship.

Change is coming in terms of alliances and strategies. At the end of January 2023, Maersk and MSC confirmed that they are to end the 2M alliance from January 2025. This is not a total surprise to observers of their recent activities. Maersk has the lowest order book to fleet ratio, but also the lowest total order book of all the major ocean carriers. It seems probable that the company is investing its huge pandemic profits and cash reserves from drilling activities in its future as a global supply chain solutions provider, with activities such as value-added services and air freight. Meanwhile MSC has an order book of 35% at the moment and is aggressively expanding its fleet, seemingly confident that it can very successfully operate a global ocean network with its fleet alone. Maersk is integrating subsidiary brands; CMA is making acquisitions in the forwarding sector; Hapag-Lloyd is focusing on terminal investments.

The trends to watch this year: “These are very interesting times after the ending of the rate explosion of the last two years. There might be good opportunities for shippers against this backdrop, with a better chance to procure exactly the service you need. For instance, if your focus is on cost control, there could be a potential partner going in same strategic direction as you.”

Air Freight Transport

Christoph Bruns 

  • Improving market conditions driving rates down

  • Capacity increases driven by growing belly space and improved connectivity, as more international flights are scheduled to more international airports beyond hubs. 

  • Growth in passenger numbers relieving pressure on airlines to replace lost revenue with freight business. 

  • Volumes down due to global factors, but less modal shift from ocean than in the previous two years. This has led to more reliable and predictable operations at airports and warehouses. 

  • Costs peaked last year, driven by the jet fuel cost crisis. Forwarders may look to use more available belly capacity ahead of own freighter networks.

Air Market Summary and Outlook

Increasing competition between passenger airlines and pure cargo airlines should lead to better performance and therefore more opportunities for forwarders and lower rates for shippers.

The forwarding landscape is also changing, with mergers and changing strategies, similarly to the ocean mode.

Shipper sourcing strategies, such as on-shoring and near-shoring, will impact on cargo networks. When volume shifts to accommodate this, there must be a focus on available capacity.

The trends to watch this year: “Shippers must adapt their portfolios to enable them to access the most appropriate suppliers for them in a changing landscape. Do they seek a wider and more balanced provider portfolio, or just stick to a very few? The clear goal for shippers must be to increase resilience, for instance by looking at back-up carriers, provider splits, re-routing options, and to ensure they are equipped for this changing market in order to fulfil internal and external requirements.”

The Whole Picture 

Nick Poels, Tribe Lead Transport Operations

Looking at the transport sector as a whole, Nick Poels confirmed a clear trend towards a shippers’ market, adding that it takes a brave individual to predict, given the turmoil of the past two years. 

Nick highlighted the role that technology is likely to play in assisting shippers and carriers with their strategies in fast-changing times. He pointed out that while the spot market is traditionally seen as a tactical weapon to help make cost savings, clever utilisation of the right technology can help blend the perfect spot/contract recipe. Like financial trading floor screens, the ability to see shifting buy-and-sell trends, at a glance, promotes more informed and confident decision-making. 

Technology also provides the tools for mutual collaboration benefits. With demand coming down in parallel with prices, it is tricky to maintain a proper balance, hence the importance of working together with partners, in order to see the whole picture. 

Nick was asked if the sector is about to see a change in the procurement cycle: “Certainly, any sensible shipper is reviewing their contracted lanes at this point, exploring if they have the right lanes, at the right prices and so on. In addition, it is always healthy to have some spot. Make use of your ‘spot muscle’ in certain areas. Yes, some shippers like the peace of mind that comes from being on top of costs in the contract market. That's fair enough if you’ve been a professional in the logistics space over the last two years. But the opportunity is there with spot at the moment. You’re leaving an opportunity cost on the table.” 

Nick ended by describing how automation has an important role to play to enable shippers and carriers to respond to market changes. Price prediction functionality will be a key element in this, offering evidence-based guidance on competitive future market prices. Traditionally, price strategy has been set by sticking to a set of rules, whereas technology can help you target and achieve a set of goals, whether they be geared towards cost-saving, or performance. 

Finally, Nick acknowledged that the bigger companies, with the larger teams and most extensive fleets under management, tend to adopt technology first. This is because the commercial benefits are usually so much easier to justify when the numbers are so substantial. However, the prize for SMEs is also now within reach, with the potential for measurable wins much clearer and easier to identify. 


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