The shipping industry’s 2023 Outlook: What to Expect

In recent years, there has been a lack of confidence in the maritime industry. From the ongoing effects of COVID to geopolitical conflicts, inventory trends, and labour struggles, shippers, manufacturers, and carriers have all had to adapt to rapidly changing circumstances.
During this time, many have wondered, sometimes desperately, when things will return to normal.

The hard pill to swallow is that 2023 will bring its own challenges at all levels of the industry. Shippers and shippers alike must prepare for changes in production capacity levels, an industry-wide shift to a more sustainable future, and a challenging global economic climate.

The challenge of driver capacity management

The second half of 2022 was characterised by a collapse in demand and prices for freight transport, which led to a large overcapacity for transport companies.

In 2023, this supply-demand imbalance is expected to widen as new vessels enter the market, increasing capacity by around 8% worldwide. 
While the drop in rates may have been welcome news to shippers last year, the decline in schedule reliability was certainly not the result of carriers trying to manage this capacity imbalance by increasing empty schedules. 

This trend is expected to continue and even intensify in 2023.
The added capacity could also increase pressure on the three main carrier alliances (2M, Oceano, and LA Alliance). With the price drop already steep and seemingly endless, it remains to be seen whether airlines will break away from these alliances to secure market share in 2023.
However, there are factors that mitigate the impact of new ship launches, although how much is difficult to predict. Some shippers are said to be in talks with shipyards to delay the delivery of new vessels.

Other options, such as scrapping older and less efficient ships, have become an attractive option given new IMO regulations and oversight this year. Another effect to consider in this already complex power equation.


How sustainable development is changing the industry

Efforts towards a more sustainable future of shipping have intensified in recent years, both in legislation and in the order books of cargo carriers. 2023 is the first year ships must collect and report emissions data under new IMO (International Maritime Organization) regulations.
In 2024.This data will be used to evaluate ships in order to determine where non-operational ships must be repaired or are inactive.This new reporting and assessment framework represents the IMO’s latest regulatory innovations. The new framework aims to achieve an overall goal of reducing the carbon footprint of all ships by 40 percent by 2030 compared to the 2008 baseline.
This change in the industry is also reflected in the new ship order book, with more sustainable dual-fuel vessels making up an increasing proportion of new orders. Dual-fuel engines can run on both traditional fuel sources and more sustainable forms of energy, such as LNG, preparing carriers to move away from traditional fossil fuels.

CSSC (China State Shipbuilding Corporation) reported that 31.6% of ships completed in 2022 were multi-fuel ships. The share of dual-fuel orders is expected to continue to grow in 2023 and will continue to grow exponentially in the future as carriers look for more economical fuel sources.
Biofuels also offer the industry a unique opportunity for a more sustainable future. Some biofuels produced from biomass, such as dimethyl ether, can “drop in” and replace existing fuel sources without the need for extensive engine modifications.

Therefore, they can be considered the most readily available low-emission fuel option. However, they are significantly more expensive than traditional sources.
Although biofuels can be considered an expensive alternative to traditional fuel sources and require investment, carriers cannot be forced to make adjustments and bear the costs.
Creating a more sustainable future requires industry-wide action. In addition to drivers, ports, manufacturers, and shippers also support this investment in a greener future.


Economic challenges are on the horizon.

Global economic forecasts for 2023 are grim and present a major challenge. Going forward, demand will be the main factor in the supply chain. As long as the economy remains subdued, importers will keep orders low.
The circumstances leading to the drop in demand are complex, so some predictions should be taken lightly.
Given the current level of demand, orders are unlikely to increase until at least the second quarter of 2023, depending on the specific industry and region.
As economic instability continues, labour disputes affecting shipping have increased. In 2022, ports were affected by 38 labour disputes, more than four times the level of 2021. These strikes often cause massive disruptions, delays in deliveries, and congestion. As economic forecasts for next year are slow, the risk of further effects of labour measures in 2023 is high.

The Role of Digitization in 2023

Along with supplier capacity management, sustainability, and efficiency efforts, the role of supply chain technology is likely to increase in 2023.
The 2022 disruptions highlight the importance of adopting new technologies in shipping, including:
Monitoring and anticipating disruptions to improve supply chain resilience
The use of real-time data improves the accuracy of the forecast and better plans the use of the ship.
 Implement purchase order management to better measure arrival times for certain products and reduce origination delay times.
Scope 3 emissions reporting and analysis to ensure compliance with recognised standards such as the GHG Protocol and ISO 17025
These tools not only affect how you manage your supply chain but also how you work with partners, especially carriers.
A better partner—the carrier of choice—can build value-based relationships based on accurate information and measurable service levels.
This is also a key factor when the economic situation improves and storage begins. Engaging with technology can increase flexibility.
2022 has been a turbulent year for shipping, and uncertainty is expected to continue.

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