Supply chain expectations for 2023

It is inevitable that we will see some supply-chain disruption this year, but it likely to be far less than the global turmoil experienced over the last two years, as consumer demand is likely to be muted through the first half of the year, at least.

Consumer demand will be weak through the first two quarters of 2023, with the World Bank warning that sharp cuts to its forecast to 0.5% for the United States and flat GDP for the euro zone, could foreshadow a new global recession less than three years after the last one.

China’s growth in 2022 slumped to 2.7%, its second slowest pace since the mid-1970s after 2020, as zero-COVID restrictions hit consumption, production and investment, with the World Bank predicting a rebound to 4.3% for 2023, which is almost 1% below the June forecast due to the severity of COVID disruptions and weakening external demand.

The World Bank noted that some inflationary pressures started to abate as 2022 drew to a close, with lower energy and commodity prices, but warned that risks of new supply disruptions were high

Any economic recovery would start earliest in H2 2023 and the UK is unlikely to start growing the economy any earlier, with Goldman Sachs suggesting the UK’s economy will not start to recover before H2.

Some 28% of the current container shipping fleet capacity is on order – equal to 7.5 m TEU – as new vessels and 2.3m TEU is due to be delivered over the course of next year.

And while shipping lines try to defer delivery of their new tonnage, excess capacity is inevitable, even with blanking programmes.

The labour disputes that were so prevalent last year, as workers sought pay increases to keep up with inflation, with strikes in the U.S, UK, Germany, South Africa and South Korea, are likely to crop up again. And while the UK’s rail unions show no signs of ending their disputes, the danger of further strikes at UK’s Felixstowe port has been avoided after a pay deal was reached with unions.

Sea-Intelligence is reporting that about half of all shipping congestion has been resolved, and that – providing there is no ‘Black Swan’ event – a full reversal to normality should come by March 2023.

IMO 2023, the latest set of environment regulations for global shipping, took effect on the 1st January and the three new compliance measures being introduced are part of the IMO’s objective to reduce carbon emissions by 40% by 2030 and 70% by 2050 compared to 2008 levels.

The new measures will negatively affect shipping capacity, by requiring vessels to lay idle for modifications, and by incentivising carriers to slow steam, to make poorly rated ships compliant.

The CEO of a leading carrier has stated that to improve the energy ratings of older vessels they need to either use biofuel, or slow down and calculated that his line would lose between 5 and 15% capacity to comply by lowering speed.

SEE OUR REPORT – The IMO 2023 challenge to container shipping
https://www.noatumlogistics.com/uk/the-imo-2023-challenge-to-container-shipping/

Many manufacturers are anticipating capability to return to pre-pandemic production volumes in 2023, at levels that flatten the 2020–22 “spikes” seen in almost every aspect of industrial activity, from inventories to production to pricing.

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.

Noatum Logistics offices in China and across Asia maintain strong relationships with regional carriers and manufacturers. They use their local knowledge to ensure that our customers know exactly what is happening with their orders and can expedite upcoming shipments, for fastest lead times.

Our proprietary cloud-based system – PowerView – provides complete visibility and control of the supply chain. With customisable dashboards, powerful reporting and the ability to mould it into the solution that meets each shipper’s unique needs.

EMAIL Matt Fullard for more information, advice and guidance.