It’s well understood that 2021 and 2022 have been one of the more challenging times for transportation providers and shippers. In this newsletter, I have reviewed all the 2022 data provided by our industry's supply chain experts and shared some of the biggest takeaways from the year.
- The start of 2022 continued similarly to 2021. It was a lucrative time for carriers and logistics companies as demand was high and capacity was still tight across all modes.
- In May, the industry started seeing a change as capacity improved and spot market rates started reducing.
- Lowering rates factor 1: Spot Market Favourability
- Shippers started rejecting contracted rates and moving to the spot market. Shippers who accepted lower service levels due to capacity challenges in June and July now expected lower rates and improved service levels.
- Lowering rates factor 2: Ocean Chaos
- North America has considerably more imports than exports and these imports primarily arrive via ocean vessel. Due to high demand and port congestion in 2021, ocean vessel owners stopped sending more containers as there was little freight making it beyond the ports. Then in March of 2022 with volumes lowering, ports started sending containers inland again. As the port backlog was clearing through September 2022, shippers didn’t need to send more and ocean vessel owners had to cancel roughly 50% of sailings and loops with the hope of driving rates back upward as they fell to Pre-pandemic rates.
- Lowering rates factor 1: Spot Market Favourability
- In the Fall of 2022, North Americans showed they are alive and well with over $9 Billion spent on Black Friday and Cyber Monday, according to Adobe Analytics.
- Economies are showing growth – yet the Federal Governments continue to raise interest rates. Financial experts such as Neil Dutta (Head of Economics at Renaissance Macro Research) have stated the Feds are attempting to slow the economy.
- The ‘R-word' is being used across several industries, and company headcounts are being lowered in late 2022 in anticipation of a potential recession.
- The United States Department of Transportation released statistics showing freight volumes increased by 22.6% in Sept 2022 over Sept 2021. The report also details cross border from Mexico was up 23% and totaled $67.4 Billion. Canada was also up 22.3%, totaling $66.5 Billion from Sept of 2021.
- With the looming threat of a rail strike in the Fall and Winter of 2022, truck volumes saw the largest increases across modes with $81.9 Billion in volume and Intermodal was second at $16.9 Billion. Currently, all increases are positive for transportation providers.
Now that we’ve covered the roller coaster of 2022, here is what we think 2023 will bring;
- A market that will see stabilization (Governments will let the economy grow) – and this more stable market will be welcomed by shippers.
- Shippers will see improved services, improved capacity, and more stable rates.
- With global unrest continuing, fuel rates will still be the variable.
- Good brokers will have used the increase in revenues to invest in technology to continue to provide added-value services to shipping partners.
- Larger Shippers will continue partnering with logistics providers that can complement their existing supply chains by providing dedicated services, continuous improvement, EDI, KPI reporting, load planning, and more.
- The pent-up demand for 2023 should start to flow after the Chinese New Year – the flow will be more in line with the 2018 market.
Wellington and Commtrex have invested heavily in technology, partners, and our people. We are working with our shipping partners to navigate the transition we will see moving into 2023. Please reach out if you are interested in discussing what’s coming next in 2023.
See you next newsletter!
Bill
