Date: Thursday, March 2, 2023
Supply chains across the world are healing, turning an annual shipping convention in Southern California this week into an opportunity to restore order and trust.
“Confidence in the industry’s ability to deliver goods consistently has been shattered,” according to the official theme for TPM23, organized by S&P Global Market Intelligence. The event is estimated to draw 2,400 representatives of the shipping industry through Wednesday in Long Beach, California.
After years of pandemic turmoil that left many importers waiting months for their goods — and paying mightily for the privilege — we’ll be watching Davos on the Docks for clues on several key questions:
- How will negotiations go for long-term container contracts as cargo owners hold the upper hand for the first time since 2019?
- How much longer will global goods trade stay in a slump that began in the second half of 2022?
- Can container carriers halt the collapse in shipping rates, and how will they manage capacity while pressing ahead with their stated goals of operating ships that emit less carbon?
- What’s the next big disrupter — labor unrest, geopolitical uncertainty, accelerated reshoring, cyber threats or some combination of all of them?
The economic stakes are much wider than the world of logistics. Just because supply-chain strains are easing almost as fast as they broke down doesn’t mean the pressure they’re exerting on inflation will disappear as quickly.
Spot rates for many ocean shipping lanes have fallen to pre-pandemic levels, but short-term prices for containers from Europe to the US East Coast are still more than double what they were in late-2019, according to data from Freightos. And high rates are still in place for the 70% of container cargo transported in containers under long-term contracts negotiated in the ‘pay anything’ mood of 2021 and 2022.
There are also higher costs for diesel, industrial equipment and major capital expenses like new and used trucks still abound. Add to that rising wages and high cost of turnover across the logistics industry, increasing costs of warehouse storage and you have a recipe for sticky inflation.