Industry Insights Special Report: A Look at 2023
January 2024
By PGL
Welcome to the PGL look at 2023 and our forecast for the coming year.
We continue to live in interesting times, and last year was certainly no exception. The last gasp of the large scale ramifications of the pandemic came to a close with China easing its Covid Restrictions in January. Though the virus is still a threat, the global community was able to bring it to manageable levels and we continue to deal with the long tail effects relative to the logistics industry. We saw large inventories transition to something closer to the pre-pandemic normal just-in-time model this summer, allowing for more efficiency and lower warehousing costs heading into a better-than-expected holiday season.
Ocean Freight:
In Ocean Freight, 2023 has seen some major events, not the least of which being that the two most important canals are experiencing serious peril in the form of a years-long drought that is having a major impact on travel through the Panama Canal leading to reservation restrictions and delays, and unrest in the Middle East that has resulted in Houthi militant attacks on multiple vessels that were perceived to have connections to Isreal, causing many to avoid the Suez Canal. The situation with both Canals has led to rerouting plans for major shipping lines and the situation continues to develop into 2024. This has had an interesting ripple effect on shipping rates, as earlier in 2023, contract rates were plummeting as shippers jumped on low spot rates heading into contract nogotiotion season. Those rates are actively rebounding. This could lead to fewer blank sailings than we saw in 2023. Stay tuned to our Industry Insights reports for more as the situation develops.
Trucking:
In trucking, 2023 saw the closure of one of the US’s oldest and largest carriers, the Yellow Corporation. The knock-on effect lead to a boost for many carriers who have been able to take on business that used to go to the former trucking giant. The industry isn’t out of the woods yet, however, as trucking capacity remains high after fleets were expanded in 2021, and we can expect to see more carriers close up shop in the near future until trucking capacity is closer to demand.
Air Freight:
Air freight saw a tumultuous year as lower demand led to reduced rates through August due to high inventories, but had a bit of a rebound in the last quarter as the peak season proved to be better than projected. Additionally, the difficult situations surrounding the canals are driving more air freight for time-sensitive shipments that may have otherwise been bound for ocean freight in normal conditions. These factors have led to a surge in pricing that had rates ahead of the 2019 pre-pandemic benchmark. 2024 is showing indicators of improvement for air freight moving forward, but it’s important to note that the geopolitical landscape can and will influence that for the better or worse.
Intermodal:
Intermodal freight has proven to be a bright spot, as the congestion that led to much of the business leaving rail freight at the height of the pandemic has been dealt with, and lower rates compared to trucking are revealing opportunities for a resurgence for intermodal performance with shippers looking to save on long-haul trucking costs.
Energy:
In the energy sector, diesel benchmark pricing defied expectations in 2023 with unseasonably low rates in the last quarter of the year, even in the wake of conflict in the Middle East and production caps by OPEC. Crude oil per-barrel prices averaged almost $20 less than in the prior year. With interest rates high, the industry is reluctant to hang onto large inventories. At the moment, demand remains high and producers are meeting that demand. Many indicators are still pointing to rising diesel prices, but a short spike in the first week of 2024 has already been reversed, and traders are not viewing trouble in the Middle East as an imminent threat to the market.
Labor:
Labor disputes defined much of 2023 in the logistics industry. Though the over 400 work stoppages in the year is roughly equivalent to the number set in 2022, they involved significantly more workers and had far-reaching effects in 2023, such as UPS, Dock Worker Unions, the United Auto Workers and more. Major factors for the significant labor issues faced last year include the fact that many contracts were set to expire and inflationary pressures. Labor disputes always have a large impact on logistics, and we can expect that to continue for the foreseeable future.
We hope you have enjoyed this look at 2023 as well as some predictions for what the coming year may bring us. PGL will continue to keep you informed and will keep delivering peace of mind, 24/7/365.
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