The shipping industry has weathered numerous storms over the past few years, primarily due to the effects (and aftereffects) of the COVID-19 global pandemic. Now, as we look at the forecast for 2023 shipping, another crisis is on the horizon: inflation and a reduction in spending. How this will play out in the economy is yet to be seen, but experts have some ideas.
Reduced Spending Leads to Relief for the Shipping Industry
When consumers were at home during 2020 and 2021, they purchased more goods, which when combined with port closures and reduced staffing, led to backlogs. Now, as inflation soars and lockdowns are eliminated, consumers are switching away from goods to services. And that has provided relief for global supply chains. By September 2022, the backlog of cargo ships waiting to dock at ports around the world had all but dissipated. That, combined with the fact that retailers increased inventories in Q1 2022 in anticipation of holiday shopping, has helped quell the issues of the prior few years.
Now, as prices increase due to inflation, and with the knowledge that spending is down, retailers are ordering less. As we head into the end of the year, port congestion has eased, capacity has lessened, and container turnaround times have dropped.
The Results of Inflation on 2023 Shipping
A rate decrease is on the horizon, some shipping experts report. Freight rates on major routes, including Shanghai-Rotterdam and Shanghai-New York have already dropped as much as 13%. Experts say that rate reduction is due to an associated decline in container shipments. And that’s where the fear of an upcoming recession comes into play. Retailers are already seeing a reduction in shopping as inflation continues, prompting them to curb purchases for fear of being stuck with inventory, as we saw earlier this year.
In fact, RetailDive reports that by the end of the year, imports will likely drop to their lowest point in two years. And many retailers continue to deal with an overabundance of inventory that they’re looking to offload to consumers.
Spot shipping rates have also fallen, with predictions that they may hit the average of rates in 2019 by the end of 2022. And 2023 shipping is unlikely to bounce back immediately in Q1.
The Good and Bad News for 2023 Shipping
As we look ahead to 2023 shipping rates and what’s to come, there are positives and negatives on the horizon. Given the state of the global economy, we can look forward to a continued drop in consumer demand, oversupply associated with reduced purchasing, and an ongoing economic crisis with inflation and a potential recession. But that does mean supply chain issues will diminish and 2023 shipping costs will go down.
ING predicts a 1.2% growth in merchandise world trade in 2023, which is lower than the expected GDP growth. The World Trade Organization echoes ING’s predictions, forecasting world GDP to grow at a rate of 2.3% in 2023—1% lower than their previous estimate. Their report cites the Ukraine crisis, along with associated price hikes on energy and food costs. What does this mean? It usually indicates a recession since consumers are unwilling (or unable) to purchase as they did during an economic expansion. And that could bring with it more changes to 2023 shipping and beyond.
Stay Ahead of the News with Cyclone Shipping
While no one can predict the future, economists and shipping experts can come close. As we look toward 2023 shipping and how inflation, war, and changing consumer habits will affect shipping costs, stay connected with Cyclone Shipping. We are not only your trusted freight forwarder, but we are also always looking at what the industry is doing now as well as where we’re headed in the future.
When you have questions about shipping, including the best routes and current rates, reach out to us. We always provide the most current information and help you navigate what the future will hold.