25 December - 31 December
Manifest Weekly: December 25-31, 2022
Welcome to the end of year edition of the Manifest Weekly. This week, we’re diving into what to expect in 2023 (and how to prepare), plus a spotlight on falling charter ship rates.
What to Expect in Logistics in 2023
We bid goodbye to the year 2022, which saw drastic change in fortunes within the supply chain industry, as bottlenecks improved dramatically over the year. The threat of COVID-19 has evolved to endemic status, even as the Russia-Ukraine conflict continues unabated. As we segue into 2023, what can the logistics industry look forward to? Here are a few trends logistics companies and players can expect in 2023.
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At the height of the pandemic in the first half of 2022, we saw major retailers like Costco and Home Depot charter their own vessels from the Chinese mainland to the US West Coast. This was thanks to long vessel queues at the ports of Los Angeles and Long Beach, which constricted freight movement and stopped retailers from receiving their inventories for weeks on end.
With the US West Coast clear of the vessel queues and maritime service levels slowly inching back to normalcy, retailers have now halted their charter vessel operations and are back to bidding for container liner capacity. While charter services do work well when there is tight capacity or when inventories are languishing at choked ports, they cost a lot of money. For instance, Costco has mentioned that it spent $93 million in freight costs over the last quarter, most of which was spent on the company’s ship charters.
In this regard, charter ship rates have also been falling. Chartering a 4,000 TEU ship in November 2022 cost $25,000 a day, which is a 71% drop from 2021. “There is a huge amount of uncertainty. There are not many deals happening at all,” said Jan Tiedemann, a lead analyst at Alphaliner.
However, there are certain retailers that flagged off their own shipping line – like German grocery chain Lidl. The company owns two container ships, aside from chartering for moving extra freight. The company’s vessels work out their own routes, thereby circumventing some of the busiest ports this year to get their inventories on time, while actually saving money compared to other alternatives.