Inflation, Recession, Reduced Capacity, Repeat...

The LoadStar reported the other day: "Against a background of extremely weak demand forecasts, ocean carriers are preparing to blank around half their advertised sailings from Asia to North Europe and the US after Chinese New Year on 22 January."

A year ago, and just a few months after the Covid-19 pandemic began, we saw the largest increase in container shipping prices ever. For large shippers the prices increased as much as 8 times. Smaller shippers saw price increases as much as 15 times what was charged before the pandemic. Even then many shippers were unable to get containers or available space on a cargo ship.

There are several reasons for the price increases, including a declining number of containers, smaller workforces, port closures, and increased customer demand.

Now, after more than a few quarters of increased interest rates by the Fed, there is a reduction in demand. Apparently enough for some carriers to prepare for more blank sailing (i.e. they don't make the voyage.) Once this begins, expect to see greater difficulty in finding space on a voyage, which will in turn place upward pressure on pricing.

With fewer independent suppliers in the industry, caused by mergers & acquisitions and the capital and risk involved in container shipping, the ocean supply chain ecosystem behaves like an oligopoly, not like a free market. Smart supply managers will keep that in mind as they prepare their strategies for shipping goods via ocean in 2023!