Looking back at what happened in 2022, January seems to be lightyears behind us. A war has started near Europe, so near that the repercussions are felt so much by everyone. We could not expect the market (our freight forwarding market) could change direction so quickly and so strongly. We could not expect the energy costs especially in Europe could skyrocket at levels that were never seen in the past decades, bringing inflation and high interests.
We could divide 2022 in 2 cycles. The first cycle was linked to the Covid period (even if in China, Covid went on for many more months, the lockdowns in Europe ended in 2021), and this was reflected in a booming freight market full of products to be shipped to Europe (or everywhere actually), sky-high freight costs, extremely tight space. Then the engine stopped. In logistics there is a situation that is called “bullwhip effect”. It happens when there is an increase of sales that down the logistics supply chain get inflated by one party after the other, by planning a higher production looking at an increasing trend. Normally what happens is that when a huge quantity of products hit a market; market not actually ready to absorb such quantity, across the supply chain each party (retailers, distributors, manufacturers) end up with too much stock.
We all know that some products were highly linked to covid: those for homeworking, home exercising and all those PPE products like masks and test kits. Such products have quickly vanished from shelves and from the shipping industry. But we could see that, because of the war in Ukraine, the FX shifts, the energy costs and mortgage interest increases, the whole market slowed down and this happened very rapidly. This has been the second cycle which we are into nowadays and will probably continue for a large part of 2023.
We, as APC, had several projects on the way to keep on with the improvements in efficiency and this approach is helping us right now. All the APC countries are now working with Cargowise (an IT platform for freight forwarders) with APC Norway, last to move in, starting very soon. This is allowing us to improve speed in exchanging information and reduce time in data entry. We have developed our new website, which allowed us to add more features, and some more are on the way. The IT enhancements are necessary when the company is growing as it helps to keep things together or at reach. Certainly, the IT is becoming the “mantra”, the necessity to become more and more reachable and allow customers to get from us, information, and documents when they need or want. This change is coming, and we are preparing for it. I very much believe that the freight forwarder becomes important when problems happen. Being available in person and solving issues with a personal, tailor-made approach is still crucial and makes the difference. We believe each shipment is different and somehow “special”, we cannot leave it to an algorithm and a bot reply on a website. “Personal touch” is one of our core values, probably the most important.
How do I see 2023? Like a black box. The reason is that there are so many global issues that require to be mended or solved; and just one escalating, may change the status quo. The main issue for us freight forwarders in 2023 will be the increase of space in the air and ocean markets. Currently flying is returning to pre-Covid conditions and this will bring back international passenger flights with the so-called “belly-capacity” growing steadily. For the ocean market, the situation will be harder. Capacity increases will hit the market during the whole year for the vessels booked before or during covid while markets were booming. A year that does not require new capacity and which is already full of blank sailings will see the highest growth. This abundance of space might be seen as a positive situation by our customers as the freight costs are very low and will remain low. However, I wish to recall the effects of the Lehmann shock which brought many shipping lines to merge to survive or fail like Hanjin did. In the past we had about 20 global shipping lines, nowadays we have less than 10 and they are clustered into 3 main alliances that eventually reduce choices. Other issues on our way are the war in Ukraine and the aftermath with Russia (still no fly zone for airlines), the high inflation in Europe and the energy prices, a possible global recession.
So, what are we going to do? APC is working with its own capital; we have no bank loans. This helped when rates were sky-high, and this helps us now as we have no interests to pay to banks. APC is part of the NX Group (aka Nippon Express) and this gives a second layer of financial strength. APC has not gone through acquisitions or new openings during the Covid period, this will also help us. Are we ready to tackle 2023? Yes, with no doubt. Actually, for us, this year is full of opportunities. We have considered and prepared for all possible scenarios this year may offer and we know not everyone is ready.
We will be very happy to welcome you to work with us as a colleague, a vendor, a customer, or in other words, a Partner.
