Second half of 2023 holds challenges for freight forwarding industry

As they approach the second half of 2023, supply chain professionals are wary of three main business challenges, including the possibility of a U.S. recession, geopolitical risks, and rising operating costs, according to a survey from German online container logistics platform Container xChange.

The results showed that 49% of those surveyed fear a recession in the U.S. as a key concern for the freight forwarding industry, followed by geopolitical tensions (32%) and rising operating costs (22%).

Other options that generated less concern included: labor strikes (12%), declining freight rates (12%), contract negotiations (8%), port operation disruptions (3%), and pandemic (1%).

The survey was conducted by Container xChange in the month of April, spanning replies from 1,200 supply chain professionals employed at freight forwarding companies, container leasing companies, container traders, NVOCCs, leasing companies, and shipping lines. 

“Interest hikes by central banks due to sticky inflation has put the balance sheets of many lenders under pressure, essentially forcing them to mark down assets or sell them off at a loss to cover short-term liquidity needs,” Christian Roeloffs, cofounder and CEO of Container xChange, said in a release. “This vicious circle of increasing interest rates, rising instability in the banking sector, tightened access to credit, falling commercial real estate values and eventual recession is underestimated by the overall market, and has significant implications for supply chains.”

On the subject of geopolitical tensions, hot-points are both the ramifications of Russia’s invasion of Ukraine and rising tensions between China and Taiwan. Global trade could be impacted because of many countries’ dependency on investments made over recent decades by China—into infrastructure projects, bridges, roads, terminals, and ports in South America and Africa—and by Taiwan as the biggest manufacturer of semiconductors.

“These high-risk geopolitical tensions could potentially lead to the fractionalization of trade blocks and potentially a world where trade becomes less efficient because you cannot trade with everybody anymore. Trade becomes restricted to blocks. Currently, it looks like there might be two major blocks but in future, there might be more. This will then limit trade and make it less efficient,” Roeloffs said. 

And regardless of that potential, many companies face rising operating costs due to a significant decline in the demand for freight after it reached its peak in September 2021, coming on top of increased energy prices and labor costs, and a shortage of depot space for goods, the Container xChange report said.