Global Logistics 2023

Then logistics experts discuss the challenges and prospects for global supply chains in 2023, it’s clear that a multitude of factors are involved. Many shippers and players in the transport and logistics business are currently under great pressure.

This is due to a number of lingering issues including the pandemic; huge increases in energy prices; large fluctuations in the supply and demand for transport capacities; delays in port trans-shipment; and bottlenecks in hinterland transport. Furthermore, numerous countries are experiencing double-digit inflation.

Russia’s war on Ukraine also has effects on the supply and flows of goods, while disruption of supply chains and the West’s dependence on imports continues to intensify the debate about relations with China. Above all, there’s also the environmental challenge and the question of how to reduce CO2 emissions and deal with the costs for doing so.

And in the midst of these unprecedented challenges, industrial and commercial companies are analyzing their supply chains and searching for optimization tactics and alternatives. One possibility is to go back to more warehousing with the aim of greater stability in the supply of goods of all kinds—which has often not been running smoothly as of late. Still, the economy has no short-term alternative to international production and trade.

As we move forward, it’s clear that global supply chains will continue to not only need exceptional risk management solutions, but also improved climate friendliness. According to experts of the German Freight Forwarding and Logistics Association (DSLV), one thing is certain: the trend is to take every bit of CO2 reduction into account and leverage climate potential step by step wherever sensible and effective.

“Through innovative technology and efficient and digital processes, we need fewer resources and can reduce emissions. Switching to low-emission modes of transport, motors, and fuels is the most important way to further climate protection in the transport sector and logistics,” say DSLV experts.

Freight rates remain high

Just-in-time deliveries, a strategy followed for a long time, can often no longer be reliably guaranteed in many places. High-volume consigners have the advantage of market power to exert pressure on shipowners, port terminals, and transport companies to meet just-in-time delivery schedules.

In addition to delays in deliveries worldwide, the huge increases in freight rates caused problems for shippers last year. For 2023, consigners hope that freight costs will gradually taper down toward pre-pandemic levels.

However, Rolf Habben Jansen, CEO of Hapag Lloyd, pointed out at an online press event that the significant increase in fuel prices will mean that shipping lines will have to reckon with freight rates around 20% to 30% higher than two to three years ago. He expects that shipowners will face difficulties in long-term planning in general and will need to rely more on quarterly adjustments in services and rates.

Major seaports, such as Rotterdam, Europe’s largest port, will respond to increasing costs with moderate price hikes of around 2.5% to 3%, according to Siemons Boudewijn, COO of Port of Rotterdam Authority. Other ports are also expected to implement price increases for 2023.

Gradual introduction of a CO2 levy in the EU

Maritime shipping accounts for around 3% of global CO2 emissions, according to a report published in October 2017 by the International Council on Clean Transportation (ICCT). Around 60,000 larger merchant ships, including around 6,000 container ships, operate on the world’s oceans.

In October 2022, the International Chamber of Shipping (ICS) announced its goal of achieving climate-neutral shipping by 2050. In 2018, the International Maritime Organization (IMO) had already set the target of reducing emissions by 2050 to a level at least 50% lower than in 2008. The EU is planning to reduce CO2 emissions and to put taxes on shipping even earlier.

Within the framework of its Emission Trading System (EU ETS), a CO2 tax for ships of 5,000 gross tonnage (GT) and above is to be introduced in the EU in three stages from 2024 to 2026. Some shipping companies, such as MSC, have already informed their customers about additional costs in the future. Container shipping companies have estimated the added costs at about $192 to $202 for a 40-foot standard container on the Northern Europe-U.S. East Coast route.

DSLV’s experts point out that it’s important that the introduction of a CO2 levy in the EU region must not lead to any competitive disadvantages. Equal competitive conditions in international shipping are crucial for global trade. In the opinion of shippers and shipowners, the IMO should implement global regulation in a timely manner.

In the meantime, the development of alternative fuels for shipping is still in its early stages. The production, distribution, and market ramp-up of sustainable alternative fuels, as well as the expansion of shore-side power supply in sea and inland ports, are important steps towards reducing greenhouse gas emissions on the way to climate-neutral shipping.

Green shipping

Shipping lines are increasingly employing modern ships with significantly improved environmental standards as well as new propulsion systems and more environmentally friendly fuels. There’s no doubt that investment in climate-friendly transport chains is on the rise.

Among the world’s largest carriers, companies such as Maersk already offer their customers special “green shipping offers.” EcoDelivery, for example, takes climate-neutral fuels into account. These are, for example, waste vegetable fats and oils from the food industry. The CO2 saved is certified for the shippers’ carbon accounting, while a total of 3% of Maersk’s total cargo volume was carried with climate-neutral fuels in third quarter of 2022.

The EcoDelivery surcharge for a 40-foot container in major trades, such as the Far East and trans-Pacific, was around $200 to $300 per box in 2022. If you convert that to, say, the 30,000 T-shirts or 6,000-8,000 pairs of shoes that can fit in such a box, at $0.007 per T-shirt, that’s not a huge added cost per unit of product.

The number of consigners interested in EcoDelivery is increasing steadily, according to the shipping company. According to Maersk, customers already using EcoDelivery include H&M, Electrolux, Lenovo, and the Danish fashion group Bestseller.

The shipping company recently ordered 19 container ships powered by climate-neutral green methanol. From June 2023 to 2025, one feeder ship and 18 large container ships with slot capacities of 16,000 TEU and 17,000 TEU will be put into service under the Maersk flag.

The carrier is also moving towards climate neutrality landside and is building or leasing very low-emission warehouses and using electric vehicles at its own terminals. To date, 300 e-trucks are already in use, mainly in the United States, and a further 140 e-trucks have been ordered.