Ocean, Rail Freight on Way to Returning to Pre-COVID Normal, Logistics Executive Says
Ocean freight and rail freight likely will be returning to a pre-COVID pandemic normal by the end of 2023, a logistics executive said at a Feb. 23 conference.
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William Rooney, vice president-strategic development at Kuehne & Nagel, said a measure of ocean shipping congestion has decreased from peak COVID levels and is getting to levels seen in 2015. That downward trend puts "more pressure on rates and if you follow that trend line, it says that [by] May/June of this year, we will likely be back to normal,” Rooney said, speaking at the USDA Agricultural Outlook Forum. The U.S. port and supply chain envoy, Stephen Lyons, made similar comments earlier this month, saying the supply chain might be undergoing a “pre-pandemic resetting" (see 2302150057).
Rooney also said the outlook for rail freight is getting better. He noted that the rail network was hurt just as much as the ocean network, but that there has finally been improvement “in the last month and a half to two months.”
New International Maritime Organization environmental regulations may slow some of the progress for ocean freight, Rooney said. Starting from January, new emissions restrictions have been causing ships to run at a slower speed. "The trouble is, if you slow down, you have to do one of two things: accept less capacity [or] add assets to make up for the slowness," Rooney said. He warned that this could be a significant issue moving forward.
This year should be a "tale of two halves" from an ocean cargo perspective, Rooney said. In the first half, a weak global economy and cargo market will make it a good time to negotiate a contract as spot rates are low, he said.
The second half of 2023 should feature "better economics, improving cargo market, inventories being replenished, maybe what they call in this business a traditional peak season for cargo, which is cargo coming from all over the world, particularly Asia into the U.S. for the Christmas season," Rooney said. "Probably firmer and maybe increasing rates, but operations should be back to normal at that point."