8 Takeaways from TPM 2023
We recently returned from an eye-opening 2023 TPM conference in Long Beach, Calif. The annual event brings together cargo shipping's major players to discuss trends, negotiate contracts, and peer into the crystal ball.
The container shipping industry's recent collapse back toward normalcy is just one piece of a changing global macroeconomic environment. Despite the industry's retreat from the national spotlight, we observed several key developments that will shape strategies for both shippers and carriers throughout the year ahead:
1) A new normal
We heard a clear acknowledgement from carrier executives that the ocean freight market is returning to pre-pandemic levels across most lanes. However, rates remain escalated on some Transatlantic and LATAM trade lanes – evidence that shippers can't paint their ocean strategies with a broad brush. Providers continue to be bullish on the 2023 back-half outlook, citing the potential for demand to bounce back at any time.
2) Changing technology landscape
As rates and congestion levels return to pre-COVID-19 levels, new types of services may gain more traction in the market. Focus is rapidly pivoting from rate and shipment visibility to new priorities such as auditing services, demurrage & detention reduction, and Ocean Shipping Reform Act (OSRA) changes.
3) Macro and geopolitical uncertainty lingers
Economic uncertainty, heightened by a growing set of geopolitical concerns (including the ongoing Russia-Ukraine war and a fragile U.S.-China dynamic), will shape the shipping landscape and define the trade lanes of the future.
One increasingly popular tactic among U.S. importers may be "friend-shoring"– a strategy that emphasizes sourcing from stable U.S. allies without investing in full-fledged nearshoring efforts.
4) A shifting carrier/shipper dynamic
One unsurprising byproduct of the recent container shipping boom is a trail of frayed relationships (evidenced by this year's conference theme: "Picking up the Pieces.") The market's recent collapse has turned shipper/carrier relationships on their head. While scarred shippers are out for a pound of flesh this contract season, carriers and providers emphasized the need to rebuild relationships and look toward the future beyond short-term rate reductions.
5) Getting smart on OSRA
New regulation – namely the Ocean Shipping Reform Act of 2022 – will bring about major subtle yet significant changes. Shippers and carriers alike are motivated to understand how this will be enforced and what it means for them (a session on this topic was standing-room-only, with over 50 participants denied entry).
Shippers are getting smart about how they can take advantage of importer-friendly policies, particularly around detention & demurrage fees. The OSRA paves the way for importers to easily dispute charges. Carriers' ability to quickly and uniformly adjust to invoicing requirements will help determine winners and losers in this newly-regulated environment.
6) Exporters face a unique environment
As a result of falling global container rates, carriers are likely to find revenue sources wherever they can. One potential revenue source is U.S. exports. In Long Beach, some analysts surmised that U.S. export and reefer rates may actually increase in the near- to long-term future. Exporters, therefore, will continue to face a very different procurement environment than importers.
7) Dealmaking remains strong
M&A persists as an interesting topic as carriers/providers are still sitting on cash reserves. AlixPartners' 2023 Container Shipping Report outlined our expectation that some carriers will continue to invest in service improvements as they put their cash stockpiles to work. Carriers seek to diversify their revenue streams by vertically integrating (e.g. buying terminals) or investing in new technologies (e.g., track and trace, alternative fuels, etc.).
8) Sustainability loses out
Sustainability has fallen to the background this year with very few sessions or discussion on IMO 2030 preparation. This will continue to loom in the coming years as carriers weigh the required investment decisions required to achieve their public environmental commitments. The focus may soon shift to fuel source availability for leading emerging green fuels, such as ammonia, methanol, and synthetic LNG—a concern posed by multiple carrier executives.
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