Freight forwarding is a complex and dynamic industry that faces many challenges in 2023. One of the main challenges is the difficulty of filling vessels and therefore their commitment to carriers with cargo, especially in the ocean freight sector. This blog post will explore some of the reasons why this is happening and what freight forwarders and carriers can do to overcome this challenge.

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Reasons for low vessel utilization

There are several factors that contribute to the low vessel utilization in 2023, such as:

• Global trade slowdown: The global economy has been hit by several shocks in the past few years, such as the US-China trade war, the Suez Canal blockage, and Brexit. These events have disrupted supply chains, reduced consumer demand, and increased trade barriers. As a result, global trade volumes have declined by 5% in 2022 compared to 2019 levels.
• Overcapacity: The ocean freight industry has been suffering from overcapacity for a long time, as carriers have ordered more ships than needed to meet the expected demand growth. However, the demanded growth has not materialized due to the global trade slowdown and other factors. According to a report by Maersk, the global container fleet capacity has grown by 4.5% annually from 2015 to 2020, while the demand growth has only been 2.8%. This has created a supply-demand imbalance that has lowered freight rates and vessel utilization.
• Environmental regulations: The ocean freight industry is also facing stricter environmental regulations that aim to reduce greenhouse gas emissions and pollution from shipping. For example, the International Maritime Organization (IMO) has implemented a global sulphur cap of 0.5% for marine fuels since 2020, which has increased the operational costs for carriers. Moreover, the IMO has set a target to reduce carbon intensity by 40% by 2030 and by 70% by 2050 compared to 2008 levels. These regulations require carriers to invest in more fuel-efficient ships or alternative fuels, such as liquefied natural gas (LNG) or hydrogen.
• Digital disruption: The ocean freight industry is also facing digital disruption from new entrants and technologies that are changing the way freight is booked, tracked, and delivered. For example For example, digital freight platforms such as Freightos and Flexport are offering online marketplaces that connect shippers and carriers directly, bypassing traditional intermediaries such as freight forwarders. These platforms provide greater transparency, efficiency, and convenience for shippers and carriers, as well as access to real-time data and analytics. Furthermore, technologies such as blockchain, artificial intelligence, and internet of things are enabling more secure, smart, and automated supply chains.

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Solutions for improving vessel utilization

To cope with these challenges and improve vessel utilization, freight forwarders and carriers need to adopt some strategies, such as:

• Consolidation: One of the ways to reduce overcapacity and increase vessel utilization is to consolidate cargo from multiple shippers or carriers into fewer vessels. This can be done through alliances, mergers and acquisitions, or co-loading agreements. For example, in 2022, four major carrier alliances (2M, Ocean Alliance, THE Alliance, and ONE Network) controlled about 80% of the global container capacity. These alliances allow carriers to share vessels, terminals, and networks, as well as optimize routes and schedules.
• Diversification: Another way to improve vessel utilization is to diversify into new markets or segments that have higher demand or growth potential. For example, some carriers have expanded into inland logistics services, such as warehousing, distribution, or intermodal transportation. Others have focused on niche segments, such as reefer containers or project cargo. For example, C.H. Robinson Worldwide is one of the largest providers of reefer containers in the world, while DSV A/S is one of the leading providers of project cargo solutions.
• Digitalization: A third way to improve vessel utilization is to digitalize processes and operations to enhance efficiency and customer experience. For example, some freight forwarders and carriers have adopted digital platforms that allow customers to book, track, and pay for their shipments online. Others have implemented technologies that enable real-time visibility, data-driven decision making, and automation of tasks. For example, Kuehne + Nagel has launched Sea Explorer, a digital platform that provides customers with information on sea freight services, such as transit times, CO2 emissions, and reliability ratings.
• Innovation: A fourth way to improve vessel utilization is to innovate products and services to meet changing customer needs and expectations. For example, some freight forwarders and carriers have developed new solutions that offer more flexibility, speed, or sustainability for shippers. For example, Maersk has launched Maersk Spot, a product that guarantees loading and fixed rates for shippers, as well as compensates them for no-shows or roll-overs. Similarly, Nippon Express has launched Green Logistics, a service that helps shippers reduce their environmental impact by using alternative fuels or modes of transportation.

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Conclusion

Freight forwarding is a challenging industry that faces low vessel utilization in 2023 due to various factors, such as global trade slowdown, overcapacity, environmental regulations, and digital disruption. However, freight forwarders and carriers can overcome this challenge by adopting strategies such as consolidation, diversification, digitalization, and innovation. By doing so, they can improve their operational efficiency and customer satisfaction, as well as gain a competitive edge in the market.

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Bibliography

: World Trade Organization. (2022). World trade statistical review 2022. Retrieved from https://www.wto.org/english/res_e/statis_e/wts2022_e/wts2022_e.pdf
: Maersk. (2020). The future of container shipping: How the industry can navigate the new normal. Retrieved from https://www.maersk.com/insights/growth/the-future-of-container-shipping
‍: International Maritime Organization. (2018). Initial IMO strategy on reduction of GHG emissions from ships. Retrieved from http://www.imo.org/en/OurWork/Environment/PollutionPrevention/AirPollution/Documents/Resolution
: MEPC.304(72)_E.pdf: Alphaliner. (2022). Top 100 operated fleets as at 1 January 2022. Retrieved from https://alphaliner.axsmarine.com/PublicTop100/:
: C.H. Robinson Worldwide. (2022). Annual report 2022. Retrieved from https://investor.chrobinson.com/static-files/6f0a9b6a-7b5c-4f1c-bf7d-0a3c8b9e5e0d:
: DSV A/S. (2022). Annual report 2022. Retrieved from https://www.dsv.com/en/about-dsv/investor-relations/financial-reports:
: Kuehne + Nagel. (2019). Kuehne + Nagel launches Sea Explorer – the first digital platform offering insights into the largest seafreight service network based on reliability, sustainability and transit time. Retrieved from https://newsroom.kuehne-nagel.com/kuehne--nagel-launches-sea-explorer--the-first-digital-platform-offering-insights-into-the-largest-seafreight-service-network-based-on-reliability-sustainability-and-transit-time/:
: Maersk. (2019). Maersk Spot: One booking platform for all your cargo needs. Retrieved from https://www.maersk.com/news/articles/2019/06/24/maersk-spot-one-booking-platform-for-all-your-cargo-needs:
: Nippon Express. (2020). Nippon Express launches "Green Logistics" service for reducing environmental impact of logistics operations in Japan. Retrieved from https://www.nipponexpress.com/news/release/2020/10/01/

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