Supply chain professionals foreseeing business challenges are approaching the second half of the year 2023 with caution. As per a survey done by Container xChange, supply chain professionals are wary of three main challenges including the possible US recession, geopolitical risks, and rising operating costs.
The survey shows 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 concerns worrying the freight forwarders are labor strikes (12%), declining freight rates (12%), contract negotiations (8%), port operation disruptions (3%), and pandemic (1%).
Conducted in the month of April, the survey included replies spanning 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. 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.”Christian Roeloffs, cofounder and CEO of Container xChange
The international strains stressing the forwarders are both the ramification of Russia’s attack of Ukraine and rising pressures among China and Taiwan. Experts are worried as the global trade can be impacted could be affected due to many nations’ reliance on ventures made over recent decades by China — into infrastructure projects, bridges, roads, terminals, and ports in South America and Africa — and by Taiwan as the greatest maker 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.
As per the Container xchange report, many companies regardless of the potential are facing rising operating costs due to a significant decline in the demand for freight after reaching its peak in September 2021, coming on top of increased energy prices and labor costs, and a shortage of depot space for goods.