The waters are choppy for lumber shipping companies, but they continue doing their due-diligence and seeing positive results. One shipper stated: “Our lumber shipments are lagging now, but we remain hopeful they will continue to increase as we move into the first quarter of 2023.”
Another shipper mentioned difficulties, adding: “Our team was able to adapt within the confines of shipping, to not only make it work but to do so successfully. The amount of effort input on a daily basis to accomplish what we were able to in 2022 was remarkable.” He also said that in 2023, “I believe the U.S. economy will head for a mini- (soft) recession before slowly making its way back.”
If optimism is one part of success and hard work is another, then these shippers have put themselves in a position to do well in 2023.
2022 was a very challenging year. Every aspect of the supply chain was broken: vessel space shortages, unreliable vessel schedules, container and chassis shortages, manpower shortages, port congestion, rail congestion, truck power shortages. Yet somehow, we survived all the chaos.
We fought supply chain issues every day in 2022, the biggest culprit being unpredictable vessel schedules. Dates changed every single day which made it difficult to plan trucking, fumigation, inspections, loading appointments, etc. We must get vessels back on schedule so we can have dependability in the market.
Thankfully we employ a group of intelligent, hard-working and detail-oriented employees who worked harder than ever to make sure our customers were taken care of. The life of a freight forwarder has not been easy these last few years and we feel the value we provide to our customers was on full display.
The tides seem to be turning, and demand is waning, but we are still seeing the after-effects of a broken supply chain.
Rates have started falling on both the import and export side. Export rates are still very inexpensive, so I predict the rates to stay depressed through Q1 and Q2 2023, especially with additional vessel capacity coming to the market in 2023.
There are still certain inland destinations where equipment is very scarce. With import demand falling by 40 percent, replenishing inland pool locations will be difficult at times through the next year.
We have noticed an increase in activity quoting log shipments since the end of December. I expect that trend to continue through Q1 and Q2 of 2023. Our lumber shipments are lagging now, but we remain hopeful they will continue to increase as we move into the first quarter of 2023.
There is no doubt our economy will enter a recession in 2023. I think the biggest question is: how long will it last? The government will, and must, get inflation under control. I think that will happen by Q3 2023, and the Fed will reverse and begin lowering interest rates. There are a lot of variables still at play, so I remain cautiously optimistic until we are out of the woods.
We, at AGL view 2022 as an erratic, yet successful year. The last two and a half years have posed very difficult challenges from a logistics perspective. Our team was able to adapt within the confines of shipping, to not only make it work but to do so successfully. The amount of effort input on a daily basis to accomplish what we were able to in 2022 was remarkable.
In addition, 2022 was a success, as it opened our eyes in regards to areas of the supply chain that we previously had taken for granted, specifically the ports and their receiving dates.
Towards the end of 2022, we saw vessel schedules and receiving dates start to normalize, which was the exact opposite of what we saw at the beginning of 2022. I anticipate this will continue to be a challenge on certain lanes, specifically for inland rail shippers.
Another challenge I expect to continue to deal with in 2023 is trucking capacity. There are only so many trucks, and so many moves drivers can do in a day. If more drivers aren’t added in the marketplace, I expect this to be a continued hot button issue.
In 2022, we shipped over 34,000 loads, added 28 team members, moved into a new office space in our Jacksonville location and opened up a 52,000 square foot warehouse in Blakeslee, PA.
I do not see any rate increases coming from steamship lines as of January 1st. We may see certain routings be increased, but as a market, we were at all-time highs for the last year. As the market normalizes, so will freight rates. In addition, many steamship lines have ordered new, larger vessels and, as such, they will be adding capacity to the market. When you add capacity, you drive down your unit cost, and, as such, rates will either drop or stay stagnant.
As a whole, shipping containers are not hard to obtain. There are certain areas in which there are chassis shortages such as Memphis, Columbus, Louisville, Cincinnati, Chicago and others. However, container availability is not as big of a challenge. Whether or not you can/will accept the price a specific steamship line sets is a different story, as the variance between the most cost-efficient carrier and those with containers can be quite large.
Shipping volumes in Q4 vs the prior three quarters have sharply turned downward. We at AGL track shipments day-over-day, week-over-week, month-over-month, year-over-year. Q4 is always a slower shipping quarter than the first three quarters of the year. November is traditionally very slow as you have Thanksgiving, the opening of deer hunting season and typically relatively wet logging conditions as the ground has yet to freeze. December is always a difficult time with all of the holidays, and then inclement weather. I expect Q1 2023 to also be weak given the current world economy. However, I do not believe that it will be quite as bad as what we’ve seen in Q4 2022. Some of our clients have said that Q4 2022 was worse than when COVID first hit.
I believe the U.S. economy will head for a mini- (soft) recession before slowly making its way back. Over the last two years, we have had cheap (sometimes free) money pumped into the economy, and, as such, many companies and end users were overzealous in their purchasing compared to what true demand was. It will be interesting to see what the Fed does with rates in the coming months. I think they are lagging reality and will hinder the economy more than is required to bring inflation back to earth. As a whole, I believe the U.S. economy is not as bad as is being perceived. However, I believe the world economy is in a tough position, and it will take some time to be strong again. Being in the export space, this does not bode well for exporters. Hopefully, I am wrong.