Over the past couple of years, the shipping industry was sent into chaos thanks to the COVID-19 pandemic, and the knock-on effects of this can still be felt worldwide.
As we edge closer to the end of 2022, we’re still seeing plenty of issues come to a head, and it’s vital for all parties in the industry to be aware of potential supply chain challenges to have the best chance at combating them.
Here’s the lowdown of the current challenges we’re facing.
Rising Energy Prices
Freight rates increased by a whopping 1000% during 2021, and whilst they are steadily creeping back into pre-COVID prices, you can expect to see the waters continue to settle into 2023.
An issue affecting the sky-high costs of moving goods is one currently impacting us all in our personal lives, too: rocketing energy prices. As the cost of crude oil and natural gas continues to rise, shipping carriers on a variety of trade lanes are forced to up their prices or face huge losses.
Unfortunately, buyers end up paying more for the same goods to bridge the gap and keep the industry afloat.
Strikes
Rail workers, postal staff and port workers are among the groups of professionals to strike this November due to bitter rows over pay, jobs and working conditions. Disputes at ports in Felixstowe and Liverpool are ongoing, and the strike series within the rail network also continues.
These strikes demonstrate the sheer levels of stress and upheaval the shipping industry has been under for the last couple of years, with big companies feeling the need to make monumental changes without consulting workers; the heartbeat of their businesses.
A new law in the process of being launched by the British government will ensure that a minimum service level is maintained so that passengers can continue to access their places of work and study as well as medical care and appointments.
But, with no resolution on the horizon and workers still fed up, can we expect to see more strike action going into December and beyond? All gauges point to yes; it is pointedly predicted that further public sector workers will follow suit, meaning we have further disruption to come.
Driver Shortages
The outbreak of COVID-19 prevented learner HGV drivers from being able to sit their test and qualify.
And then, when we all fought our home-based boredom by becoming avid and full-time online consumers during the pandemic, existing drivers left their current roles in the freight world to join couriers offering higher pay. Someone had to help deliver all of those Amazon parcels, right?
The bad news is that there is still a national driver shortage. And that means that road freight rates and delays remain at a high (albeit decreasing) level.
Additional Rules And Regs
IMO23 is a new set of regulations brought forward by the International Maritime Organisation (IMO) that will affect your supply chain going forward.
The IMO is the United Nations agency responsible for improving the freight industry’s safety, security and eco-friendly nature, and IMO23 introduces three new compliance measures set to combat CO2 emissions from hereon in. Here’s an overview of the new regs:
EEDI and EEXI
EEDI (Energy Efficiency Design Index) and EEXI (Energy Efficiency Existing Ship Index) are one-time certifications that will need to be obtained by all ships over the coming years, old and new.
The EEDI is a graded-level certification measuring the percentage improvement of standard efficiency. Currently, ships have to be 20% more efficient than those built in 2022, but from 2025 a 30% increase is expected and necessary for compliance.
The EEXI targets efficiency through technology and will demand technical upgrades to many vessels, such as rudder and hull improvements. All existing ships will need to meet these standards by 2023, though some ship types will be required to meet them this year.
CII
The Carbon Intensity Indicator (CII) focuses on operational, measuring the amounts of CO2 emitted per nautical mile and per cargo capacity. Ships will be rated on their operational carbon emission from grade A through to E. Without a grade C pass, they will not be permitted to trade until the situation has been rectified and compliance is achieved.
Carriers with ships brandishing three years of D grades or one year of an E grade must produce and action a plan that improves each vessel’s rating. Measures such as implementing energy efficiency technologies, optimising operations and sailing speed reduction will be instigated, to name but a few.
The grading system comes into play on the 1st of January 2023.
The Ripple Effect Remains, But Are We On The Up?
Our supply chains have been through the wringer over the last two years of freight-related chaos, but is normal on the horizon?
Though shipping costs continue on
a downward creep, it’s still looking pretty gloomy out there, so prepare for delays. Shortages of containers, parts and workers continue to bring daily strain to our companies, and unpredictable weather conditions plague our consignments.
Need help managing the onslaught of Christmas consignments? Want to know how Millenium can help? Contact us today for friendly advice and insightful expertise.