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January 2 2023

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Januar y 2, 2023 | Journal of Commerce 27 Maritime half, with a large influx of new vessel deliveries into the global fleet. Some of that glut could be offset by accel- erated scrapping of vessels, as well as the IMO 2023 initiatives, a package of emissions regulations from the International Maritime Organization (IMO) that go into effect Jan. 1. A new normal: The recovery from COVID-19 produced what was presumed to be a permanent change in the eastbound trans-Pacific, with the new baseline for US imports from Asia at least 25 percent higher than in 2019. But a steeper-than-anticipated drop in volumes in the fourth quarter of 2022 means the market is return - ing to a baseline that resembles the pre-pandemic growth curve. While carriers learned during the pandemic that they can effectively use blank sailings and service culls to mitigate the impact of excess capacity, there's a limit to the effectiveness of those capacity management strategies in the face of a wave of vessel deliveries due in 2023 and 2024. JOC email: twitter: @billmongelluzzo August–October peak shipping season, before turning negative in the fourth quarter. At the same time, port congestion eased, releasing additional effective capacity back into the trade lane and dragging vessel utilization rates down as low as 60 percent, according to Platts Container Freight Weekly. The capacity shortage of early 2022 had turned into a capacity glut by the fall, and carriers began blanking sailings and suspending entire strings in an effort to match supply with demand, but it was too little too late. A look ahead: Retail holiday sales are forecast to jump 6 to 8 percent on top of an already record-setting 2021 holiday season, according to the NRF, but consumer demand is expected to soften in 2023. US real gross domestic product (GDP) will decline 0.2 percent in 2023 after expanding 1.8 percent in 2022, according to S&P Global, parent company of the Journal of Commerce. "We expect the flattening of demand that began around the middle of this year to continue into the first half of 2023," Hackett Associates founder Ben Hackett said in the GPT report. Over - capacity could worsen in the second A look back: It was a tale of two halves in the eastbound trans-Pacific in 2022. In the first half, US imports from Asia spiked 6 percent from already elevated 2021 levels, according to PIERS, a sister product of the Journal of Commerce, pushing vessel utiliza - tion rates well above 90 percent and spot rates to record highs. Fearing a repeat of the previous year's supply chain bottlenecks, retailers shipped their 2022 back-to-school and holiday merchandise at least three months earlier than usual. "Cargo levels that historically peak in the fall peaked in the spring this year," Jonathan Gold, vice president of supply chain and customs policy at the National Retail Federation (NRF), said in the Novem- ber Global Port Tracker (GPT) report, published by the NRF and Hackett Associates. Although overall volumes increased 2.9 percent year over year in the first 10 months of 2022, volume growth slowed considerably in the second half, including the traditional Crashing wave Record trans-Pacific freight growth to recede in 2023 By Bill Mongelluzzo The big picture: Shippers that begged ocean carriers to increase their trans-Pacific capacity allocations last spring are seeing those same carriers offering them as much space as they want as the calendar turns to 2023. Consumer spending drives containerized US imports, but consumers enter the new year with diminished buying power due to inflation and high interest rates. While demand remains strong compared with 2019 levels, overcapacity looms large. Analysts expect US imports from Asia to continue to decline in 2023 amid weaker consumer goods spending. Yung Chi Wai Derek / "Cargo levels that historically peak in the fall peaked in the spring this year." Trans-Pacific imports slide during traditional peak season Monthly US containerized imports from Asia, in TEU, with year-over-year change TEU volume 1,000,000 0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 100% -20% 0% 20% 40% 60% 80% Year-over-year % change L Jul Nov Sep May Mar Jan 2022 Nov TEU Year-over-year % change Tra Dec, 2017 Jan 2022 229,270 200,000 -10% TEU: TEU: 1.2M 1 2M 000 000 70 Year-over-year % change: Year-over-year % chang y g 4% Source: S&P Global © 2022 S&P Global 2023 ANNUAL REVIEW & OUTLOOK

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