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January 2 2023

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Januar y 2, 2023 | Journal of Commerce 35 www.joc.com Maritime IN PERSPECTIVE 2023 ANNUAL REVIEW & OUTLOOK "Technology development has been on a steady diet of steroids." Lars Jensen A technological reckoning the short term. Not merely attractive visions of business transformation, but actual tools used by actual cus- tomers as part of their actual business processes. Should anybody doubt that this process has already begun, they need only to look at the decision by Maersk and IBM to shut down TradeLens. As a concept, TradeLens certainly had merits, and theoretically it could have created a range of opportunities in the market. However, in the fiery crucible of the marketplace, the ideas and the technology were not enough to create sufficient business value to warrant its continued existence. TradeLens will not be the last player to disappear. We will most likely see a culling over the next 12 to 24 months, in which the companies that survive and emerge stronger have proven their practical value to the market. The sophistication of the technology used, or the disruptive potential of their visions, will not play a role in this; practical adoption by industry will be paramount. Of course, everything is obvi - ous in hindsight. Every industry needs risk-willing capital and people willing to push the boundaries of new technological solutions. As more technological innovators get culled in the days ahead, this should not be accompanied by an "I-told-you-so" attitude, but rather by a gratitude that there were so many companies and investors willing to stick their necks out to drive innovation in the face of great uncertainty. JOC email: lars.jensen@vespucci-maritime.com to the entire global market, it means that the global revenue available for use in the industry increased by $27 billion per month. Even if that's an exaggeration, just half of this amount would still amount to more than $160 billion on an annual basis. A 'diet of steroids' This unprecedented infusion of cash allowed easier access to funding of supply chain–related tools than ever before — and consequently, likely also much more optimistic val- uations in some cases. In other words, technology development has been on a steady diet of steroids. Now, the market is rapidly losing momentum as demand collapses, capacity becomes plentiful, and freight rates quickly tumble below pre-pandemic levels on some trades. The pressure on technology provid- ers is mounting quickly. It's time to show actual, tangible business value in dollars and cents, not merely projected earnings and value a certain number of years down the line, but in IT'S GETTING TO be crunch time for the plethora of providers of new technology in the supply chain sector in general and in container shipping specifically. Of course, all new technological solutions are born with the inten- tion — or at least the aspiration — to improve or even transform the way freight is managed. All solutions come equipped with business cases show- ing their long-term financial poten- tial. And with some of the valuations seen in the past couple of years, these aspirations are large indeed. The COVID-19 pandemic led to a trifecta of factors boosting the already ongoing development of tech- nology services in the industry: the need to work remotely, the need for visibility, and access to large amounts of capital. The initial impact of the pan- demic was to turbocharge the notion that all business processes had to be digitalized as quickly as possible to avoid being dependent on people hav- ing to physically show up in offices. The effects of the pandemic created an array of operational dis- ruptions beyond anything ever seen before in container shipping. This was similar to pouring gasoline on the digital fire: It became more vital than ever to get visibility into the supply chain to handle the multitude of disruptions everywhere. And finally, as disruptions led to insufficient capacity, freight rates skyrocketed. Just to give an illustra- tive example: In the pre-pandemic third quarter of 2019, Hapag-Lloyd reported an average global freight rate of just over $1,000 per TEU. In the third quarter of 2022, clearly the peak of the pandemic market, the company reported an average global freight rate of just over $3,000 per TEU. If we apply this extremely sim- plistic but very illustrative example Shutterstock.com

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