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4 Journal of Commerce | J anuar y 2, 2023 www.joc.com ANNUAL REVIEW & OUTLOOK 2023 William B. Cassidy Editor's Note The winds of 2023 Twists and turns: US truckload shippers regained pricing power in the second half of 2022. The signing of contracts with elevated rates early in the year induced a down- ward correction in spot market pricing, which in turn pulled down contract rates. Like their ocean ship- ping counterparts, they are eager to win back even more of the rate hikes they've seen since 2020. But shippers need to exercise caution; in transportation pricing, what goes down eventually comes back up. Market analysts like Coy- ote Logistics and DAT Freight & Analytics already believe the next "inflection" in the truckload market will arrive by mid- to late 2023 as volumes recover, putting carriers back in the driver's seat. If that happens, the shippers that pushed for the deepest rate cuts will be first to lose access to capacity when the market tightens. Slowing, not stopping: The US less-than-truckload (LTL) sector enjoyed a stint as the indispensable side of trucking in 2021 and 2022, as tight truckload capacity and boom- ing e-commerce demand pushed more freight to the middle ground between truckload and parcel. But in 2023, there will be plenty of truckload capacity in the market, which means demands on LTL will lighten. LTL pricing, however, is more resilient and will be tougher to bend than truckload rates. That's in part because it's a smaller sector, but also because LTL companies have become increasingly disciplined when it comes to matching price to cost while still leaving room for a profit. LTL rates are more likely to flatten than to come down signifi- cantly, but the LTL sector sees long- term growth opportunity. Carriers may ease off the gas pedal when it comes to terminal expansion and growth, but not by much. JOC email: bill.cassidy@spglobal.com twitter: @willbcassidy increased sick days were forced back to work by a tentative contract agreement brokered by the Biden administration and approved by Congress. That averted a national rail strike but only capped labor frustra- tions, rather than addressing them. UPS will negotiate a new con- tract with the Teamsters in 2023 and faces a more combative union lead- ership under new general president Sean M. O'Brien. UPS hasn't faced a Teamsters strike since 1997. Port labor flex: On the US West Coast, negotiations were stalled through late 2022 as the Interna- tional Longshore and Warehouse Union (ILWU) and employers await a federal decision on a jurisdictional dispute with machinists at the Port of Seattle's largest marine terminal. In addition, the contract between employers at the ports of Vancouver and Prince Rupert and ILWU Canada expires next year. At the Port of Montreal, an arbitrated contract due by the end of the year between Montreal port workers and employers will likely only provide a couple years of labor certainty, given that the last con- tract expired in December 2018. Dig two graves: Unlike the last two years, there will be few early birds signing trans-Pacific annual service contracts during the winter. Shippers in the last few months have been able to get carriers to adjust contract rates downward as spot rates have dipped below pre- pandemic levels. Now, it's the carriers going back to the shippers offering space. That's a flip of the dynamic from a year ago, when some shippers were scrambling to sign contracts well before spring to lock in capacity at higher rates. US importers of goods from Asia resentful after two years of higher rates and poor service are eyeing a chance to give it back to the ocean carriers. Other shippers, however, may take a longer view, seeing the need to get access to capacity during the second half of the year, when outbound space from Asia tends to be at a premium. BARRING ANOTHER BLACK swan event, a variety of forces ranging from labor to shipper–carrier power dynamics will shape the freight transporta- tion sector in the coming year, both on the ocean and on land. Looking back at 2022, events that can appear abnormal in terms of swings in ocean and truck pricing, and even the flexing of labor power, are simply part of familiar cycles. Yet some factors, such as the sharper attention both multinationals and smaller mom- and-pop sellers are paying to their supply chains, seem to be charting a new trajectory. The following are our modest predictions for 2023. C-suite scrutiny: They're no longer swooping in to drive the chartering of vessels, but the C-suite's gaze on supply chains hasn't softened significantly, nor will it fade, according to discussions with shippers, container lines, and forwarders. The cost of disruption — whether lost sales or missed manufacturing deadlines — hit shippers in a way few executives had experienced in their lifetime. Geopolitical tensions, particu- larly tied to Asian sourcing, will keep CEOs and CFOs focused. Retailers and other importers with low margins have little choice but to return to just-in-time inven- tory management, but others may find their CFOs more agreeable to higher levels of emergency stock, even if interest rates are increasing the carrying costs. Surface labor flex: Organized transport labor, squeezed by higher living costs and having proven its irreplaceability to global supply chains during the COVID-19 pan- demic, will demand more. US rail unions unwilling to accept higher wages without Looking back at 2022, events that can appear abnormal are simply part of familiar cycles.