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We Asked AI Predictions for International Shipping in 2023 – This Is What Happened

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We Asked AI Predictions for International Shipping in 2023 – This Is What Happened

On 21 March 2023, Google Bard was launched. In simple terms, it’s a chatbot powered by artificial intelligence – like Google’s version of ChatGPT. Its information derives from a massive dataset of text and code from the internet, books, and other sources. Unlike its competitor, Google Bard can access the latest data available on the internet, up to the present day.

Funnily enough, it was able to give us some predictions on what might happen in the second half of 2023 in logistics and supply chain management.

We were intrigued, and so decided to ask Google Bard when it was born. It did ‘t know:

google bard conversation

Here is what it did know though:

Predictions for the future of international shipping in the second half of 2023:

  • Rising freight costs: The cost of shipping goods is expected to remain high in the second half of 2023. This is due to a number of factors, including the ongoing shortage of shipping containers, the rising cost of fuel, and the ongoing war in Ukraine.
  • Capacity constraints: The global shipping industry is still facing capacity constraints. This is due to the fact that there are not enough ships, trucks, and other modes of transportation to meet the current demand for shipping.
  • Labour shortages: The logistics industry is also facing labour shortages. This is due to the fact that there are not enough qualified workers to fill the available jobs.
  • Geopolitical instability: The ongoing war in Ukraine is a major geopolitical risk that could impact the global shipping industry. The war has already caused disruptions to shipping routes and could lead to further disruptions in the second half of 2023.
  • The continued growth of e-commerce: The growth of e-commerce is expected to continue in the second half of 2023. This will create demand for new shipping and logistics solutions.
  • The development of new technologies: The development of new technologies, such as blockchain and artificial intelligence, could help to improve the efficiency of the global shipping industry.
  • The increasing focus on sustainability: There is a growing focus on sustainability in the shipping industry. This could lead to the development of new, more environmentally friendly shipping solutions.

What Do We Think About The Above?

After 30 years in the business of moving boxes around the world, it is fair to say we are in a position to judge Bard’s predictions. So let’s dive down into each of the predictions below.

Freight Costs & Capacity

Contrary to Bard’s predictions, freight rates are reaching their rock bottom in Australia and around the globe. Spot freight rates in 2023 are significantly declining from their peak levels in 2021 and 2022. Some would argue they are collapsing:

“The ocean freight industry saw a slump in global long-term rates of unprecedented proportions in May 2023, as the contracted cost of shipping containers fell by 27.5%. That marks the ninth consecutive month of rates drops, and is the largest ever monthly fall recorded by Xeneta’s Shipping Index (XSI)”.

Source: Marinelink

The main driver is the fact that May marks the point when 12-month contracts in the US come to a conclusion and new agreements come into force.

Additionally, the fall in shipping rates can be attributed to easing of COVID-19 restrictions and the increase in carrier capacity as a result of lower global demand, pushed by higher interest rates.

Bard also predicted capacity wrong. Capacity is now at very good levels. So much so that some shipping lines are cancelling sailings to limit the supply of services and control the demand as freight rates plunge. This arbitrary cancellation of sailings, called “blank sailings”, is a known tactic used by carriers to control the supply and demand ratio while protecting their profit margins. Skipping Australian ports (port omissions) is also another well-known tactic. By reducing Australia exposure, carriers can set course for more-profitable routes.

Carriers are, one after another, announcing fast-deteriorating financial results for the first few months of the year, with at least two (ZIM and CMA CGM) seeing the return of red figures.

“Both shippers and liners know that there is a middle range that is the natural equilibrium that we should all tend and lean towards. If this does not happen though and shippers insist on extremely low rates there was a warning of a serious impact on service levels. If we don’t get the rates that we believe makes sense for us to continue sailing we will stop sailing, and then if we stop sailing then it may have a more drastic effect on the ability of our customers to secure their supply chain”

Xavier Destriau, CFO and Executive Vice President of ZIM

Despite the drop in rates, levies and fees continue increasing: we’re seeing a rise in port infrastructure fees, landside terminal access and ancillary fees, including truck appointment fees, biosecurity fees, and cartage fees. More than $1 billion in annual fees were levied on transport companies that use ports, according to the Freight Trade Alliance. They warn that “increases are contributing to inflationary pressures across our economy”.

Port charge increases 2018-2023 graph

And that’s not to mention the ongoing container detention charges levied by foreign shipping lines in Australia, costing cargo owners and transport operators a total of $70 million in 2021-2022.

Conclusion: Bard’s prediction is wrong. Freight rates are plummeting in Australia and across the world, which on one hand brings a long-yearned relief for importers and exporters. However, there remains some apprehension around how long the rates will remain low and how far shipping lines will use blank sailings to protect their profits. If rates drop too much, shippers will also be at risk.

Labour Shortages

While the unemployment rate rose to 3.7% in April 2023 in Australia, indicating a slight increase in job losses, some employers are still struggling to find skilled workers.

Economists believe that Australia’s labour market is approaching a turning point, and employment conditions may weaken in the coming months. And that’s largely a consequence of interest rates going up to bring inflation under control. The unfortunate side effect is that some people will be thrown out of work, while skilled labour in a number of industries, including healthcare, construction, hospitality, and manufacturing remains a severe and ongoing issue.

Conclusion: Bard’s simplistic prediction is right, although the picture is more complex than that.

Geopolitical instability

Rising tensions, strained relations between the United States and China, and Russia’s invasion of Ukraine have contributed to concerns about the global economy. Financial fragmentation affects cross-border investment, international payment systems, and asset prices. The effect of disruptions to supply chains and commodity markets on domestic growth and inflation could exacerbate banks’ market and credit losses, further reducing their risk-taking capacity to lend money.

Conclusion: Bard’s prediction is right. While there isn’t much that importers and exporters can do to stop a recession, they can use risk management tools, such as insurance, to protect themselves from the financial risks associated with instability.

The continued growth of e-commerce

E-commerce has had a tremendous impact on the shipping industry, and will most likely continue to do so in the second half of 2023. Global E-commerce sales are expected to grow 10.4% in 2023. In recent years, the increasing demand for online products has translated into:

  • Faster (and more flexible) supply chains

E-commerce has revolutionised supply chains by enabling businesses to collect customer information online, exchange documents electronically, sell products online and expedite deliveries.

Ultimately, this makes the shipping process faster – because critical information can be obtained in a fraction of a second. This has resulted in more flexible supply chains, and quicker shipments, that can rapidly adapt to changing customer demands.

  • Growth of home deliveries

The advent of e-commerce has led to a significant shift from traditional retail deliveries to home deliveries. Consumers increasingly prefer the convenience of shopping from home, driving the demand for direct-to-consumer shipments.

This shift has prompted shipping companies to develop robust “last-mile delivery” networks to efficiently fulfill home delivery orders.

  • Development of new distribution facilities

E-commerce has spurred the development of specialised distribution facilities known as e-fulfillment centres. These centres are strategically located and equipped with advanced technology to handle the high volume of online orders.

They play a crucial role in efficiently processing orders, picking, packing and shipping products. Companies like ShipBob and RedStag are examples of e-commerce fulfillment providers that offer warehousing, inventory management and order fulfillment services.

  • Shift from Just-In-Time to Just-in-Case Models

JIT inventory management focuses on minimising inventory holding costs by receiving goods only when they are needed for production or fulfillment.

However, the uncertainties of e-commerce, such as fluctuating demand and potential supply chain disruptions, have led more businesses to adopt JIC models. Just-in-Case models involve maintaining higher inventory levels as a precautionary measure to meet online order demands promptly.

Conclusion: Bard is correct. E-commerce is still growing and the shipping industry is adapting to meet the demand.

The development of new technologies

We are seeing this through the use of technology-driven automation. From automated cargo tracking and real-time vessel monitoring to automated documentation and invoicing, these relatively new technologies have completely streamlined operations, massively reducing the risk of human error and the need for manual labour.

We are also witnessing an increasing reliance on the Internet of Things (IOT). South Korea’s Ministry of Oceans and Fisheries, for example, has installed Internet of Things technology on containers to track the location and status of containers and, in the case of reefers, temperatures. With this, shipping companies can periodically provide cargo location, status information and temperature control services to shippers. In addition, conventional accounting standards do not usually recognise containers as assets because they are difficult to locate in overseas ports, but with location tracking, shipping companies can strengthen their balance sheets with these assets.

Conclusion: Bard is absolutely correct here. Technology keeps advancing, and most companies are adopting digitalisation, whether to be at the forefront of this digital revolution or simply to keep up with the market.

The increasing focus on sustainability

Shipping companies are adopting various strategies to reduce carbon emissions, such as investing in energy-efficient technologies, optimising vessel design, using alternative fuels like liquefied natural gas (LNG) and hydrogen, and implementing slow steaming practices to reduce fuel consumption.

As part of the IMO’s Greenhouse Gas Strategy (GHG), the IMO more recently passed the IMO 2023 regulation, which aims to achieve a 40% reduction in carbon emissions by 2030 and a substantial 70% reduction by 2050, both measured against the emission levels of 2008.

Conclusion: The AI is correct. The shipping industry is going green and players across the industry are starting to take action to minimise the environmental impacts of shipping.

Our Verdict On AI’s Predictions

Google Bard is undoubtedly a powerful language model and was able to make most predictions on the future of logistics correctly, which is impressive.

However, not all information presented was correct. Its prediction on freight rates, for example, was in fact the opposite of what we would predict as industry experts. Ultimately, it relies on the vast amount of data it was trained on, and this data can contain biases, inaccuracies or outdated information.

While this was a fun experiment, we don’t expect an AI to know the future (thankfully, because that would be scary).

You can see for yourself and try to get other answers from the AI: https://bard.google.com/

We’ll Stick To Human Experts

Managing international shipments involves a multitude of considerations, such as navigating complex customs regulations, optimising routes, coordinating multiple stakeholders, and addressing unforeseen challenges.

When it comes to getting your head around the shipping industry, you are always welcome to give us a call and have a chat with one of our experienced team members. After all, personable communication is what makes ICE the top freight forwarder in premium customer service in Australia.

If you require a shipping review or an initial consultation instead, reach out to our team today.

or call us on 1300 227 461

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