Midsummer Special 2024: What next for freight markets?

[00:00:00] Speaker A: You're listening to the Lodestar, the supply. [00:00:02] Speaker B: Chain and logistics industry's leading source of insight. This podcast was created and produced by MK and associates and your host Mike King. It's our midsummer special and we're defining the here and now and divining, we hope. What happens next in the world of freight markets? Who's winning and losing in 2024 and what disruptions do we have on the horizon? Apart from the Red Sea crisis, us elections and supercharged freight rates that is. We're also looking at the challenges facing those whose job it is to design freight spending, inventory management strategies, what's next for Schenker and why SME's are losing their collective minds about IATA's cash payment system. Joining me today are the Lodestars Gavin and Alex and giving us some insight from the viewpoint of the freight buyers that make our entire industry tick. Today we have for you the ever insightful and delightful director of the Global Shippers Forum, it's James Hookham. [00:01:03] Speaker C: The whole history of supply chain management through the past decade has been trying to squeeze out ever greater efficiencies and yet the narrative of certainly everything since COVID has been actually we need a bit of slack in order to cope with the unexpected. And certainly GSF is supporting its members in making that case because the world out there is so much different to what was previously experienced. [00:01:29] Speaker B: Hello everybody, I'm Mike King. Welcome to the Lodestar podcast. I hope you're all having a better summer than me. Guys, message to self for posterity, never ever move house again. It's seriously bad for the soul. Enough moaning from me. If you don't know already, you can find all episodes of this podcast on all the usual platforms and on theloadstart.com where you can follow breaking supply chain stories from around the world. And that's that. So let's push on and introduce today's thought leaders. They actually told me to use those words. Returning once more, we have for you both the publisher and the managing editor of the load store. How lucky are we? It's Alex Linnane and Gavin van Mahl. How is your summer going guys? Off on holiday soon are we? [00:02:19] Speaker A: Yes, Monday. Can't wait. The summer's been rubbish. [00:02:22] Speaker B: Excellent. Please send me some pictures because I'll just be completing my move then. I just need some cheering up knowing someone's having fun. Thanks for joining me. Before you leave dear listeners, me, Gav and Alex promised to share our combined wealth of knowledge and foresight with you all today. But we didn't want this to be too short an episode. So we've also drafted in retaining star to this shire to give us a view on freight market from the buyer's side as trail. He's the director of the Global Shippers Forum and he does tend to have a strong opinion or two. James Hookham, welcome back. [00:02:59] Speaker C: Hi Mike, great to be here. [00:03:01] Speaker B: I want to look back shortly on some of the major stories and trends of 2024 so far, and then we'll be making some predictions about what comes next. In particular, we're getting some insight on what's driving air and ocean markets, variables around the Red Sea, and of course what we can expect from some of these seismic changes in the box shipping alliance system. We'll also be looking at this restructure of the air cargo market around e commerce in 2024 and why IATA is letting a lot of SME's down. Allegedly that is. But let's start on what I think the big story is right now, and probably for the next few months, and that's the us presidential election, which I suppose, unusually for a one off event, I think has got the capacity to reshape the trading and geopolitical landscape both in the shores and the long term. As we're talking in the last week of July, President Biden is no longer running. Vice President Kamala Harris is the big favorite to lead the Democrat ticket. Presidential candidate will be officially nominated at the Democratic National Convention, which is slated to take place August 19 through August 22. Trump is still a big favourite to win the election, whoever he runs against. But Biden stepping down has thrown more risk into all of this, given that markets had already priced in a second Trump presidency, in many senses. So, lots to consider. Trump has said many things, it would be very hard to miss them. He's promising to cut taxes and solve disputes in the Middle east and the war in Ukraine, just for starters. He's also terrifying his NATO partners with his pro Putin stance. But he's a China hawk, which seems to me a bit like saying my enemy's ally is my best buddy, which is not your normal approach to statecraft, but what do I know? James? Now feel free to opine on any of the trading or other implications of the us elections, but let's start on tariffs. Trump and his team are talking about a 10% universal import tariff and a 60 plus percent tariff on chinese import. What does this do for the shippers apple cart? Upset it, I guess. [00:05:06] Speaker C: Well, it could do, Mike, but let's face it, he's got to get elected first. So there's a lot of water to go under this bridge yet. And let's not forget that this could be part of a much bigger strategy were President Trump to be elected again, because there will be retaliatory action by other states. So you could see trade wars breaking out in terms of tariff. There is a school of thought that says the result of increased tariffs on imports to US will just harm us consumers because it will just reinsert inflation back into the us economy, which it just successfully seems to have contained. Of course, you have to be careful what's said during election campaigns, especially us ones, and it could just be that this is rhetoric, campaign talk, because what the administration might want to do is just simply use this as a big negotiating stick, but other outcomes. So it's too early to start giving specific advice, but it's certainly one that I know american importers are watching carefully. [00:06:09] Speaker B: Is the global shippers forum or just yourself, James, offering any advice to manufacturers or retailers about how they can prepare for what would be the worst case scenario in terms of what we've just discussed there, which would be a potentially defining shift, I guess, away from the post World War Two rulebook towards. Well, you mentioned retaliation there. I mean, this could usher in a new phase of protectionism or even regionalism, unless it's all just hot air. [00:06:36] Speaker C: Absolutely. And I think what we're needing to do is to make a distinction between supply chain management, which will obviously respond to wherever goods need to be got to or obtained from. I think the first impact of these tariffs would just simply be on procurement patterns. So, for example, if we do get big hits on, say, steel, where are you going to be buying the steel for your next big construction project, your next big infrastructure project? So it will be those kinds of decisions that will ultimately affect the shape of supply chains in the longer run, and that will cascade down as, obviously, the redeployment of capacity, the redeployment of. So it would take a while to play out through the supply chain. So our advice to GSF members at this stage is, obviously, keep an eye on this, factor this in, don't be blind to the possibilities, but probably make sure that you're flexible enough to respond quickly should it happen in the long run. [00:07:33] Speaker B: Gav, Alex, how are people you're both talking to preparing for these many possible outcomes around the us elections? [00:07:42] Speaker A: Well, one of our writers just did a story on this, and he sent a note with it saying, I would have expected a few more folks to make a noise about this, but maybe they prefer to quietly rush in as much stuff as they can. So there is very little political news in freight, it seems. At the moment, I think people are just focusing on mitigating against possible risks without making much of a comment. But there certainly are consequences to trade from geopolitics. So we've just seen that Virgin Atlantic stopped flying to Shanghai, which is a route it served for 25 years. Not being able to fly over Russia has added heaps of costs. You need more crew, more aircraft because of the extra flight times, and it just wasn't viable. Airlines say this is anti competitive because chinese airlines can overfly Russia, and you'd expect Trump to potentially add to this kind of drama. But in fact, I've just found out that rather quietly, in the latest round of american capacity given to chinese carriers, any chinese airline operates a newly applied for route is avoiding russian airspace. So I imagine that was a sort of silent quid pro quo that the Americans gave to the Russians. It's chinese, sorry, but older chinese routings still overfly Russia. And I expect that's the sort of thing that might change if Trump comes in. [00:08:58] Speaker B: Well, obviously he's promising peace in Ukraine, but at what cost for Ukraine is. [00:09:04] Speaker D: The big question on day one as well, I think, isn't it? Yeah, one day, that's all he needs. One day. That's brilliant. I mean, it's amazing. I mean, I haven't actually been talking to shippers so much, but I have been focusing on some other tariffs announced, which is from the Biden administration and the decision to apply a 25% tariff on chinese made container cranes, which is quite an interesting sort of dynamic, where you've got six or seven ports that have pending orders with Chinese. With ZPMC, right? That's the chinese crane manufacturer. And this new tariff is due to be implemented on the 1 August. So really, the. The american ports were given about six weeks notice of this tariff. And there are, there's around about. I think at the last count, it was about 30, 35 container cranes currently being manufactured in Shanghai for us ports, which combined will add about an extra $130 million of cost to the us port system. My understanding is that the lobbyists, working on behalf of the American association of Port Authorities, are currently trying to convince the us authorities to, or as the us trade representative, to delay the implementation of this tariff, but at least until these pending orders are fulfilled. So that's one interesting aspect, because it runs. It's not just. It's not just trump who's talking about tariffs, right? The Biden administration has also been applying tariffs. And in fact, you look at the tariffs that Trump applied when he was president, not a single one of those has been rescinded during Biden's administration. So both parties seem pretty tough on the sort of tariff issue. And, you know, the recent Trump declarations just seem to me a posturing about who is more tough. [00:10:57] Speaker B: Well, that's a good point. It's very easy to establish Trump and perhaps I did that slightly in my intro, maybe unfairly as the, the bogeyman on tariffs, but as you say, Biden didn't rescind any. In fact, he's actually ramped up tariffs. [00:11:09] Speaker D: Yeah. And if you look, there hasn't been a single, not a single representative or senator over the past four years has even brought Bill to the House requesting reduction of tariffs. So, you know, tariffs are sort of here to stay. I think it's a question of what sort of severity we'll be looking at. [00:11:26] Speaker B: I think it's also fair to say as well, certainly where some chinese exports are concerned, there may be EV's. It's not just the US either. It's Europe, it's Brazil. This is not just a US China trade war. There's some fundamental things going on about the fairness of trade in this new world order that seems to be emerging. James, have you got anything you want to add? [00:11:46] Speaker C: Well, I certainly agree that this is nothing unique to Trump, and let's even look at what's happening in Europe, because not only are they threatening countermeasures, so as I was mentioning earlier, but they've got their own sort of non tariff barriers that are coming in, like the c band, the carbon border adjustment mechanism, which to exporters to Europe are perceived as equivalent inhibitors to trade. So not as in your face, as perhaps a 10% tariff, but almost as expensive to comply with and meet the documentary requirements for, and so on as any tariff. So it is regrettable we're taking big backward steps, you know, and having spent a career championing simplification of trade and automation and general better awareness and understanding of trade procedures, it is depressing to see all this disappearing backwards and the world becoming much more insular because you cannot feed and sustain a planet of 6 billion people by just doing stuff in your back garden. You need international trade to support a population that size. This is going into real uncharted waters. [00:12:51] Speaker B: Well, we had this assumption that free trade was, almost, had to be fair almost by its nature. And then, of course, when it's not, then it's uncompetitive and then what happens next? If people aren't sticking to the rules, then why should anyone stick to the rules? [00:13:06] Speaker C: Absolutely. And it becomes utterly unpredictable. And that's when shippers, supply chain managers are having to build in so much contingency, so much resilience. But again, the costs go up and all the efficiencies of the past two or three decades suddenly get eroded. [00:13:22] Speaker B: Okay, thanks. Maybe we should lighten this away slightly from impending doom and a fractured world. [00:13:29] Speaker D: A dark place very quickly. [00:13:33] Speaker B: We literally have just jumped down a black hole. Let's have a look at the year so far. I'm going to use one of those dodgy radio gimmicky game things. Honestly, it'd be fun, you sounding like you're all in a good mood today, starting with Alex and then Gav and then James. If you might, please each give me three words that sum up the first six months of 2024 for our industry, and then a quick sentence or two explaining why you chose them. [00:14:02] Speaker A: Okay, I'm glad I'm going first, so that if anyone else got the same, they're going to have to think pretty quick. My three words surprising, fortuitous and fragile. I think it's been sort of universally acknowledged in various C suites that no one was really expecting this year to turn out in the way that it has done and they haven't quite worked out what's going on. So that's my surprising fortuitous. I mean, various sources report that there's been very little shame about the change of fortunes brought upon the industry by the war in Gaza and the Red Sea issue. I've seen the internal messages from one very large group which told its staff they could now put up rates with abandoned and hoped to divert what they thought were going to be large losses. So fortuitous is certainly true. And fragile. I think there's a lack of understanding about why the market's been quite so buoyant. And plus general election nerves and increasing frustration with China means it all does feel a bit fragile. And I think that's particularly true in air freight. The e commerce boom, I would say, is unsustainable in almost every way. There will always be commerce, but I. The way it operates currently is unsustainable politically, economically, environmentally, and after our stories about the political and economic tensions, the customs and border Protection then started cracking down on forced labour. So there's quite a lot of issues and I think the airlines are trying to make hay while the sun shines. But at some point I think things may change. [00:15:26] Speaker B: I had a great series that was actually on e commerce that the Lodestar did. So I would urge anyone to go and find that on theloadstar.com and have a good read. Some excellent journalism, Gav. [00:15:39] Speaker D: Okay, right, so my three words. My what three words are sentiments over capacity and congestion. So sentiment, it seems to me, just from my perspective, that it has become so prevalent in spot freight rate pricing and also shares stock pricing that have been so guided by. The market's been so guided by sentiment this year, almost to the expense of data and what capacity is available, et cetera, et cetera. Overcapacity, as in shipping overcapacity, which we started the year with a big overhang and it's just got even larger. But it turns out overcapacity is a good thing when times are bad, right? It's basically kept container supply chains moving this year with the Red Sea crisis. So perhaps I, and I'm sure James will have an opinion on this, but perhaps overcapacity shouldn't be such a bad thing when times are good. Right, finally, congestion. I think I'm coming to the conclusion, looking at the troubles that container supply chains have had this year, that congestion should be considered the root of all evil. [00:16:48] Speaker B: We'll come to overcapacity in a second, James, but your three words please. [00:16:51] Speaker C: So my three words describing the first half of the year, Mike, are not expecting that, which based on sentiment of ethics and gap, because I remember doing presentations to my members sort of going into December last year, talking about the falling spot rates that have been falling since the middle of 2022. We had a pretty much a flat peak season in western Europe and the UK. Certainly disappointed. Expectations of the carriers inventory levels were still generally high, so there was a bit of extra capacity from a sugar perspective in terms of keeping supply chains. And the big news we were expecting for the first half of 24 was the flood of expected new capacity. So were rates going to sink even lower? And the Lodestar did a lot of coverage on those expectations at the time. And we thought the big stories would probably be environmental, the introduction of the emissions trading scheme and the charges levied for that, the various IMO measures, the so called eeaxi, but the general energy efficiency of ships, would that result in slow steaming? Would it result in restructured schedules? And of course the ending of the consortia block exemption, which would have required some rethinking, at least of the alliance and consortia structure. But it wasn't really any of them as we know it was the Red Sea diversions and what seems to have been the absorption of all that new capacity during the early months. We still have trouble accounting for where all those new ships went in order to sustain demand. And just wonder whether or not we're going to see in the second half of the year the new deliveries coming through and adding to that overcapacity. And perhaps we're seeing a resumption of more expected types of rates at this time of year. But it has been a year of surprises. We talked about a lot of different things than what we expected. It's only reinforced the message from COVID is that expect the unknown, expect the unexpected. And of course, in that we haven't bargained for what of course was the absolutely critical thing. It was nothing to do with ships and capacity. It was all to do with a windows update. Who knew that? [00:19:04] Speaker B: Yes, the windows outage. Yes. Okay, James, just on the de facto closure of the Red Sea that sucked up all this container shipping capacity, can you give us any insights about how this has impacted shippers in terms of the freight spend or inventory management strategy? It's just thrown everything to the seas as it. [00:19:20] Speaker C: Yes, of course. It introduced a sort of what we thought would be a one off hit on delays as the routings readjusted. And you had that extra seven to ten days delivery time in terms of making the transit round the Cape of good hope. And I think the expectation was once that the routes have been reconfigured, the schedule has been readjusted, then things would settle down. I think what surprised a lot of people, and I, if you listen to them, it surprised the carries as well as just how big the repercussions are. The ripple effect has been. I mean, who would have ever foreseen Singapore, of all ports becoming hyper congested and was brought to a standstill? That was never in the script. So clearly something's going on out there which us poor shippers are lost to understand. But the modeling that we have done at GSF is to so try to understand the difference between the absolute total capacity that is available to shipping lines, that is, the number of vessels they've got multiplied by the TeU per ship, which is your aggregate fleet capacity, and the number of slots that are actually available to shippers and forwarders to book over a given period. And whereas the total capacity has risen very sharply, as you would have expected it to, with all the new vessels arriving, the actual available capacity, the deployed capacity available for booking, has remained relatively flat. So there's a story to be told in how the demand has been or the capacity has been managed to meet the demand and maintain the rates. But I think that may be a story for the second half of the year. [00:20:59] Speaker B: Yeah, well, let's look at the second half of the year a little bit. I mean, this should be the traditional peak season now, but if you're looking forward in terms of how you might plan your freight spend or your logistics strategy, it's so complex. I don't want to sound a bit Monty Python esque and go, what did the Romans ever do for us? But it's a little bit like that. Aside from the us elections, the Microsoft outages, the weird things going on with e commerce, upcoming Asia Europe contracts which negotiated at the end of the year. We've also got higher ETS surcharges for movements to Europe coming in at the start of next year. Starting next year. We've also got subject clearance, of course, from the Federal Maritime Commission. We've got this rejig of the container shipping alliance system. Mayor's going to hap our journey forces as Gemini cooperation. MSC is going get a loan. Maybe we'll see more changes there in the coming months. No one knows what the Houthis will do, so there are lots of short and long term variables to think about. If you're trying to formulate any sort of plan now, James Gav, feel free to come in here. What would you do? What would you suggest others should do? [00:22:06] Speaker C: Okay, so apart from it being a great time to be in logistics journalism, and that's very, very true, I would say it's also going to be a very challenging time for supply chain managers because they will have to explain and communicate on those disruptions and those effects that you've just been describing back into their businesses to explain why supply chain costs have gone up unexpectedly, because that's inevitable from the factors you've been describing, why, for example, expected savings in emissions that many companies are targeting and have got intermediate targets for as early as 2030, they're not going to be seeing because supply chain emissions have not reduced in the way that was expected. And also, I think that the other big thing that they're going to have to be explaining is why it is they're building in additional capacity or resilience into their supply chains to cope with or give themselves a bit of wiggle room, I suppose, in the light of some of these developments that you've been talking about. I mean, the whole history of supply chain management through the past decade has been trying to squeeze out ever greater efficiencies and yet the narrative of certainly everything since COVID has been actually, we need a bit of slack in order to cope with the unexpected. And certainly GSF is supporting its members in making that case, because the world out there is so much different to what was previously experienced. [00:23:33] Speaker D: Yeah, that's interesting. Yeah, just sort of a couple of points, Mike. One of them is that certainly this year there has been a shift in the sort of calendar for a lot of european shippers, and we're seeing increasing amounts of Asia Europe contracts now being concluded in May. They seem to have followed a very similar calendar to the trans Pacific. And partly that's to do with, as James noted, at the beginning of this year, a lot of carriers were reluctant to sign their normal Asia Europe contracts because the spot rates were so low. So they weren't willing to do that. So the negotiations at the end of 23 and beginning of 24 basically extended. So there's quite a lot of big shippers who have done that. So what that means for larger european shippers is that many of them will have a bit more time than might otherwise than your question sort of implies, as it were. I mean, for me, the long term variable, the one to focus on, is capacity, because once the current trade obstacles are removed, if they are, but one assumes that they will be at some point, then the overcapacity that James has talked about will make itself fell and pricing will fall. That should be, in theory, a certainty. If the obstacles are removed, you know, they could increase. History has not taught us otherwise. And then, moving on, you mentioned the Gemini. I mean, assuming that the Federal Maritime Commission clears Gemini, and I don't think there's any real reason to suspect that it won't, given the continuing existence of the other alliances. To my mind, there are two questions about this. One, can Hapag, Lloyd and Maersk make this hub and spoke system work? And secondly, what happens to the alliance, the one that HapAG is currently a member of? Because it looks to me like it will need another partner to retain the scale that it requires to operate as a global vessel sharing agreement. [00:25:27] Speaker B: Yeah, it's a bit light on certain trades, isn't it, Gavin? [00:25:29] Speaker D: Yeah, very much so, yeah. [00:25:31] Speaker C: Can I just come in there, Mike? Because I think it's a really important point Gavin is making there about Gemini. The thing that caught our eye back in January when the announcement was made, wasnt just the hub and spoke structure, which seems to have captured a lot of the attention. It was the very explicit commitment to customer service standards that both chief executives made in the joint statements and being the Global Shippers forum, of course, thats the bit we put the highlighter through. So what does that mean? What does that look like? And I think that this is obviously consistent with the journey that Maersk has been on for several years. So one of the things that you can do to remove a lot of this uncertainty we've been talking about, and of course it's widely practiced in the other modes of transport, is get a very good logistics service provider that buffers you, the shipper, against a lot of the turbulence that we've been talking about and offers that apparent seamless service which is so valued and so priced. Now, if shipping lines see themselves as performing that kind of three Pl, four Pl kind of role for ocean shipments, then this is where they want to be investing their time and their management capacity, because offering a service and a service level which somehow buffers their customers against all this is going to become more highly valued. It's going to be something that will be worth spending money on. If you are going to get this degree of protection. In taking forward that Gemini narrative, I would be really interested to see how that actually manifests itself in what undoubtedly would be a premium service, but actually recognizes the very great uncertainty that's in the logistics sector at the moment and generally world trade, and tries to do something about it for the benefit of the shipper. And in return, the shipper is able to make bigger commitments to the volumes and so on they offer to a more reliable partner. I mean, this may well be idealistic, but that's where you've got to. For example, in most road based transport, we have a lot of the day to day, month to month ups and downs, absorbed and cushioned by a very agile, flexible contractor. And then that's recovered and renegotiated in a much more constructive and productive environment than just slapping another surcharge on it. [00:27:50] Speaker D: Yeah, it's quite interesting hearing James draw the parallel with the road transport sector, because if you look at the proposed Gemini service structure, one thing that struck me is it, it rather resembles a UK pallet network. [00:28:03] Speaker C: Yeah, good analogy. [00:28:05] Speaker D: Yeah. It's weird, isn't it? And when they originally announced it, I mean, they did actually, they talked about hitting 90% schedule reliability, and they added at the time, ive yet to sort of get a figure on this, but they said that they would be willing to make a financial commitment to that as well. That is, if they missed the 90% thing, there would be rebates available to shippers. Thats what I understood. I havent had a number put on it and I wondered whether that was something that your members had picked up on. [00:28:34] Speaker C: James well, absolutely. Put double highlighter through that point. [00:28:37] Speaker A: Money back. [00:28:38] Speaker C: But again, no further details as yet. Gav so as I say, that would be one of the things that were looking for as presumably that the plans for final implementation start to take shape and further announcements are made, but that will be a success criteria for shippers. [00:28:53] Speaker B: Certainly we do have a number of people from Maersk who listen to this podcast. So if any of you pick up this listening to this particular section, there is an open invite to Maersk with the PR department to come on and talk about Gemini and explain all this for shippers. Please get back to me soon. I would direct anyone listening who's interested to find out a bit more to podcast we did on May 21 where we looked at Hapag Lloyd strategy 2030, and that was with Matthias Dietrich, senior director of strategy at Hapag Lloyd. And he was very generous with his time and insight. So I would urge you to go back and have a listen to that. You can find it on all podcast platforms. Gav Alex, I want to just look a little bit, James mentioned that it's been a great time to be a supply chain journalist. I think. Is it lazy shorthand when we compare what's been happening to freight market now or in 2024 to the COVID era? Because I've had guests on here and some of them instantly use that comparison, others dismiss it entirely. And then if you break it down a little bit in terms of what's happening with container shipping, people say, oh well, the profits are the same as the COVID era and then people counter, well, rates aren't quite as high, but actually rates right across all of the trades have gone up rather than it being so focused on the east west front halls as we saw during the pandemic. So are we framing this correctly, do you think, guys? [00:30:15] Speaker D: Well, it's a really interesting question. I mean, I sort of crossed my mind back to pandemic. You remember so much happened, right? There were so many things going on and it struck me and I was looking at it and I was looking at the chronology of it, that really, if you think about it, the pandemic, the rate boom, the catalyst for the pandemic rate boom, in my opinion, was the ever given, which now if you look at the ever given now, it now looks like a dress rehearsal for the current day. Right? [00:30:42] Speaker B: That's a very good point. [00:30:44] Speaker D: But the thing about the ever given, it got stuck in the Suez Canal when demand was growing really rapidly and supply was much more muted than today. So what we've actually got today is a semi permanent, ever given situation against a backdrop of far greater supply and much more muted demand. So they are comparable, but they're not comparable, if you see what I mean. There are certainly differences. And again, you're absolutely right that there are a whole load of secondary trades that have really come to the fore in the last year or so. I mean, particularly India is just booming geographically. It's been hit by the Red Sea crisis a lot more because a lot of its exports are to Europe. And so the vessel diversions are a lot sort of more accentuated for indian exporters. We've talked about other trade bubbles, Asia to Mexico, Asia to South America. So those aspects are much more prevalent today than they were two years ago. I mean, just on the subject of rates, very briefly, just to give a sort of picture where we are now, I mean, if you look at the Zenita XSi spot rate benchmark that we often quote in this podcast, they look on the main east west trades on Asia to North Europe and Asia to the west coast. They look like they have now plateaued over the last week. Asia North Europe has basically, it's actually come down a few dollars. And Asia to the US west coast is now several percent, single digit percentage points below what it was 8910 days two weeks ago. So it looks like the recent spot rate climb has come to an end. [00:32:21] Speaker B: So if you're looking at how the container shipping trades compare the pandemic versus now, it seems a bit like same, same but different. Is that what you're saying, Gav? [00:32:29] Speaker D: Yeah, basically it pretty much is that there's more supply now, but everything has been. I mean, you know, the ever given was such a sort of shocking event, but it came at a time when there was so much demand trying to be pushed through the system that it created these congestions all over the place. You've seen a similar thing happen this year, but not nowhere near the severity. And I can only conclude that that's just a reflection of the fact that demand has been much more muted. [00:32:57] Speaker B: I think it's been managed, well, much better this time by the lines. If you remember the outbreak of the pandemic that we drew so much capacity and then all of a sudden demand took off and there was that big lag period that built everything up into. Built up a head of steam that made everything crunch. James, would I be right to assume that shippers aren't that pleased by all these line of profits? And if so, is this about the supply demand balance which of course they can't really determine, can they? Or is it about how pricing is being passed on to customers? [00:33:26] Speaker C: I dont think we begrudge anyone making a profit. After all were all in business to make profit. I think what grinds shippers gears I think is when the profit is made. Certainly at times of poor service, which was the case during COVID very very poor reliability or predictability, its impossible for shippers importers to know when their goods were actually going to arrive. Its bad but its not that bad right at the moment. But the ability of the container shipping industry to recover its unexpected costs in real time almost is otherwise known as surcharging is obviously a feature that we have to live with. But I know really, really does frustrate shippers just because it blows their budget, it blows the credibility of them as professionals when they're having to account for the spend that they've made on a given trade, on a particular shipment. So all of this disruption and delay and so on being recovered through the system, through the surcharges just does generate a huge amount of dissatisfaction. And just going back to one of the more customer focused shipping lines, I would suggest they start with that particular aspect of their operations if they really do want to endear themselves to shippers in the short term. But look, just coming back to the biggest strategic points that you were making, Mike, I'm picking up on some of Gav's points there. I've been reluctant to concede that this is as big as Covid. Certainly the demand spike that the shipping lines are trying to manage is much, much more subdued than summer 2020 and going through 21. I mean that was just massive simply because of the circumstances at the time. Lots of people couldn't go to work sitting at home on the sofa and just ordering consumer goods over e commerce because they weren't allowed to go out and go spend the money in pubs, restaurants, football grounds and so on. [00:35:14] Speaker B: I'm trying to sell it all now, James. Now I'm moving house. If anyone wants any, give me a shout please. [00:35:19] Speaker C: So it's a very different type of demand. Very different. And it could just be time shifted rather than genuine new growth. It may just be that we're seeing peak season come early. Amongst the many questions that GSF is asking of this very uncertain market at the moment, and to Gavin's point about the significance of the ever given, is exactly what are the conditions necessary for a return of container shipping to the Red Sea. This is a really serious question because obviously we're concerned about safety of seafarers and crews and the damage and loss of a vessel. So this isn't a trivial point at all. But I think one of the next big adjustments in the market could well come when services or carriers decide they can use the Red Sea and Suez Canal route again. Obviously, the cost base and the schedule, timing all revert back to normal, as we would probably understand it. And that will put another big disruptor into the market. For a start, there will be, in a period of adjustment, there's expected to be quite a rush of vessels all arriving at once at european and north american ports, which will bring its own problems. But also there will be, one assumes, all the capacity that's been added to cope with the diversions will suddenly become redeployed, re available. And that could be the next big step, change in the market as and when it comes. But having some idea as to what the criteria are by which carriers would deem it safe to return to the Red Sea, I think is an interesting point to debate, and I would be really interested to hear the carriers thinking on that. [00:36:57] Speaker B: Yeah, well, we'll try and find out. I mean, the lodestar has been reporting recently that the Houthi area of disruption, or where they can get their missiles too, has been expanding even further away from the Red Sea. So, yes, we'll keep an eye on that. Of course, everything that's happening in the Middle east is having multimodal repercussions. Alex, how's this played out in terms of air freight? [00:37:20] Speaker A: Well, yeah, modal shift. I mean, it's a story that keeps on giving, really. But as the great Ram Menon used to say, from Emirates, freight's like water and just flows where it can. So I think air picked up a few choice pieces from the Red Sea crisis, especially at the beginning. And there's certainly been a lot more sea to air. I mean, there's congestion in Colombo airport. That was a month or two ago. I mean, there's new sea air routes picking up all over the place. But one of the sort of casualties of this is the perishables market. Obviously. Traditionally they export in the slowest summer season when rates are down. Generally it's mango season at the moment and cherry season. And normally they prefer rates being a bit lower. And obviously they're much higher than they should be. So we're seeing some shift. Now back to sea freight. Shipping lines have got much better at fruit and veg than they used to and so we're seeing some of the perishables market now moving over. I think Kenya said that all its avocados would now go by sea and not by air and it's partly in response to having really high air freight rates. They flattened a little bit this week I believe. But Xenotor said recently in a note about the impact of the global it outage which obviously caused some disruption. The demand growth is higher than capacity growth, giving shippers higher costs. So the global air cargo spot rate was 17% higher in June this year than it was last year and it's about 262 per kilo us dollars. But I do think June to July will probably see a slight decline. Who knows? [00:38:54] Speaker B: Alex, what's your view on what happens over the rest of the year in terms of air freight? Is all of this hinged on what happens in the Red sea as James implied, for container shipping particularly or are we also looking at what's going on with e tailors regulations? Are these the market setters? [00:39:09] Speaker A: Yeah, I think so. I don't think the Red Sea is going to amount to very much for air freight. I think obviously as I just said the sea air things pretty strong but I don't think it's going to make any sort of difference to what's going on at the moment and I think it would be something of a shock if e commerce didn't see air cargo through the rest of the year. I think that's what everyone's banking on and expecting and I mean who isn't going to start buying more e commerce around Christmas? It just happens. There may be some action taken by governments against the worst excesses of some of the chinese platforms but even if they do I don't think it's going to affect the second half particularly. I think everyone is very happy for e commerce to continue in the crazy way that it's going on. [00:39:52] Speaker B: Alex, sticking with air cargo my favourite story of yours this year was that July series of stories you did on the detrimental impact of Iata's cash payment system on SME forwarders. This stems from an October 2022 change Iata's regulations that basically meant Cass associates were obliged to provide financial guarantees so they could access the payment system. Companies say that not only are the rules unfair but the wrong formula is being applied. I like one of your quotes which says that Iata is using a sledgehammer when a tack hammer could do the job. Now I was slightly confused about what a tack hammer was to be honest. DIY is not my thing. Gav could probably explain I can but. [00:40:34] Speaker C: It'S not the base for this podcast. [00:40:36] Speaker D: But if we can start a DIY podcast I'm all in to. [00:40:39] Speaker B: Yeah, yeah. Well I'd definitely be only asking questions and someone else would be writing them. Alex, what's wrong with these rules? How is this impacting forwarders and what are they doing about it? [00:40:50] Speaker A: Oh Mike, once you, once you start writing about Arthur it's like pulling a thread. It just keeps on coming. I cannot tell you how much information I'm being given now about what a terrible association it is. There just appears to be nowhere and so much so I've started to wonder if my whole career now is going to be dedicated to unraveling IATA. I really hope not. But. So the forwarders are complaining about. It's not so much that the rules are wrong but they're unfair and they're overly burdensome. So if you wanted to be a cass associate in September 22 you wouldn't have to find a bank guarantee or deposit of 20% of your air freight revenues. But if you wanted to be a CAS associate in October 2022 you do. So they're saying it's not fair. It's not just new companies as well, it's new offices, new names, new anything really. And on top of that the airlines are also asking for guarantees. So it's tying up an awful lot of money for particularly SME forwarders who actually account for about 50% to 60% of the market. So it's quite significant and it's sort of stopping growth because it creates a barrier or at least a hurdle to entry for smaller companies. The difficulty with fixing it all is that the laws vary from country to country. African companies seem to be most affected and I think that's how IATA manages to get away with so much, so much incompetence really because it's so complicated. It's subject to all these different rules and air cargo systems work differently in different countries. Like I said, it would take a lifetime to unravel it and no one really has the time or money to sort of start sorting IATA around. But now companies are starting to take it to various competition authorities which may see some change. But whether that work I don't know. [00:42:39] Speaker B: I mean you've spent months trying to get sent out of iota or even a comment. You've been asking very publicly for them to reply to anything to your questions that you're asking on behalf of forwarders and others. Are they still keeping dumb to the media or also to all these trade associations that are complaining about this. [00:42:57] Speaker A: Yeah, I felt bad for putting on LinkedIn but I just was desperate. I didn't know how to get in touch them short of going to Geneva and knocking on the door and they probably wouldn't have let me in anyway. They did issue me a statement after some time of me trying to contact them. But you can't get through on a phone or get a phone call back. That's just not a thing. I don't really know what the issue is with them. I think that they should be accountable to their members, their partners, the media. But they don't seem to care. It might. Maybe it's just a cargo thing that they just don't care about cargo. It's hard to know. So fiat came back to me but they sounded rather powerless. Sadly Jaka is trying to help its members with the issue but obviously has no power to do so. I mean cargo makes IATA huge amounts of money and I find it 30%. [00:43:42] Speaker D: IATA revenues come from cargo. [00:43:44] Speaker A: Yeah, something like that. And you feel that they should take it more seriously. And I find it highly irritating that they make many of their rules based on passenger operations and then just sort of translate it to cargo. It just doesn't work. And yeah, in response to the articles I've not heard a single word from them. I mean if it had been me I might have got in touch. But no, IATa hasn't commented at all. [00:44:08] Speaker B: Well, no to IATA. If anyone's listening please, you are more than welcome to come on and have a chat to me and alex on the podcast. Thanks for that, alex. Gav, I'm gonna very unsubtly pivot m and a. Has it been an active year so far? [00:44:25] Speaker D: Not really. Generally muted, except for in the sort of contract logistics sector where there has been quite a lot of activity. I mean we've got GXO buying win. Canton, Belgium posted a 1.2 billion takeover of statue. I think that's how you pronounce it. Stocky stacky? Stasi, not Stasi. We've got rider buying carbon logistics. Daxa Bort Brummer, SG holdings have bought acquisition of chilled and frozen logistics. So there's been quite a lot of strategic purchases in the contract logistics sector and that's, you know, there is a growing trend of large shippers outsourcing their warehousing and distribution activities. So that continues. And there's been a couple of private equity things on the other sectors. Not really. There's been a few bolt on deals in the freight forwarding sector. Normally it's what I call the acquisitive forward, as people like, you know, scan global and those sort of things. So they've looked to add a geographic region or an office here and there, and not very much in the road sector either. The big. Obviously, the big M. And a story this year has been the sale of DB Schenker by Deutsche Bahn, where, as far as I can see, the news at the moment is the prospective bidders taking themselves out of the race. Yeah, they're really. There's really. I mean, what are we looking at now, Alex? There's two. [00:45:46] Speaker A: There's two left. [00:45:47] Speaker B: Two bidders left. [00:45:48] Speaker D: There's DSV, which could possibly be the most politically unpalatable option for DB. [00:45:54] Speaker B: Why is that, gav? [00:45:55] Speaker D: Well, DSV, in its numerous acquisitions over the last nearly ten years now, the playbook, the form book, is that it takes over a company and makes up to 50% of its workforce redundant, which is going to be quite difficult when you've got 80,000 of them in Germany. Just a thought. It's an election year next year, that's going to be a tough sell. And you can get a flavor of the german public's view of foreign businesses acquiring german logistics champions just by looking at what's going on in Hamburg at the moment. And a relatively uncontentious deal that would see MSC take a minority stake in the Hamburg port operator Hhla, which is going. Which is receiving all sorts of opposition. So, sorry, we're back to the DSV. So we've got Schenko, really. At the moment, it's either DSV or that's a private equity group consortium led by CBC. And at the same time, when DB first put Shankar up for sale, at that time, with its Covid bounce revenues, was looking at a price tag of around €20 billion. If you looked at it on current valuations, you're looking at twelve to 14 billion. So the impetus for the sale of DB Schenker was that it would help clear parent company Deutsche Bahn of its debts. But with the sale price going down, it's difficult to see whether even the original reason for the sale is still valid. [00:47:26] Speaker B: So Deutsche Bahn is going to make a loss on it. Most profitable sector? [00:47:29] Speaker D: Well, this is it. I mean, it really. As time goes on, the sale makes less and less sense. [00:47:35] Speaker A: I mean, I'm also hearing from various people that a lot of money will need to be spent on DB Schenker's IT system, which apparently is one of the reasons Maersk pulled out. So if you're spending too much money on a company and you have to redo its IT system. It's looking like a less attractive buy, Alex. [00:47:53] Speaker D: Right. I mean, I spoke to a forwarder who used to work for Cunham Nagle, and he had several colleagues leave Kunam Nagel and go in to work for DB Schenker. And they said that the software system is as 400. Well, that was first introduced by IBM in 1988. [00:48:08] Speaker B: Is this one of the reasons why DHL's lost interest? That would be the palatable option in Germany, presumably. But DHL has its own struggles with IT systems, as we all know. [00:48:18] Speaker D: Yeah, I mean, obviously a DHL takeover of DB Schenke is the obvious step to do, and you fund it through DHL's listing on the stock exchange. You get private investors to fund the buy, and that would make a lot of sense. But DHL ruled itself out pretty early on, and I suspect it was to do with the IT system. I think this IT system is a real millstone. Dbshenko's net. [00:48:42] Speaker B: Well, the curse of the new forwarding environment for DHL. Thanks for that, Gav. And Alex, I'm sure we'll be discussing DB Schenker again in the months ahead. Okay, before we start doing some forecasts, each of you, please, could you give me one trend, a company, a thing that has won, and another one that has lost in the first half of 2024? One winner, one loser. [00:49:07] Speaker A: Alex, I've got one word for both, which is e commerce. I think e commerce is a winner and a loser. I think it's sort of rapacious rise, which is making its various e commerce platforms and airlines nicely rich. It's also propelled it into the political spotlight, and I think that that could, in some ways, the way e commerce currently operates anyway, could turn it into something of a loser at some point. [00:49:30] Speaker B: Mister Van Marl. [00:49:32] Speaker D: Sorry. Same with Alex. I've gone for one word, which is decoupling. Well, it's a compound now, but decoupling, if you want to know. I mean, we've heard a lot of talk about decoupling, right? Especially decoupling from China. But if you want to know what a decoupled supply chain really looks like, go to Russia, right? It's completely cut itself off from Europe. Entirely. Its main hubs to feed Russia used to be Rotterdam, Antwerp, Braemar. Now the three main load ports into Russia are Casablanca, Damietta, and Ambali in Istanbul. This is the rise of the so called parallel imports into Russia since the war in Ukraine. But it comes with a massive cost to russian consumers. Look at Brexit, that's decoupling. And lo and behold, trade barriers cost consumers more. Who would have thunk it? Not like any of us here predicted that. [00:50:22] Speaker C: Right? [00:50:23] Speaker D: And none of it seems to worry us politicians, who, of course are talking about decoupling in exactly the same way. And we've already discuss that. So here's my thing, that decoupling as a concept is winning, and most of us are losing as a result of it. [00:50:37] Speaker B: And James, to you. [00:50:39] Speaker C: So my loser, not just of this year so far, but the previous few years, is just simplification. Trade simplification, the fact that it's not only getting more unpredictable and disruptive to move goods around the world, the frictions, as we call them, the paperwork, the bureaucratic requirements, the red tape, whatever you call it, it's just a whole lot more stuff that needs to be done now and completed, information provided, that just makes it increases the risk of failure at the border, rejection or delays and further frustrations. So that's been a big winner in a negative sense, because we've seen all these additional burdens placed, and it's the shipper's job to get around them. It's the shipper's job to navigate them. So we're having to think about a lot more non logistics issues in order to actually successfully deliver on the supply chain performance. And the winner, and this is perhaps a little bit predictable, so it yawns all round, but the winner in the GSF lexicon of frustrations this year has got to be surcharges, because there's far too many of them. They're coming far too frequently, far too big in terms of their magnitude, and we still don't really know what the basis for levying them is and why they always seem to come out at such nice round numbers. So I'm back on my favorite theme again. Let's have the drains up on your. [00:52:03] Speaker B: Winner really is liner shipping balance sheets, isn't it? [00:52:08] Speaker C: Well, yeah, who knows? I mean, it'll be good to see some of that invested in decarbonising some of their activity, which some of them, yes, some of them are doing, and some are doing it in a particularly spectacular way. But again, looking forward again, this time next year, I think we're going to be talking about carbon levies. We're going to be talking about the various mechanisms that are going to be used to reduce greenhouse gas emissions from shipping. They should all be coming through in the next twelve months. So in terms of direction of travel, I think the surcharge issue is only going to get worse. [00:52:39] Speaker B: I'd like to do a whole podcast just on surcharges. I think it could be insightful and funny at the same time. Anyway, let's look at the rest of the year and peering into 2025. James, what do shippers want over the next twelve to 18 months? [00:52:52] Speaker C: This is again so predictable. I just say stability and a little bit of predictability. Go back to the top of the discussion. The huge seismic uncertainties that now attends elections and changes in government, and therefore the hedging of bets, the delayed investment and reluctance to so really get on the growth path because you don't quite know what the trading environment is you're going to be operating in. And although it's a very local, very specific scenario for a global audience. But I was struck by the fact that there was a report out only yesterday that showed, as a result of the more predictable political environment we've now entered into the UK since our election beginning of the month, there are already indicators of increased hiring, increased investment, certainly increased confidence, not because everyone wanted a Labour government, but what they just wanted was a little bit of calm, a little bit of predictability. Let us get on with the day job rather than trying to deal with everybody else's fallout from their rather wild and unexpected ideas. So I don't think it's likely. I think it's going to get worse. If it gets better at all, it's going to be continued. And the thing that we obviously still can't predict are the real black swans, the ones that we haven't even begun to think about, because they are genuinely unknown and they will completely surprise us by the impact that they have and the way that they disrupt our logistics lives. So it's all edge of seat stuff for the next twelve months at least. [00:54:23] Speaker B: Mike Gav, we've sort of covered this a bit, but maybe it's the defining question of this podcast. Container shipping. Lots of ships still joining the fleet through the rest of this year, lots of disruption and challenges in the pipeline. Is this entire market poised on a knife edge called Houthi attacks on shipping? [00:54:44] Speaker D: Well, I have this one of my pithy terms that I've been repeating for the last few months, but basically the greatest threat to carriers balance sheets is peace in the Middle east. And since I'm not a carrier shareholder, I'd prefer peace. But im not really very hopeful for that at the moment because it really doesnt look very likely, does it? I mean, looking ahead, its not just this year that a lot of ships are coming right, this next year as well. And I think it was either Rolf Haben Janssen or Vincent Klerk im veering towards Rolf, who said in a recent call that even if the Red Sea crisis continues and persists throughout 2025, there is a point nearing the end of 2025, or the first quarter of 2026, that the ship deliveries will create a situation of overcapacity on the global line of trades, even with the continued diversions around the Cape of Good Hope. So that is going to happen sooner or later. It's just a question of when. And the sooner it happens, the more severe the consequences for the carriers, I would imagine. [00:55:51] Speaker B: Alex, air cargo, what are you watching with intent for the rest of the year and into 2025? And what should our listeners and readers be watching out for or caring about? [00:56:00] Speaker A: Well, I mean, as James said, geopolitics could get even madder and, yeah, nice, actually, that the UK seems to now be headed by an adult. [00:56:09] Speaker C: Well, it's counter cyclical, as always, isn't that? We were losing it, we were dropping. [00:56:13] Speaker D: Off shopping when everyone was right and then everyone else lose their minds and suddenly we take a sensible cause. [00:56:20] Speaker A: Well, yeah, the UK aside, happily, obviously, geopolitics could just get madder and madder and there's always going to be an impact on trade and freight. I think how e commerce sorts itself out into something sustainable and sensible is going to be something to watch. I don't quite know how it's going to be achieved, but it needs to be achieved and that will have an impact on air freight and of course, net zero. And I mean, that's going to take longer than through 2025, definitely, but it's a constant drum of noise now, which I think is encouraging, even though there apparently is no south and no way to make aviation net zero, but at least people are talking about it. So I'll be watching that. [00:56:58] Speaker B: Just to finish up, where are we all in terms of sentiment? Are we, any of you seeing economic indicators suggesting optimism, or is there, just as you've just Alex just implied, there is a simply too many unknowns to be anything but cautious as we look forward? [00:57:15] Speaker C: Well, it's in the nature of logistics, isn't it? We can do this. It might be tough and it might cost more than we thought, but the whole purpose of logistics is to overcome these barriers and deliver the goods as required and intended. I think it will be more challenging. I think that businesses are talking about the corporations that, that most of my shipper members are the large corporations. Many of them do need to put more into supply chain management and that's hear the lessons of COVID and address the risks to their growth plans and their profits that lie within the vulnerabilities of their supply chain. And yes, that is a rather obvious plea for more support and staff, for the hard pressed members to attend micrometers and so on. But listening to the range of challenges that they face now and the scale and the enormity of some of the disruption out people that could still yet to become, I think that would be a smart move by a lot of businesses to insulate themselves against some of this trauma that we've spent an hour and a bit talking about. [00:58:20] Speaker D: Can I just ask James a question there, James, because obviously there was a bit of a ramp up during COVID in terms of companies fortifying their supply chain divisions subsequently, did those divisions then get hollowed out again post Covid and theyre now looking to restaff them. What was the general trend there? [00:58:43] Speaker C: I think there was some recognition of that. Gav, youre absolutely right. I spoke to a lot of people that said, yeah, weve got more people looking after that now. Theres inevitable erosion and attrition because things did sort of fall back. And therefore, as I said, the beginning, one of the lessons from 2024 is things didn't go the way that everybody thought. And perhaps some of those, those cuts, some of those efficiencies that were taken because things had calmed down a bit suddenly seemed to be a little bit premature and uneasy again. And I think we've very carefully over the past described why the resilience, as it's called, needs to be back in those supply chains. Otherwise, companies are going to be cautious, they are going to be unable to respond and we could quickly find ourselves back in a situation where supplies are disrupted and the consumer is feeling the pinch. [00:59:37] Speaker D: Yeah, that charms. If I wouldn't mind focusing, James, another question people have talked about near shoring, onshoring, all this sort of thing. I couldn't help when I was preparing for this, this podcast, I couldnt help thinking if you were a startup company now say youre in the UK and youre a startup of a retail company and youre looking to sell goods or whatever, and you had a blank page from which to design your supply chain, I would have thought that you would want it to be as short as possible and try and avoid as much of these. I would be looking to have as much manufacturing production as I could either here or as close to here as I could get it. Whether that was what James thought about that. [01:00:22] Speaker C: I've not heard serious discussion about relocation of production, anything like the scale that was being predicted during COVID or indeed in response to net zero pressures. And it's not a trivial decision. So you've got a big decision to make as to whether or not you suddenly let down one supplier that you probably worked with for a good number of years, got a contract with anyway, and are getting a fair price from at the moment, otherwise you wouldn't be using them. And suddenly you're going to say, well, we're going to stop using you and we're going to go with these new guys that have set up a lot closer to home. We've not used them before, so we're not certain about their reliability. We've got a few unanswered questions about the quality of their product and they're relatively new to the game, so we don't know whether we're going to do a one year or a five year contract with them. I mean, that is a career defining decision in many procurement managers lives, I would have thought. So it's not easily taken and it's a big risk for very uncertain rewards. Now, that's not to say it won't happen when some of the serious metrics change and the factors that will force that decision are tariffs and sanctions and massive new regulatory licensing and certificate of origin and other trade frictions. That's the sort of thing that moves the dial on location of production. That's what I'm looking out for. Those sorts of changes that suddenly mean that some of these cost bases have risen and are unlikely to come down in the medium term. So your big investment is going to have a chance of paying off because the competitive price you can get from being nearer to home is going to endure. And also you are able to think through some of the downsides of relocation. I mean, don't forget, for every factory you open up closer to home, there's a factory that you're either closing down and making a whole bunch of people redundant in the country you're trading with now. So that's great for your carbon footprint and your environmental credentials. It's got questionable social weight in your ESG calculation. And if you sack all your stuff by sending them a text, then your governance factors are shot to shred as well. So it's a very difficult decision to take and it's not as straightforward and without its consequences as a lot of people seem to think. And therefore it's not happened at anything like the pace so far. But that could change if some of these bigger factors we've been talking about. [01:02:51] Speaker B: Raoul, where is that bar, though, James? Is it 60% tariffs, say, on China, because no one wants to be the first mover in terms of building resilience if it then leads them to be uncompetitive in the short term because they might be bused before they need that resilience. [01:03:05] Speaker C: Absolutely. So you've got to ask yourself the question. So this is, assume a Trump presidency, a second presidency that only lasts four years. Now, whoever succeeds Trump, unless he decides to appoint himself alive, but it won't be Trump next time round. So what's their policy going to be? Will they do what Biden did and just carry on? Or suddenly, will there be a much more openness to free trade? And suddenly all these tariffs disappear, and the cost advantages that you thought you had by resourcing that production suddenly disappear again. So the big 15 year investment that you made trying to get that closer to home is now suddenly looking a little bit of a white elephant. I mean, they're the kinds of decisions that will be gone through, as I say, at procurement level and investment level in businesses. So these are bigger than supply chain in that respect. So it's all part of procurement and sourcing, rather than just simply the mechanisms of getting the stuff into the home market. [01:04:02] Speaker B: I'm sure Ron Menon wasn't talking about tariff avoidant when he was saying, cargo will always find a way. But I'm looking at you, Mexico. What happens when the tariffs go up? Where do the cops turn to next in terms of managing that process? Alex, final thoughts? [01:04:18] Speaker A: Yeah, I mean, I can't really add much to what they've just said. I just. You use the word expectation, and I think the word expectation is almost defunct now in freight. I mean, no one knows what's going to happen tomorrow. Yeah, that's my final word. I think optimism is too strong a word for the market. [01:04:36] Speaker B: Alex Linane, publisher of the Lodestar, Gavin Van Mole, managing editor of the Lodestar, and James Hookham, director, the Global Shippers Forum. Thanks for joining me today on the Lodestar podcast. [01:04:47] Speaker A: Thanks very much, mate. [01:04:48] Speaker D: Thank you, Mike. [01:04:49] Speaker C: Thank you, Mike. Thanks fol. See you soon. [01:04:55] Speaker B: Big thanks to my editing team, Karen Ballen, Tom Matthews, and most of all, gratitude to you all for listening. We'll be back soon.