Episode Transcript
[00:00:00] Speaker A: Foreign and welcome to the Lodestar podcast. News in brief. We're going to be rounding up week 11's supply chain news. And to help me with that, as always, I'm joined by Alex Linane and Gavin Van Mahle. So the major story of last week was the ship collision. So just for background, on Monday, oil tanker and US flagged MV Stenner Immaculate burst into flames after being struck while at anchor in the Humber by The Portugal flagged 8,000 TEU so long. One crew member is unfortunately still missing, but the rest of them have been rescued. The tanker is managed by Crowley in the us who said that the vessel sustained a ruptured cargo tank. The fuel is now leaking into the North Sea. The so Long was operating the service between Grangemouth, Scotland and Rotterdam. Obviously it's quite a small ship, so it won't take capacity out of the market and it's not occurred in a densely populated shipping lane, so it won't cause too much disruption. Alex, there's been some speculation about the cause of this. Could you shed some light, please?
[00:01:07] Speaker B: Yeah. A seafarer who has worked on this coastal route, writing in trade winds, said that these ships tend to be undercrewed and have difficult working conditions around the Humber estuary. There's really strong tides, there's locks. There were 14 crew on board the Salon at the time and it had made 17 port calls in 30 days, which apparently is quite a tiring number. The seafarer suggested that fatigue was a very likely cause of the accident, but the UK's Marine Accident Investigation Branch is now fully examining the causes. It's going to lead the investigation, but with support from the US Coast Guard, because the Stena Immaculate was US flagged and chartered by the US government along with help from Portugal where Solon was registered. Now, the Captain of Ceylong was arrested on suspicion of gross negligence manslaughter. And there's been a lot of stuff in social media about the fact that the captain was Russian, but I think that's something of a red herring, especially given the current geopolitical situation with the US effectively changing sides. Well, as we go to press anyway, it's hard to understand why a Russian would risk lives to hit a tanker that he probably didn't even know was carrying jet fuel for the Americans. So I suspect it's just a sad accident, possibly brought on beau fatigue. But we'll find out more as and when the report comes out.
[00:02:23] Speaker A: Yeah, I did read a thing from Zenita that said this just again highlights the fragility of maritime navigation. Well, something else that is manifesting again, as a danger to vessels, although I'm not sure it ever really went away, is the resumption of Houthi attacks in the Red Sea. The Houthis declared that they will be attacking any Israeli ship in the region as their deadline for Israel to resume humanitarian aid deliveries was not met.
[00:02:48] Speaker B: I absolutely love the fact that we get press releases from the Houthis. It's brilliant. I'll leave it to Gav to explain what's going on there.
[00:02:55] Speaker A: Yeah, you've got a direct line of contact with them. Gav, what do you make of this?
[00:02:59] Speaker C: Yeah, I mean, it's not really a surprise that no one's going to go back through Suez. All the talk at TPM was that the earliest that people could see any resumption would be second half of this year. I think every time the Houthis come out and say that, reconsidering, relaunching attacks, it probably pushes the process back by another couple of months. So, on the basis of their latest pronouncements, you would sort of imagine that we probably won't see a resumption of Suez Canal transits this year unless something really dramatic happens on the sort of peace front.
[00:03:32] Speaker A: Another big uncertainty is tariffs. We've kind of been a bit hesitant to report on something as soon as Trump says it, which is what we did at the beginning. Last week, he proved us right by announcing 50% tariffs on steel and aluminium from Canada in retaliation to the new 25% tax on electricity export introduced in Ontario. That was, of course, itself a retaliation to Trump's tariffs initially. Everyone's still with me.
The electricity tariff was scrapped and the 50% tariff on steel and aluminium turned into 25% against the whole world, not just Canada. That came into effect last Wednesday. The EU announced retaliatory tariffs on 26 billion euros of US goods from April in two stages, with 8 billion euros worth of steel and aluminium impacted from April 1 and 18 billion euros worth of goods from April 13. We're still not clear exactly which goods will be targeted. Does anyone want to comment?
[00:04:32] Speaker B: Well done for saying all that, Charlotte. It's pretty complicated stuff and, yeah, it's exhausting, to be honest. Anything we say right now while recording may well have changed by the time this is published. The biggest impact from the latest steel and aluminium tariffs is likely to be on U.S. automakers, which we all knew they're going to see a huge hike in production costs. And the aerospace industry is also potentially going to be Badly impacted, which is not very helpful on top of the already big delays and disruption in aerospace. But there's also problems in agriculture, aren't there?
[00:05:04] Speaker A: Yeah. Peter Friedman, who is executive director of the agtrans Coalition, warned that the agriculture sector will be and has been particularly impacted by tariffs because it's a low margin sector where the growers obviously can't realistically put up costs that much for their consumers. And ultimately he pointed out that China or whoever the importer is, can source its soybeans from anywhere, which it is currently now doing in Brazil, likewise with Mexico and its corn imports.
[00:05:30] Speaker B: One interesting thing was that Walmart had said that it was going to push all the tariffs onto its Chinese suppliers. But unfortunately for Walmart, the Chinese government apparently didn't like that idea at all and it's had talks with Walmart to try to stop it from doing that. So there's another interesting angle there. But as you say, it's all moving so fast, we should move on.
[00:05:53] Speaker A: Yeah, lots of unknowns. Right, let's move on. Gav at the start of last week we reported that Peg Lloyd's port business, Hanseatic Global Terminals, has acquired a 60% share in CNMPLH, which operates the Atlantique terminal at the French gateway of Le Havre. What is interesting about this, this is.
[00:06:10] Speaker C: The bit where liner shipping and port operations really intersect the Atlantique terminal. The main service it hosts is the Gemini's Euro Shuttle 6 service, which runs Rotterdam and to GL half and back to Rotterdam. So is effectively the container gateway for the Gemini partners into northern France and the crucial Paris market. There's been a lot of discussion about Gemini's reliability ambitions. They've talked a lot about how they control the transshipment hubs and through control of the transshipment hubs they'll be able to achieve this reliability. And one of the questions that's been raised about this is like how do you then control the port efficiency at the end ports at the local ports, places like Le Havre? And this is your answer. So it was bought by Hanseatic Global Terminals, Hapag Lloyd's growing port arm. So I started looking at the Euro Shuttle 6 service and then I discovered that when, when it hubbing at Rotterdam and obviously Maersk has a very large terminal in Rotterdam. But the Euro 6 service actually calls the ECT Delta Terminal, which also happens to host all of the Gemini partners transatlantic services and their two Middle East India Europe services. So although the Gemini partners have claimed that all their main services are going through their own hubs. Actually that's not the case. In case of their transatlantic and Middle East India services. They're actually being hubbed through ECT's facility in Rotterdam, which you will probably remember is actually owned by Hutchison, which of course is subject to the the takeover bid from MSC we started looking at in places like Rotterdam. If MSC were to acquire ECT's assets in full, effectively the Gemini partners are going to become a customer of MSC or til. And that's probably not an ideal situation for them. In any case, such is the control that Hutcheson has in Rotterdam. I mean it really is the largest port operator there. We would expect that the competition authorities would require some kind of remedial action to prevent a market domination situation occurring. Ae, we expect that MSC TIL will be forced to sell off some of the Rotterdam operations. Now this fits very neatly in with what's going on in Le Havre because it's very clear from what's happened in Le Havre, the Hanseatic Global Terminals is now very much on the hunt for new terminals and a very obvious one in Rotterdam would be for it to buy the Euromax terminal. So some very interesting things still to play out on Gemini and of course the Hutchison acquisition.
[00:09:06] Speaker A: Well, Gav, I'm glad you brought up the MSC Hutchison acquisition. You've provided me with an excellent segue there. We had a story at the end of last week and there were some people that weren't happy about this. Could you explain some more please?
[00:09:18] Speaker C: So it was published on the the Hong Kong and Macau office of the Chinese government basically. And they released a rather stirring op ed that they called the Sale of Betrayal and railed against sort of American hegemony, said that the Americans are embezzling the wealth of other nations and so on and so forth. Their position is that the deal was prompted by Trump and all of his proclamations about Panama, wanted to take back control and so on and so forth. And I'm not really sure that the timing of everything fits with this view from the Chinese, although the timing of the announcement of the deal certainly seemed to fit in with the Trump agenda. The fact is putting together a deal like this takes ages.
A 22 billion plus deal, the Chinese thing here is all about Panama.
You don't spend 22 billion plus dollars on two Panamanian ports. You're spending them on 43 ports around the world. Here's a crucial point is that I don't think a deal of that magnitude would have even got to the negotiating table if the government in Beijing hadn't given its blessing to it. And in any case, as the jury analyst Eric Cooper talked about last week, for the best part of a decade, Hutch as a port operator has effectively been in sort of silent mode, right? There's been very few developments. It hasn't really pitched for new concessions. His view was that the ports business has basically been acting as a sort of cash cow without having much management attention placed on it to finance the other areas of the business.
[00:11:01] Speaker A: Well, another port operator that caught our attention last week was Transnet, and in particular their port, Cape Town was experiencing severe delays due to bad weather. We spent ages on the EC database looking at which sailings were impacted, and some vessels on the Sax Europe South Africa service jointly operated by Hapag Lloyd, Maersk and one were delayed and moved around. And also on Maersk's India Middle East Africa Misawa service operated with CMA cgm, Maersk noted on Wednesday last week that there was around eight days waiting time at the port. So we expect that to have an impact until the middle of this week. Now, Alex, I'm coming back over to you because you had an interesting story at the end of last week on another lawsuit involving Flexport. What are they claiming?
[00:11:49] Speaker B: Well, last year a startup launched called FreightMate IO. It was founded by two ex Flexporters and one ex Amazon Manager. It was clear at the time, just from the start date, plus the dates they left Flexport, that they've at least been moonlighting, at the very least. But now Flexport has filed legal action against them, claiming that they copied tens of thousands of documents, including proprietary coding for Flexport's platform. Flexport hasn't put a dollar amount to the claim, but it's a long claim. One of the odd things about reporting on court filings is that you only get one point of view initially. So it always looks a bit open and shut when you read the first complaint. But we have yet to hear from Freightmate. We've asked them for a comment, but there's been no reply. In January, they announced that they'd raised another 5 million DOL seed money. I'd be fascinated to see what the investors think of this particular case.
[00:12:41] Speaker A: Very juicy indeed. Well, now switching to something perhaps slightly less so. Should we delve into some numbers? Alex, you reported on EV Cargo's results. Was there anything interesting there?
[00:12:52] Speaker B: I mean, to be honest, not in the results as such, they were better than a year earlier. But more interesting is that EV Cargo is thought to have been bought by DP World. We've now heard it from several sources, but there has been silence from both DP World and EV Cargo, which is not the same as a denial, but it's not confirmation either. The other interesting point is that according to one person, DP World bought it for $600 million, whereas when it talked about having an IPO in 2021, EV Cargo valued its business at $1.1 billion. One of the reasons, we think is that it's had problems in Hong Kong. It expanded there, but when it did so, it upset investor and director John Lao Shek Yao, who saw it as encroaching on his business. So he asked for his $45 million investment back and sued for unpaid invoices. So we think, but we don't know that. It's likely that EV Cargo is undergoing an acquisition process and it will be announced soon, but I can't guarantee it. But it's not actually the only Ford are up for sale. Forto is also said to be looking for buyers. So we'll report on that as and when we know more.
[00:14:01] Speaker A: Just another thing, you had a bit of a good news story last week, didn't you?
[00:14:04] Speaker B: Well, yes. Well, there's two parts to it actually. But let's focus on the good part. The UK requires larger companies to file statistics on their payment performance. And according to the data that we saw, Air Charter Service takes just three days on average to pay. With only 8% of its invoices paid late. Just 1% are paid after 60 days. Now, I did say it was a good news story. It's not so good if you're a supplier to Siva Logistics uk, which is in the serial late payer category, with an average time to pay an invoice being 79 days with more than half its payments late. But let's focus on the good stuff instead.
[00:14:42] Speaker A: Well, some other companies who celebrated some good news were ZIM and OCL gav. You took a look at their annual results, who came out on top?
[00:14:49] Speaker C: First things first, it wasn't just Zim and 00 who were popping the champagne corks. It was also Evergreen released results, Yang Ming released results. Everyone did well, right? I mean, you shouldn't be running a shipping line if you didn't produce a bump profit in 2024. The interesting thing is to look at who did better than others and that we can only really tell through their shipment carrying so their liftings, their TEU volumes. And unfortunately neither Evergreen nor Yang Ming, as far as I can tell, actually disclose those numbers. So put those to one side. Focus on ZIM and Double O. And it's very clear that ZIM won double OCL lost. Right. The market growth in 2024 was 6%, so there were globally 6% more container movements in 24 than there were the year before. ZIM saw its volumes grow by 14%, so more than double the market rate, while OOCL's volumes grew 3%. So half the market rate, which as a general rule of thumb basically shows that Zim1 market share, which they said came mainly through the Trans Pacific and trades to Latin America, while double OCL lost market share. Simple as that.
[00:16:03] Speaker A: And you covered ocean freight rates too last week. Have they seen much of a change?
[00:16:08] Speaker C: They've resumed their downward spiral, as I think we predicted in last week's podcast. So Asian North Europe was down 5% to the Med. It was down 11% to the West coast, down 8% to the East coast, down 7%. And we would expect to see further declines this week. And that's certainly what the sentiment seems to be saying. A couple of carriers, HHAPAG Lloyd and MSC, have announced new FAK rate levels for the 1st of April. They're setting a rate of $4,000 per 40 foot on Far East North Europe shipments.
When we met last week for this podcast, there had just been new GRIs introduced that had arrested the rate decline. I said I would expect there to be similar ones introduced for the first of April. Yeah, that happened this week. So what we're probably going to see is gently declining rates next two weeks, with another sort of plateauing off at the beginning of April. The one trade that seems to be bucking the trend at the moment is the transatlantic, where rate levels have maintained a sort of surprising strength. I had a chat with Sea Intelligence chief exec Alan Murphy, who described it as a special animal. You know, the transatlantic just works under its own dynamic. He said, you know, it can only continue doing this for so long. He thought it's pre tariff front loading from European exporters trying to get stuff into the States before the the tariffs come into full effect. And Alan said that sooner or later the supply demand dynamic is going to hit the transatlantic trade, at which point he expects a serious downwards correction in rate. So carriers should enjoy the transatlantic while they can.
[00:17:54] Speaker A: Alex, do you want to round up the episode with a little look into air freight rates?
[00:17:58] Speaker B: I mean, the short answer to that is no. Actually they weren't particularly interesting this week. There's a decline in rates out of China to both the EU and us. Jeffrey's investment bank said this week though, that forwarders exposed to air freight would fare better than those heavily exposed to sea freight. Air is a better bet this year, it thinks. And the other really interesting thing that we spotted, we got some numbers from the US Customs and Border Protection which saw a 90% fall in collected revenues in February. 90 yeah, in collected revenues in February than in January, but the number of entries it processed fell just 7%. Now make of that what you will, but I'm pretty sure that isn't what the White House is after number wise.
[00:18:41] Speaker A: Probably not. Thank you very much.
[00:18:43] Speaker B: Thanks Charlotte.
[00:18:51] Speaker A: So now you are up to date with what happened in the news last week. Here is what you might see on the Lodestar this week. Our news editor Alex Whiteman is off to Leipzig with DHL for a tour of their hub there and he is going to be doing a deep dive into the life sciences and healthcare verticals. So looking forward to seeing what he finds out on Thursday. This week, Hapag Lloyd is releasing its annual results. So we'll be doing a summary and perhaps some analysis of that.
Sprinkle in a few more tariffs as well, some retaliation tariffs and I'd say that just about covers it for this week. No, but seriously, if you are finding it tough to keep up to date with supply chain news, especially differentiating between what will have an actual impact and what is just noise, then do check theloadstart.com daily and we will tell you all you need to know. Thank you for joining me and I'll see you next week.
