Episode Transcript
[00:00:00] Speaker A: Foreign and welcome to the Lodestar podcast News in Brief, where as always, we're going to be recapping last week's supply chain news. Now, Gavin Van Maal is not here this week, but I am joined by Alex Linane. Last week saw a huge escalation in hostilities around the Red Sea region and Houthi leaders said they had launched a wave of missile and drone attacks on US warships following a series of American airstrikes on Yemen last Saturday. Now this news is obviously incredibly sad and again reiterates that large scale returns to Suez Canal transits are off the table for a long time. This was discussed in Maersk's annual general meeting for shareholders last week where the proposal was made by a shareholder for the Danish carrier to increase due diligence reporting and cease arms shipments to Israel. Now the proposal was rejected by around 98% of shareholders in the meeting and one analyst pointed out that the good proposals, like green proposals or ethical behavior, they always get rejected because they're not investment friendly. CEO Vincent Clerk maintained throughout the AGM that Maersk had a strict policy not to ship any weapons or ammunition to active conflict zones. But when he was pushed on this, he, he kind of explained that where some people draw the line between what is classified as a weapon and, and where others might draw the line is different. So take from that what you will, but they assured that they are complying with rules and regulations. So I'm not sure how loose those rules and regulations are, but they are complying. He also said that they didn't need additional due diligence reporting because they already do what's required in the Corporate Sustainability Due Diligence Directive. What do you think of that, Alex?
[00:01:46] Speaker B: I would have thought that classifying a weapon would be reasonably easy to do, but whatever, you would think.
[00:01:50] Speaker A: So, yeah.
[00:01:51] Speaker B: Also while we're talking about Maersk, last week saw the first complete Asia to Europe port calls as part of the Gemini alliance. So their whole thing was about 90% schedule reliability. Have they managed to keep that going?
[00:02:04] Speaker A: Yeah, Gav and I spoke to some analysts at Lyna Database EC and they've been tracking the Gemini networks very closely. I should say that their reliability is still very high. I mean, compared to the like 50% that shippers have been facing over the last year. They're still very much in the high 80s. So in the two weeks since the 3rd of March, Gemini arrivals have shown a respective overall on time performance of 87% and 84%. And when we reported on this early last week, they were around 83%. So the good news for US importers is that the 18 Gemini Trans Pacific head haul arrivals into North America from the Far east so far the on time performance there is around 94%. And as you say, they have just started complete calls from Asia to Europe. So fingers crossed that European importers enjoy the same reliability. Rolf Haben Jensen did say at TPM that he assumed it would dip below the 90% as the network beds in, but he was confident that it would deliver by the second half of the year. Don't worry, we are going to be closely tracking those numbers. I suppose while we're on the topic of the Gemini pair, it would be remiss of us not to touch on Hapag Lloyds financial reports from last week. I mean like all carriers, they did very, very well in 2024. But do you have any extra details Alex?
[00:03:23] Speaker B: Yeah, sure. Rolf Haben Janssen said that he thought this year would be worse than last year, which I think most people are agreeing with. Mind you, Hapagoloid did actually lose market share last year. It had a 4.7% increase in volumes, but the global market saw a 6.2% growth in volumes. So it was under there. But it also said that its results exceeded expectations with a 6.6% rise in revenues to 20.7 billion while EBITDA and EBIT grew slightly.
[00:03:54] Speaker A: Thanks for doing that, Alex. I know that's usually the bit of a gaff does, but we'll move on to air. So you're more in your comfort zone perhaps. You reported that Lufthansa and Air France KLM have opted to put extra capacity into Hong Kong. I'm surprised they haven't been put off by talk of the reversal of the de minimis exemption.
[00:04:11] Speaker B: Yeah, I've been interested in where carriers are putting their freighters for the summer season. Of those that replied to me, both Lufthansa and Air France KLM Cargo said they were putting more capacity into Hong Kong to take advantage of E Commerce and to some extent this will come at the expense of perishables and the north south trades.
[00:04:29] Speaker A: It's always the perishable shippers that seem to lose.
[00:04:32] Speaker B: I know, it's so sad, isn't it? Air France KLM is taking capacity out of Brazil, Peru, Ecuador and Guatemala and it's also suspending Harare and cutting back on Kenya and South Africa. But it did say that it still has plenty of belly capacity in those southern markets, while Lufthansa has said it's still committed to South America but there could be pitfalls in Hong Kong. Changes to E Commerce rules, or too much capacity in one destination. Could see rates fall there. And of course, there's the de minimis issue in the US at the moment, which is, you know, obviously a big one. Clothing retailer Forever 21 went bankrupt a week or two ago, and it blamed it pretty squarely on unfair competition from Chinese companies using the de minimis exemption. But also, interestingly, the suspension of the exemption won't be bad for everyone, including Forever 21 and those like it. DHL, for example, has said that it could be a real opportunity for it. I don't think it's saying it particularly loudly, but it is true. And it said it would hire more staff to deal with customs processes, for which it, of course, gets rather a nice fee.
[00:05:43] Speaker A: Well, while we're on the topic of the Trump administration's decisions impacting shippers, we had a story about the USPS Postmaster General, and he had invited the US Department of Government Efficiency, or Doge Task Force, led by Elon Musk, of course, to find opportunities to cut costs. I mean, unsurprisingly, this stirred up opposition, but can you explain a bit more, please?
[00:06:05] Speaker B: Yeah, I did read somewhere that people are starting to call it dodgy rather than doge. We'll see how that goes. Yeah. USPS lost $9.5 billion last year, which is quite a significant number, in part owing to its requirements to offer standard services to rural locations without additional funding, like most post offices, to be honest. It has, perhaps surprisingly, given Doge Dodgy's reputation, asked it to look at how it can cut costs. It's grappling with things like retirement benefit calculations and investments, misallocated pension liabilities, excessive charges, and a workers compensation program. And of course, it faces restrictions on pricing because it's run by a regulator. That's something that's irritated rivals like FedEx and UPS, because USPS can undercut them. Lots of people are wondering whether this is actually the first step in a path of privatization for the usps. Either way, prices might go up, which would mostly impact small and medium businesses, who tend to use USPS because it's so much cheaper.
[00:07:12] Speaker A: Well, we're going to stay on the topic of the Trump administration decisions impacting shipping stakeholders, because there's a few. But at the start of last week, we reported that Donald Trump appears to have weaponized the Federal Maritime Commission as part of U.S. efforts to revitalize its shipping sector. So on Monday, it was announced that the FMC would investigate seven choke points in liner shipping, the Northern Sea Passage, English Channel, Malacca Strait, Singapore Strait, Strait of Gibraltar, and the Panama and Suez Canals to identify any regulations or policies that it said would create unfavorable shipping conditions. So if the investigations concludes that there are undue practices at the expense of US Shipping lines from governments or authorities. Sandler, Travis and Rosenberg, which is an international trade law and consultancy practice, said that the FMC was empowered to take any action deemed necessary and appropriate. And the law consultancy said that this kind of seemingly removes the limits on what the FMC could do should it deem necessary. So perhaps more to come on this once the FMC concludes its investigations.
[00:08:18] Speaker B: It does seem like the FMC is going quite beyond its remit perhaps to look at English Channel shipping. And it's very hard to understand really what's it got to do with the fmc. But anyway, we will find out.
[00:08:32] Speaker A: Yes, we will. Now, if you're familiar with this pod, you'll know we like to finish with rates. So as GAV isn't here, it falls on me to explain how ocean freight rates have moved since last week.
[00:08:42] Speaker B: Yeah, your favorite, Charlotte. I know.
[00:08:44] Speaker A: Well, the good news for shippers is that it's another week of decline. According to Drewry's World Container Index, the Asia Europe rates declined quite slowly with the Shanghai Rotterdam decline showing about 2% week on week to end at $2,463 per 40 foot. While the Asia to US rates were on a more rapid decline with a drop of around 9% to the West coast and 7% to the East Coast. Shanghai to Los angeles ended around $2,658 per 40 foot, while Shanghai to New York was around $3,774 per 40 foot. And what's interesting is that usually when there's this kind of continued price decrease that we've seen, carriers will try and aggressively cut capacity with blank sailings. But as they're in the middle of phasing in their new alliance networks, blank sailings are relatively ineffective. But should the spot rate decline continue past where the new networks have been fully rolled out, which is expected at the end of April at the latest, and providing there has been no resumption of Suez Canal Transit, there is expected to be a much greater use of blank sailings. So shippers should enjoy this moment while it lasts. Alex, how is it looking in air?
[00:09:59] Speaker B: Well, shippers might have more to look forward to in air. To be honest, there's very little to report on rates. In fact, they've stayed broadly flat in most major lanes. But as I promised, I have been looking at the Chinese end of the supply chain and I spoke to a Shanghai forwarder in particular who was very interesting. He noted that of a couple of things he said, one was that the E commerce platforms are now developing an ocean freight based strategy for the US in particular, which could leave a lot of air freight capacity open. He also, along with other forwarders, said that he expects air freight rates to decline in general. But forwarders have also warned that air freight could see a very dramatic change very quickly for whatever reason, but in particular, if de minimis to the US is stopped, more tariffs introduced, he says the market can turn upside down without a moment's notice. So that will be a fun one to watch out for.
[00:10:53] Speaker A: I also just wanted to ask you quickly, I saw that you reported that CMA CGM Air Cargo was perhaps making a bid for Air Belgium. Was this something that the market expected?
[00:11:02] Speaker B: I mean, not really, no. Air Belgium's future is being decided by a court now. Air1, which is spreading far and wide these days, was hoping to buy the carrier. It's Air1's second attempt to get a Western European AOC after it was thwarted by the Dutch authorities maybe a year or two ago. But the Belgian court also rejected its bid. It's appealing that decision, but the bidding has now reopened and apparently there are actually quite a few contenders, including CMA cgm, which no doubt sees it as quite a quick growth mechanism. Air Belgium comes with four aircraft. They're not necessarily the best fit for CMA's existing fleet, but I can see that there's an advantage in buying Air Belgium because it's been decided by the court. It may come down to how many staff are retained in the bids for the airline. Air1 said it would keep about half the 400 staff. CMA hasn't said yet what its plans are. We'll find out more next month.
[00:12:01] Speaker A: Looking forward to it. Thank you very much for joining me, Alex.
[00:12:04] Speaker B: Thanks, Charlotte.
[00:12:11] Speaker A: So now that is last week's news done and dusted. Here is what you might see on the Lodestar this week. Our news editor Alex Whiteman has returned from his trip to Leipzig with DHL and he is now working on a story from that for this week about how advanced and individualised medications are altering life sciences and healthcare supply chains. And he is being kept very busy with travels as he's off to Rotterdam this week speaking to Maersk about topics such as the Gemini Network, green fuels and its integrator strategy. So look out for that and our other Alex, Alex Linnane will be delving into the semiconductor supply chain with insight from Qatar Airways and she's also doing an interview with Robert Van der We about his move to Mexico based freighter carrier Mass Air Cargo. Finally, the investigation by US Trade Representative Jameson Greer that suggested hitting Chinese built ships calling at US ports with an up to $1.5 million fee, which he said was because of unfair Chinese state support of maritime supply chain. That is going to have some response this week. The U.S. trade Representative will hold a public hearing about the proposed actions on the 24th of March. So that is today. If you're listening on Monday. One interesting bit of feedback to the proposal as we reported last week, was by transatlantic carrier Atlantic Container Line that warned it would have to exit the trade if the US enforces its proposed 300:1 rule on Chinese built ships. So it's going to be very interesting to see the outcome of this hearing and we will of course be reporting the updates on theloadstart.com thank you very much for joining me this week and I will see you next time.
