Episode Transcript
[00:00:00] Speaker A: Foreign and welcome to the Load Star podcast. News in Brief. I always just assume everyone's listening to this in the morning, but if you're not, then good afternoon, good evening, whatever time it is with you. Thank you for joining me this week. We're going to be rounding up last week's supply chain news and giving you an insight on what you might see in the news this week.
And before I start, I just want to give a shout out to Air Charter Service who are sponsoring this episode. And Air Charter Service is the aircraft charter broker of choice for thousands of shippers globally. So if charter is the answer to your shipment, then contact Air Charter Service for a no obligation quote. We're going to get straight into the news from last week and there was a bit of an update on the Red Sea situation.
I mean, nothing concrete has happened as of yet, but we reported early last week that the US President Donald Trump claimed that the Houthi had agreed to end attacks on shipping transiting the Red Sea. He said to reporters in the Oval Office that the Houthis just didn't want to fight anymore. Then he said that I will accept their word. We will stop the bombing of the Houthis effective immediately. And this obviously would be a very positive development for the regular retransing of the Suez Canal. But then the Houthi leader stated at the end of the week that Trump's claim that the ceasefire against US Vessels was because the Houthis had given up was far from reality.
So the situation, as usual, is very, very uncertain. And it is important to remember that if the Suez Canal does reopen for regular transit, it would temporarily cause a very chaotic situation at European ports as vessel schedules change and Suez routings overlap with Cape of Good Hope routings. And this at the moment especially seems like a very scary reality, given that port congestion in Europe is already on a pretty critical level.
And I'm now joined by Gavin Van Mul, who did a report last week on the latest with European port congestion. So what did you report on this, Gav?
[00:01:56] Speaker B: So before we get into that, Charlotte, let's just state that this isn't about pointing fingers at ports and blaming them for congestion issues that are often way beyond their control. I think actually that's become increasingly well understood since COVID and the various things that have happened since then. But in no particular order, this week we had Maersk notifying UK shippers that it was moving its UK port from London Gateway to Felixstowe for its TA5 service that runs between the sort of Caribbean into northern Europe. A lot of the congestion was due to sort of the alliance reshuffles which I think some of the trade had been well aware of. And London's been on the sharp end at this one. One of the things that we'd heard from forwarders was that when London Gateway welcomed the Gemini network to its port as obviously it was getting a lot of Gemini services that led to a massive strain on sort of hinterland transport capacity.
So it's going to take a while to work that one out. I mean here's the thing about congestion, right? It can happen either at the berths or it can happen at the land side gates. But where you see it most clearly is in the utilization of the container yards. And the way that the port industry works is that anything over about an 80% utilization basically means that some form of congestion is taking place. Kuda Nagel's C Explorer platform, which is an excellent tool, has some various yard utilization figures here. Hamburg's containment terminal, Burkhardt Key, which is the big one in Hamburg, which famously is undergoing this switch from a manually operated system to an automated system. It is a place where congestion regularly rears its head because of this project.
So what Hamburg's at 85% utilization was expected to go well over 90%.
London Gateways 83% utilization. Rotterdam World Gateway in Rotterdam clearly 78% in the berth at 100%. I mean also in the Med you've got Piraeus, you've got La Spezia, all of these guys are showing above 80% yard utilization and all these issues they hit carriers schedule reliability that causes longer transit times and thus it sort of amplifies the effect of congestion. It's a, it's a horrible vortex.
[00:04:17] Speaker A: Yeah. I actually went to a Hapag Lloyd webinar last week and it was a Canada based webinar. But one of the things that they were saying was that they were reluctant to accept a lot of shipments from Canada to the Middle east because of the trans shipments that were happening in Europe.
That would just mean that they would have no ETA for their customers and they weren't happy with that obviously with their 90% schedule reliability under Gemini. But Gav, you mentioned an advisory from Maersk there. So I just want to touch on their Q1 earnings from last week. Have you got any interesting points from that to share?
[00:04:47] Speaker B: What we've been looking at when we've been covering these first quarter results, given how unpredictable the period has been, is to see whether carriers are growing in line with the market or not. So we just had CTS Container Trade statistics. We released its data on Friday morning.
And when you extrapolate all the stuff out, here's the headline figure is that the global container Market growth first quarter 2025 was 4.1%.
Maersk posted volume growth of 0.1%. So they were clearly under the market growth. And just by way of comparison, pepac, which I think you reported on the week before, posted a 9% market growth. So, you know, back of an envelope calculation, which is what we specialize in. You can see that the Gemini volumes all seem to be going to happen, but that's a very, very broad brush to paint a picture with and not particularly accurate specifically on ap. More numbers are solid. Ocean was pretty much where we all thought it'd be. Terminals are having a great time and logistics is a bit weak. The key thing going forward this year will be how the full operation of Gemini will impact Maersk and by extension Hempface Lloyd's cost per container, especially if there is a long term downturn in the Trans Pacific trade. Although Vincent Clerk said that actually China to US volumes only represent 5% of MASK's overall business. So we sort of wait and see. The other thing he said, which I should just add, is that there is no crossing of any resumption of Red Sea or Suez Canal transits this year. You said earlier on this podcast about Trump declaring that the Sutis are surrendered. Yeah, I mean, Vincent Clark, if you listen to the exact quote, which is like this is a deal, we don't understand the contours we don't understand, which appears to have been already broken, there's absolutely no way that we're going to be sending our work colleagues, our ships or our assets and our customers busy that close to a war zone.
[00:06:49] Speaker A: Well, I'm now joined by Alex and Lane. Alex, you noted something interesting in Maersk's report about its air freight arm. Could you explain what they said, please?
[00:06:58] Speaker C: Yeah, sure. Maersk actually said very little about Ayre, perhaps not surprisingly as their numbers in volume terms anyway, because they don't give us anything interesting like financials on air, they weren't great. It said it had ditched its less profitable customers, which did make me wonder about its automotive logistics business from Germany to the US under the Senator purchase, which it made a couple of years ago. But those flights do still seem to be operating. Anyway, its volumes fell 19% year on year in Q1 to 69,000 tons, while other cargo airlines have reported a relatively strong Q1. But Vincent Clerk said Maersk took targeted actions to replace those businesses to focus on margin in favour of revenue.
EBIT margin remains a priority even at the expense of revenue growth, he said.
So I think we can expect something better next year in terms of margins anyway. But as I say, they don't release financials on their airfreight.
[00:07:58] Speaker A: Alex, obviously things are changing quite rapidly in air freight at the moment in the wake of the US removing de minimis privileges for China and Hong Kong. But would you be able to give us an overview of kind of where the market stood last week in terms of networks, capacity, demand?
[00:08:13] Speaker C: Sure. As expected, there's been a significant drop in the number of freighters. Lots seem to have pulled out of the market. There's various estimates 19 fewer aircraft per day into the US as well as reductions in flights by UPS and FedEx. That's according to Cirrus Global Advisors, which said that's about 2 million kilos of capacity each day. Wow. Yeah. The TechStop Anchorage is a good way of monitoring this.
Their freighter traffic to the US is down 38%.
Rotate said it saw a 30% decline following the May 2nd de minimis ban. All 40 freighters. So there's a few different figures there, but these are from different days. Either way, it's quite a lot.
Now it seems that some of the freighter operators might take this opportunity to put their aircraft into maintenance, but others are looking for alternative markets.
And there are some, well, there have been anyway, some opportunities. Latam Airlines and Avianca both said that they carry a lot of flowers recently for Mother's Day. And Mother's day is the second Sunday of May in the U.S.
so there's a bit of traffic in South America to North America and then there's cherry season is on its way. China is one of the big consumers of US cherries, so it'll be quite interesting to see how that pans out.
And there are problems in India, Pakistan and Bangladesh. I won't go into them all here, but just read a newspaper. And that's also impacted demand.
And there have been a few new services coming up, which may be people trying to pivot away from the Trans Pacific.
So Shenkha is offering a new service from Silhet in Bangladesh, I think, to Spain. Challenge groups adding a flight to Bangalore. And India is expected to see quite a lot of additional capacity.
Qatar has launched a flight to Atlanta via Frankfurt, so there's a bit more capacity going on. The transatlantic Perhaps most interesting of all the flight announcements is DSV's decision to start a multiple times a week charter service from Shanghai to Chicago, which is properly bucking the trend.
I assumed when I saw it that it meant it had a specific customer or cargo in mind. I asked a Chinese forwarder what he thought about it and he agreed. It's probably mainly for some project or certain blue chip clients, something like that.
[00:10:30] Speaker A: While we're talking about air freight, I do just want to quickly remind listeners this episode is sponsored by Air Charter Service and Air Charter Service have a network of 34 offices worldwide and 650 aviation specialists within that they can always deal in your preferred language, time zone and currency no matter where you are located and they are available 24,7 to help you with your charter requests so they can help find the perfect solution for you quickly and efficiently. But back to the market and how that is behaving Alex, this weak demand, has it been reflected in rates at all or is it too soon to see?
[00:11:06] Speaker C: Well, I think it's probably too soon to see anything very dramatic. And I have to admit that I have been reminded by readers that there are other markets. It's not all about China us. Having said that, last week we spoke to three or four Chinese forwarders and I'm going to focus on China us.
So one told us that he'd been offered loss making co loading rates from BSA contracted forwarders out of Hong Kong of $3.50 including fuel and security surcharges to the US West coast and $3.90 to the US East Coast. But it's even lower for volumetric cargo. Another said that the market to the US west coast was softer than to the east. He said more consumer goods and E commerce was going to the west which is making the market weaker, while industrial cargo which is still flowing more or less was going to the east coast.
But rates haven't fallen as much as anticipated, partly because of the withdrawal of some of the freighter capacity, you know like in ocean with blank sailings. And an E Commerce forwarder told us that low value Chinese goods to consumers was still competitive even with tariffs on so a $10 product is now $14.50 which is still relatively cheap and cheaper than American made goods.
But she said that the higher price points were more difficult. So a hundred dollar product now being $145 that was leading to lower demand and $1,000 product and so on and so forth. They also felt that talks between China and US which were happening over the weekend were likely to help the situation. Or rather they said it probably wouldn't get any worse. So that's not overly optimistic.
And then world ACD said that worldwide rates were broadly flat, have been for about three weeks.
China to the US is volatile, but has dropped four consecutive weeks to Europe. Spot rates out of Asia have been more stable, but from China have dipped 4% to $3.87 per kilo in week 18. And that's the only numbers I'm going to give you.
[00:13:11] Speaker A: Well, obviously this drop in demand is quite a universal thing, but someone that I feel very sorry for is the road freight market who have also been hit by this weak demand. But they have less options in terms of route management and pulling capacity than airlines and ocean carriers do. And there were predictions of a recovery in this market recently, fed by signals of tightening capacity and strengthening industrial demand. But this has been thwarted yet again.
We had a report last week from DAT Freight and Analytics that in the light of the rapid deterioration in demand in response to the trade war, it forecasted for the US trucking market flat volumes and rates for this year. And according to JB Hunt's CEO Shelley Simpson, margins for many US trucking operators are slim to non existent. She said that the trucking market is on a stretch of decline of unprecedented length. And she commented during the company's earnings call, I've never seen a recession last three years. So a pretty grim outlook for US road freight stakeholders.
So moving to the ocean side of demand and how carriers and alliances are responding to this, we had some reports that there were different tactics emerging. Gav, you looked at some network rejigs and blank sailing strategies last week. What did you find?
[00:14:26] Speaker B: In one of my nutshells, which obviously turned out to be bigger than both a nut and a shell.
The general trend is this, that the bigger the grouping it appears the less options they have to respond very reactively to situations. So there's been 90 blank sailings announced on the Pacific. That's both to west and east coast of the North American continent. The ocean allies, by far the biggest of these, you know, that's four members, represents 50% of the blanks. MSC obviously completely on its own now is doing a mixture of suspending services, entire services that is. I mean, just last week it announced two of its six Asia US east coast services would be suspended indefinitely until demand returns and rejigging existing ones. So you can see that MSC can basically do whatever it wants. The Gemini carriers haven't announced a single blank and they've been simply focused on replacing bigger ships with smaller ones to match capacity that way.
So a grouping of Four carriers is able to blank surfaces and that's pretty much seems to be the only tool at their sort of short term disposal or Gemini grouping with two carriers, they're able to redeploy vessels on the fly, was what Mr. Clark said last Thursday.
And MSC is able to do pretty much what it wants.
[00:15:52] Speaker A: Is this capacity management preventing rates from plummeting. I mean presumably they're on the floor right now.
[00:15:57] Speaker B: Well, you would think that. And we talked in previous podcasts about the 35% decline, it's sudden drop in Trans Pacific Brookings and so on. But actually last week's race they grew on the Trans Pacific. They're up 5% of the West Coast, 4% on the East Coast. It's probably as these things often are, it's probably a combination of reduced capacity and growing demand. The Port of Los Angeles beginning the 18th of May, we'll see a 55% year on increase in volumes coming into the port in that week. So it's over 100,000 ToU. It's quite the opposite. On the Asia Europe trade there have been vessels coming from the Trans Pacific onto the Asia Europe trade in search for more cargoes. The sort of the round ballpark figure at the moment is that capacity on Asia Europe is about up 20% year on year and rates keep on falling. They were down 7% to North Europe and down 5% to the meridian.
And most of the forwarders I've spoken to, in fact all of the forwarders I've spoken to believe that rates will continue to drop. There is no sign of a peak season. It's worth remembering that the early peak season in 2024 on that trade began this week and there's absolutely no sign of that occurring again. So weak consumer demand, large amounts of capacity, poor congestion, yada yada. Our sources believe that rates, from what they're seeing of the booking quotations for the rest of this month, it's looking like continued ascent.
[00:17:36] Speaker A: Yeah, obviously the main factor of this slump in demand is the huge cost increase from tariffs and additional duties now needed to enter the United States. I reported last week that some shippers were getting a bit tactical in trying to evade these extra costs by something that's been called place of origin washing. This involves transshipment from from China to another location in Asia or elsewhere to then send it on from that country and avoid the 145% tariffs or the de minimis fees. And US trade rules state that a shipment must undergo substantial transformation.
So processing that adds real value before it can legally claim a new national origin. And Canada based shipping and logistics company Chit Chat warned last week that the US CBP had been thoroughly checking parcels for verification of country of origin and immediately refusing entry of entire trucks upon discovering even just a single misdeclared or ambiguous country of origin. This means that even compliant shippers were being affected if their shipments were tied up in the same dispatch as those trying to avoid tariffs. And Chit Chat said that its shipments crossing at the New York State border were refused and some shipments crossing in Washington had been held for inspection.
And if a falsified shipment has been found, CBP can impose penalties of up to $50,000 and bar you from shipping to the US. So it's probably not worth it One of the emerging popular places for place of origin washing last week had been Malaysia. So much so that Malaysia's Ministry of Investment, Trade and Industry announced on Monday last week that it would now be the sole issuer of all certificates of origin for shipments to the US and said that the issuance of certificates of origin to the US market by business councils, chambers or associations would cease immediately. So let this be your warning if you are considering doing some tariff dodging. I mean there were also reports that some shippers were mixing expensive items with cheaper goods in a consignment and declaring an average price so that the duty bill is lower. Which seems quite smart if you ask me. But yes, don't do it. Not worth it.
So that brings me on to what you might see in the news this week. Well, I'm very excitingly going to be attending IATA CNS this week in Miami and I've got a whole host of interviews lined up with forwarders and carriers, plus of course some great panel discussions during the event that I will be sure to keep you updated on.
There's been lots of talks of the US reducing tariffs on China to 50% with negotiations having taken place over the weekend, although as usual there's not really a clear timeline at the moment.
So as has become a regular pattern this week we'll probably see some change to tariff policy or trade deals between countries and there was that deal made between the US and the UK last week, but quite a few stakeholders were saying that this lacked any real substance in terms of its impact on supply chain. We will of course keep you updated on whatever you need to know, so keep checking back@the loadstar.com and I actually have an article coming out this week with some advice on how to manage this tariff uncertainty from the global shippers forum, so do keep an eye out for that. Thank you so much for joining me this week. And thank you to AirChart Service for sponsoring this episode. I'll see you next time.
