[00:00:00] Speaker A: Good morning and welcome to the Lodestar podcast. News in brief, we are going to be rounding up last week's supply chain news and included in this episode is details of new terminal Investment, updates to CargoWise's new pricing model, and a recap on air freight and ocean freight rates. I hope everyone got some good rest over the holiday period and is ready to jump straight into more logistics news.
And to help me with this episode, I am joined by the Lodestar publisher, Alex Linane. Hello, Alex.
[00:00:35] Speaker B: Hi, Charlotte.
[00:00:37] Speaker A: And the Lodestar managing editor, Gavin Van Marl.
[00:00:40] Speaker C: Hello, Schultz.
[00:00:42] Speaker A: And while the holiday period did bring with it lots of cheer and festivities, it did also bring with it lots of cold weather. And this is not ideal if you are trying to operate a port. We had some warnings last week that the cold weather had quite an impact on port operations in some major gateways in northern Europe. So terminals in Hamburg, Rotterdam, Bremerhaven and Willemshaven all saw full operational stoppages on both the waterside and land side. Operations were slowly resuming throughout the week, but remained disrupted. Antwerp was slightly less disrupted, but still reported a few short interruptions during heavy snow. Kuhner and Nagel warned that harsh winter conditions had resulted in delays and service interruptions at terminals and depots. Traffic jams and major road closures reduced handling slots and congestion throughout the entire supply chain. And it also said that because the snow and icy weather conditions were expected to persist for a while, that times may not be met as planned in the coming weeks. I think the main impacts of snow and ice are often worse for trucks and trains. So do make sure that you monitor this side of your supply chain in Europe at the moment. And while we're talking about European hinterland connections, gav, we had a bit of insight last week from the German news source dvz, that Chinese line Cosco is looking to expand its footprint in the air area. So what are the details here?
[00:02:04] Speaker C: Yes, indeed, Charlotte. So you've got Costco via its it has a subsidiary in Holland called Gold Lead Supply Chain Development and it has filed, it was rather tabled, an offer to buy 80% stake in Zippel, which is one of the big intermodal operators in Hamburg. So it's operating the trains, taking the containers into the European hinterland. And we know this deal's underway because actually Gold Lead has filed the bid with the German Monopolies Mergers and Monopolies Commission. No, I'm going to go for it. It's the Bundes Kartellamt.
I think that's right. Anyway, so at the moment Zipple is majority owned by two German nationals, Alex Plass and Alex Kroger.
Again apologies if I've mispronounced those names.
And it from what I understand from DVZ was that the latter of those two gentlemen wanted to retire.
It was also noted that there were a number of private equity buyers that were circling the company. But Mr. Plass said to DVZ we were looking for an investor who needs our know how. And I mean the reason why this is sort of significant Charlotte, is that it very much follows in the, in the wake of what MSC has done obviously with its takeover of HHLA which gives it access to the Metrans intermodal network in Europe. And similarly with CMA CGM's investment in Eurogate which gives them access to Eurocond.
It's the same thing. It's the major shipping lines looking to broaden their reach from beyond the purely ocean activity and into the, you know, the landlocked countries of Central and Eastern Europe.
So it's quite an interesting deal from that perspective. And actually alongside with MSC and CMA the investment in the hinterland thing came alongside the ownership or part ownership of a port terminal in Hamburg. And Costco has for a couple of years now had a 35% stake in the Tolerate terminal in Hamburg. So it's another evidence of the sort of integrated logistics capability that shipping lines are trying to do. And really the net effect of this is where does this leave Maersk and Hapag Lloyd? Certainly that's the question that's being asked in some circles in Germany.
[00:04:36] Speaker A: Well, keeping on a similar theme, we also had some further news about investment happening on the land side of the sea freight supply chain with two other major carriers announcing investment in two terminals. So who is splashing the cash and where?
[00:04:49] Speaker C: Okay, yeah, so this is, I mean apologies if this is slightly dated news but obviously we're dealing with a bit of catch up over the Christmas period. But basically on 23rd of December announcements from complete separate announcements from 1, the Japanese carrier Ocean Network Express that it had bought a minority stake in Dalian container terminal in North China. And on the same day AG Lloyd's terminals division Hanseatic Global Terminals announced that it was become a 50% joint venture partner in a new greenfield terminal in Brazil. Just very briefly on the details of this.
Dalian is pretty much the most northern deep sea container terminal in China.
Dalian Container Terminal in which it's taken minority stake capacity of around 6 million, 6.6 million t a year.
Currently part owned by PSA International from Singapore as well as Costco. Very similar. Right. We've just been mentioning all these names in the previous item and you know, want to be very clear that it's been wanting some stakes in terms. I know Charlotte, you've interviewed some of their executives in the last year and they expressly said this to you that they were looking for more investments in the land side.
And the other interesting aspect on the Dalian side is that with the new Premier Alliance east west network that was. That was recently announced just before Christmas, one of the features of that was that they basically dropped all direct calls at Japanese ports to get to Europe. So there's very little. There's no. In fact there is no a single direct option for a Japanese exporter to Europe. So there's going to be increased need for the Japanese exporters trans ship most likely via Busan. But now having the stake in Dalian gives them that option as well.
Over in Brazil, Hapag Lloyd has signed a deal with a local firm to develop a new greenfield terminal in a place called Aracruz which is bit north. It's in Santo Espirito state. It's about 50 kilometers north of Vitoria.
There's no port there at the moment. Right.
It's basically a beach and jungle.
It's not but as well be and operations set to open in 2028. And again it's very much a deal that will it's there. A.G. lloyd, as the owner of Hanseatic Terminals be expected to provide the base cargo. It said that it would probably use it as some sort of transshipment hub. And in relation to that cabotage which is shipping amongst domestic Brazilian ports is restricted in Brazil. You have to be a Brazilian shipping line to be able to undertake those operations. And actually Hapag does have a Brazilian cabotage operating north coast.
So you'd expect to see this terminal to become basically some sort of hub for its cabotage operations after it opens in 2028.
[00:08:00] Speaker A: Thanks, Gav. Yeah, as you mentioned there, we had quite a lot of catching up to do over the Christmas and New Year period. There's nothing more stressful than when you've been off for a certain amount of time and then you've got to not only catch up with the news but then report on it. So I appreciate that from you.
Alex, I'm coming to you now in light of what I just said, could you give us kind of a broad overview of where we're at with air freight at the moment. I mean, if you've got anything on capacity, rates, demand, just kind of a picture of where we are currently at.
[00:08:28] Speaker B: Sure. I mean, like you said, we've been off for a couple of weeks. That's quite difficult to catch up.
But I wrote an article when we got back saying seasonality is back basically because in the last couple of years, well, last year in particular, the traditional peaks and troughs of the industry had changed. They're in different places. But here we are in January and traditionally rates fall and they have, they've fallen fast in our freight.
So the Global Baltic Air Freight Index, which is the TAC index, essentially it fell 14% in the first week of Jan and it's also 11% lower than a year ago. So we do seem to be back in the January doldrums.
So that was rates out of mainland China and much of Asia to Americas and Europe have all fallen back, however, and there are always exceptions. Taiwan rates out of Taiwan have stayed high because of the demand for Taiwanese AI servers and we're expecting that to stay high this year.
So Intra Asia contract rates apparently are going to go up 10 to 20% this year. But that is the most bullish expectation on the market at the moment. Generally speaking, rates are very soft and if you look at Rotate's capacity database, you get a lovely picture and charts then and you look at the freighter usage over the first week of Jan and it's just all red, the numbers have diminished significantly. There's double digit declines in capacity all over the shop. I imagine there's quite a few freighters in maintenance at the moment for one thing. So yeah, right now things are looking pretty slow, but then they're bound to pick up sometime before Chinese New Year I would have thought, which is February 17 to March 3 for anyone who's still wondering. So I imagine we'll see rates start to tighten, I don't know, early February maybe. We'll see.
[00:10:23] Speaker A: Alex, I'm glad you mentioned Chinese New Year because on the ocean side of things we are starting to get an idea of what ocean carriers are doing with their capacity in the run up to Chinese New Year, which as you mentioned is February 17 to March 3. So Gav, what is the situation looking like at the moment?
[00:10:39] Speaker C: Very strong demand at the moment on the Asia Europe trades. I mean we, I'm pretty sure this is one of the trends that we picked out in our year review, wasn't it that we, we talked about the way that the peak season, the calendar of the peaks and has Completely shifted. And, and, and it definitely seems to be the fact that, you know, a few years ago the main peak season was the, was the sort of late summer, early autumn run up to Christmas.
Now the supply chains become much more spread and very much that. It's almost like there's a new peak season on Asia Europe and it tends to be post Christmas before Chinese New Year. And you know, it's for all the sort of reasons, fairly obvious. You know, there's the Red Sea crisis, which equals longer transit, transit times. Longer transit times equals less schedule reliability, less schedule reliability equals poor congestion. And so in an effort to try and mitigate that, people have spread out their sourcing patterns. I mean, forwarders that I spoke to sort of the back end of last year and a few that have come back to work this year have all reported really strong bookings, certainly for the first half of January.
And given that Chinese New Year is until the second half of February, which is relatively late for Chinese New Year, I think there's still a bit of time for that demand to push through, as it were.
And that has been matched by carriers increasing capacity on these routes.
We ran a story last week, I think it was you that authored it, actually.
Asia North Europe trade in the week before Chinese New Year is likely to be 50% higher than the normal baseline capacity that would be offered on that route. That's an awful lot. Right. But when you look at the bookings that are being made now for that time, so when you look at that and you look at the fact that rates are holding despite a 50% increase in capacity, that tells you that demand remains strong. Right? I mean it's according to most laws of economics that I understand.
[00:12:56] Speaker B: Yeah.
[00:12:56] Speaker A: I mean, the Asia Europe route specifically did have a lot of capacity projected, but also a sea intelligence analysis showed that actually every major trade is projected expected to exit the 10 week run up to the Chinese New Year window, a significantly higher capacity level than it entered, which as you said, could be an indication of heightened demand at the start of the year. Alex, didn't you also have some data to suggest that ocean freight demand could see another little boost?
[00:13:22] Speaker B: Well, I don't think the ocean freight industry would notice even if all of our freight started to go by sea. I don't think it would even notice. But yes, I think there could be a shift from air this year.
So we saw Victoria's Secret last month note that in part to mitigate their tariff costs, it was going to switch a portion of its volumes from air to sea.
And we also looked at whether AI servers, which obviously, as I already mentioned is quite a big thing, whether they might look at changing mode and it is a possibility.
So essentially there is a couple of factors at play here.
One is that Ocean Freight, and with thanks to the Gemini alliance, is much more reliable than it used to be in terms of scheduling and costs have gone up for shippers in tariffs and what have you.
So that's leaving shippers looking for budget basically. And one way of doing that is by stopping using air and using sea freights. However, air might be relatively cheap this year.
Volume growth is expected to be about 2% this year where it was 4% last year. So. So quite muted really.
And bar any major upsets and of course looking at the current geopolitical situation, that may well be some upsets.
Air freight could have a bit of a muted year and yes, I do think that some volumes are going to switch to sea.
[00:14:45] Speaker A: You also had an update to a story that really made an impact at the end of last year and got a lot of people talking, and that is the updates to Cargowise's new pricing model. And last week they actually issued their first invoices with these changes.
[00:14:59] Speaker C: So.
[00:15:00] Speaker A: So what happened?
[00:15:01] Speaker B: Yeah, I'm still slightly ashamed at calling Cargowise customers losers in our Christmas podcast and I apologize for that. But yeah, there've been a lot of comparisons of the first invoices on social media essentially. And quite unexpectedly I think Cargowise introduced a transitional pricing plan which has caused more confusion.
Some people say that Cargowise has wrongly calculated the charges and that the, this transitional pricing plan is a way to address that.
Either way, and despite, sorry, either way, the CEO of CargoWise has been, or WiseTag rather has been freely available on social media answering questions which I do think is quite impressive, to be honest. Whether he's answered them to anyone's satisfaction is a different question. But I do think it's good that he's, he's been around.
However, it has not been a well executed change, that has to be said, and I'm sure there's more to come on this. There's so much confusion in the market. I think we'll probably, we're going to do a follow up quite soon, but I think we're going to start to look at what the options are, what the alternatives are to wisetech, if there are any, and what forwarders you can no longer afford Cargowise are going to do next. It sounds like most of them are pretty unhappy about passing the costs onto their customers.
So yeah, we're going to try and find some alternatives for them.
[00:16:29] Speaker A: Yeah. And next month I'm going to Las Vegas for the supply chain Technology conference manifest. So perhaps I'll hear more about it there. And please do get in touch with me if you're also planning on attending to the.
Sorry. And please do get in touch with me if you're also planning on attending the event. I would love to meet up and chat with some of you.
So while we're talking about pricing, I want to know what ocean freight rates did over the Christmas period and where we currently stand. Gav, do you, you have any numbers for me?
[00:16:58] Speaker C: I do. They've just come in actually. So this is going to be slightly hotchpotch.
No change there then.
Quite interesting.
[00:17:07] Speaker B: Okay.
[00:17:08] Speaker C: So on timing, so the wci, the jury's World Container Index is published on a Thursday, which meant that this year that fellow on Christmas Day and then New Year's Day. So there's a bit of a thing. But they did actually publish the W. So WCI on, on the 25th of December. I'm not going to spend very long on it. But there is one thing that I've never seen before and that is that the, basically what happened at the last, in the last week of December was that the, the rates into Europe continued strengthening as per our discussion earlier, and into the North America they were flat or weak to the extent that, and this, I've never seen this before, that the rate from Shanghai to Genoa was actually above the rate from Shanghai to New York. Right. That includes obviously a Panama Canal fee or much greater sailing distance.
And I've never ever seen that happen before. And just in comparison. So I mean basically it was about a hundred dollars more to ship it to Genoa, but in comparison, if you went back to the beginning of November to ship to the US East coast would be about $1,700 more expensive than the Med. Now you went back to June during the tariff stuff, it would be well over $3,000 more expensive. And now that spread's completely disappeared. So that just I think indicates some of the weakness. I think it really indicates the weakness into North America.
However, 8th of June, sorry, 8th of January, WCI, the recent one just passed which we is just in our rear view mirror, very close in our rearview mirror in my case. But it shows the major trace getting off to an absolutely rocking start. I mean up 10% up north to North Europe, 13% up to the Met, 26% up to the US West coast and 20% up to the US East Coast.
Now and okay, we can talk about strong demand and all that.
The price increases going into North America from Asia as recorded by the WCI kind of, they kind of beg a, they kind of beg a belief really because this isn't what forwarders are reporting on the trade. You know, they talk about there was some early January gris that were applied on first. You know, Gris on the Trans Pacific are applied on the 1st of month and the middle of the month every month. And forwarders have said that actually these gris at the beginning of January just collapsed. So I suspect there's a bit of. Because of the Christmas break and the new year break, I suspect that there's.
Best way of putting this. The data's still sort of sorting itself out. It probably needs a bit of time to settle.
And you know, and although it is a strong start to the year, it should also be remembered that these rates are well down where they were at this time last year. I mean they're 50% down on where they were going into North America and between 25 and 30% down on where they were going into, into North Europe and the meds. And that was probably at a time, if I remember this rightly, when the demand side wasn't looking anything good as what it's looking today. So yeah, things are kind of murky.
[00:20:46] Speaker A: So what you're saying is carriers need another ginormous global disruption.
Anyway, I don't want to tempt fate. Don't want to tempt fate. We've given a lot of love to air freight and sea freight this episode. So finally I want to touch on land freight. And we had an update to the LUM merger between US Railroads Union Pacific and Norfolk Southern. So Alex, what is the status of the merger now?
[00:21:10] Speaker B: Yeah, it's starting to smell a bit whiffy, I would say. So up and NS's rivals, so BNSF, Radiant national and so on, they have filed a number of objections to the merger. They say that the plan is incomplete, that there is insufficient data to prove the core set of claims, that it'll generally be a good thing.
Things like 2 million truckloads will be removed from the roads. They say the data isn't there to support it. The data isn't in the filing to support it. Whether it's there at all is a different question.
They also claim that two key pages on the conditions of the merger were withheld in the filing and that UP had failed to provide a serious analysis of the downstream effects of the merger.
So they said essentially the, the merger filing is superficial and doesn't really dig deep enough to find out the attempts of what will actually happen.
Will that matter? I don't know. I wouldn't have said this a year ago, but Union Pacific is one of the companies donating to Trump's new White House ballroom, so maybe that's a cheaper and easier way to get the deal approved than doing a proper merger filing. I don't know. We will see.
[00:22:26] Speaker A: Alex, while I have you here, could you please round up what's been on Premium recently?
[00:22:30] Speaker B: Yes, sure. There's been a great article on the mandatory reporting of containers lost at sea. Now that started on January 1st, so it's well worth a read because you need to know there have as ever been various exclusives on job changes at the top of major forwarders. So Ad Ports, for example, seems to have taken on quite a lot of the DB Schenker top team, including the CEO Jochen Tuas.
We've got an article on a court case against Amazon which could threaten the 3 PL contractor model and a deep dive into the hyperloop. Remember the hyperloop? Anyway, there's, there's many things on Premium always worth a read.
[00:23:09] Speaker A: Thanks, Alex.
Looking to next week now we are currently awaiting the Supreme Court's final ruling on Donald Trump's IEEPA tariffs. At the time of recording we don't know the verdict, so hopefully they haven't extended the decision deadline, but if they haven't, then we will have plenty more details in the next episode. And
[email protected] with how importers are reacting and responding to the verdict. Alex, do you have anything on your radar for next week?
[00:23:36] Speaker B: Yeah, like I said, I might be looking more at cargo wise alternatives and I think we'll be running a look at Atlas Air's potential sale by Apollo.
[00:23:49] Speaker A: And Gavin, what about you? What are you looking at next week?
[00:23:51] Speaker C: Oh, it's the British International Freight Association's annual Freight Service awards on next Thursday, which is going to be absolutely great, as it always is. Every year basically the whole of the UK freight industry gets together and tries to forget that it's January.
Does a pretty good job of it as well in my experience.
[00:24:12] Speaker A: Sounds like a very good evening. Alex, Gav, thank you both so much for joining me this week.
[00:24:18] Speaker B: Thanks Charlotte.
[00:24:19] Speaker C: Thank you very much Charlotte.
[00:24:21] Speaker A: And thank you all for watching listening to this podcast. If you are listening then do head over to YouTube so you can watch us and like subscribe, comment, share all of that good stuff. We really appreciate it. We will see you next week.
