Episode Transcript
[00:00:06] Speaker A: Good morning, and welcome to the Lodestar podcast. News in brief, we're going to be recapping all the main stories from last week's supply chain news and give you some exclusive insights on what you might see crop up in the Lodestar over the next few days. Now, just a slight disclaimer for this episode we're recording in different places, so we're recording this over teams, which I'm sure everyone has become well accustomed to over the last few years with the pandemic. But the audio quality might not be up to scratch with the usual wonderful standards of the Lodestar podcast. Now, last week seemed quite chaotic from an ocean shipping perspective. I mean, there was a major shortage of containers. It was near impossible to get containers in the right place at the right time. And Jebel Ali and Colombo both reported having excess of containers, whereas major ports in China and across all of Asia really saw a large shortage. And on top of this, port congestion is getting worse. And we reported that in Singapore it's kind of reached near critical condition. And at lots of ports there are vessels, you know, waiting up to seven days, which seems crazy. And there's also been an increase in blank sailings on the Asia to Europe trade. Obviously, all of this has stemmed from the Red Sea diversions, and all the impacts have kind of been a domino effect on each other, and it goes around in a vicious cycle. But this week, it's just kind of seem to reach boiling point almost. And I only joined logistics about seven months ago, so this kind of disruption is all I've known, really, as I've been following logistics. But gav, I mean, is this level of disruption normal?
[00:01:33] Speaker B: Morning, Charlotte. No, I mean, it doesn't usually happen. You do get periods where trade is busier than it is others, and that's what we normally call a peak season. There is certainly a great deal of supply chain congestion going on. You know, the multiple reports that we've had, as well as the various analyses that have been put out by industry observers, consultants, the carriers themselves, forwarders, all of these testify to the fact that it's very difficult to get hold of containers, that vessels are waiting for extended periods for a berth at port. And yes, Singapore has been a focal point of that congestion.
[00:02:09] Speaker A: Right. And so what's this done to rates?
[00:02:12] Speaker B: It's been an interesting week. The congestion and the pickup in demand have resulted in surging freight rates, which everyone knows about because we've been talking about it endlessly for the past three weeks.
This week, rates rose again, but not in the double digit increases that we've seen in recent weeks. So Asia to North Europe trade. Brewery's WCI saw a 5% increase and you had a 2% increase on the Asia US west coast trade. But the point here is that the rate of increases have definitely sort of tapered off. So the expectation from Drury's head of container research, Simon Healey. The jury is now expecting the rate rally on Asia North Europe to reverse later this month, and a similar thing to take place on the trans Pacific trade, but a much wider timeframe on that. They're just saying that rates will either stabilise or soften in the second half of 2024. What sort of characterised the public discussion around the situation is that I think people have started to get a handle on what's causing it. If we rewind back two or three weeks, there was talk about possibly restocking activities in Europe. Both Drury and Zenita have been doing surveys to try and understand where the demand is coming from. Certainly in terms of restocking, most of the respondents to the Drury serve said that their inventory levels are at target. So it appears that restocking isn't possibility. And what appears more likely is that actually we're in the midst of an early peak season.
[00:04:00] Speaker A: Okay, so now everyone's realize that we are kind of in an early peak season. Is there anything being done to soften the impact of this?
[00:04:07] Speaker B: So, okay, so look, there are some mitigating efforts being put in. Singapore announced yesterday that it reactivated some old container yards, freeing up storage for about an extra 50,000 containers. It's also got some new terminals opening up later this year and it's under construction two s area, so that will offer additional port capacity in that region. The other thing to remember, of course, is that there is still around 2 million teu of new capacity that's to be delivered into the system over the course of this year. So that will start to provide some sort of pressure release valve to the system for the course of the coming months. But, you know, I mean, certainly in the short term, it's still going to be very difficult for shippers and their forwarders to find space on vessels, particularly if it's contract carriers will basically prioritise higher spot rate cargo. And so there is still a danger of shippers having their contracts rolled. I would like to just make one point. There was a very interesting comment from jury Simon Heaney at the freight loop briefing, which I would urge listeners to have a listen to, and he was talking about there being a data lag. So if we look at shipping capacity, I can look at it today and I can tell you what's available today. So capacity is updated almost to the minute. Demand data, however, always lags. So the latest demand data that we've got ends at the end of the first quarter. We've only got demand data for the first three months, whereas supply data is up to the end of May. And Simon said, in that lag, there's an information black hole. And in the data vacuum lies the opportunity for misinformation about a return to pandemic market conditions to spread.
[00:05:54] Speaker A: Oh, that's really interesting, actually. Definitely something to be aware of. If you're looking at capacity versus demand data then. And so now moving from sea to land, we had the news that international distribution services, the parent company of Royal Mail, accepted Daniel Kratinsky's bid of 3.57 billion pounds, or 37 pence per share.
[00:06:16] Speaker B: So, Charlotte, you've been on the trail of tale of the Royal Mail snail sale.
[00:06:21] Speaker A: You had to get that one in there.
[00:06:23] Speaker B: Will it fail?
[00:06:25] Speaker A: Well, it still needs to be accepted by shareholders at a meeting in September and I spoke to CEO of transport intelligence, John Manners Bell, and. But he said that it likely won't be allowed because it's a highly controversial deal and it's still regarded by many as a public service. So obviously we've got the general election on the 4 July and he said that there'll be a probable change of government. That's a contributing factor. But chief analyst at Transport Intelligence, Thomas Cullen, did say that despite the political problems, the shareholders, which includes the workforce, would probably quite like the money. And he pointed out that the government actually don't have the capital to invest in the requirements that Royal Mail needs. So it's kind of to be decided, but likely, probably not going to go through.
[00:07:13] Speaker B: It's the old economic versus political priorities. Right?
[00:07:16] Speaker A: Yeah, it'll be interesting to see how it plays out. So we've covered sea and land, now moving on to air, and last week we had an Alex Linnane exclusive and this was to do with Atlas Air's contract with Amazon. So what's happened, Alex? What did you find out?
[00:07:32] Speaker C: Yeah, hi, Charlotte. It's been a cracking week, actually, in air. So after, I think, eight years, Amazon and Atlas, our parting company, although Amazon has extended its dry leases on 16, 767s that it leases from Atlas subsidiary Titan. So they're still connected in some way. But Atlas is no longer flying for Amazon. Well, won't be. They're going to phase it out over the next year, roughly, we got this story from the pilots and they reckon that about 750 crew will be affected. But I mean, quite surprisingly, because pilots are quite a uppity kind of bunch of people, they're pretty supportive of the decision. They said that Amazon had very large crewing requirements and that the planes were underused. So it wasn't a great deal, economically speaking. Apparently Atlas wouldn't confirm the story when we were running it, as they were about to tell their shareholders, they offered me an interview if I held off on the story. But this being the Lone Star, we decided to publish. So my interview was actually cancelled. But they did confirm it and that is part of the reason that we've seen ATSG and its subsidiary ABX there. It's been getting more deals with Amazon recently, so it's just shifting over to ATSG.
[00:08:49] Speaker A: Ok. And you also got a tip off from a GSA contact about e commerce being held in the US. What was the issue there?
[00:08:56] Speaker C: Yeah, this is huge, really. I think the us government has decided to crack down on all e commerce shipments from mainland China. They are inspecting every single parcel, particularly, particularly at Los Angeles, Chicago, New York. Obviously that's causing a huge backlog and they are finding many illegal things in those e commerce shipments, which I suspect comes as little surprise. There's fentanyl, there's drug making equipment, there's a lot of shipments that have been mis declared in terms of their value. So breaching the de minimis threshold but not paying tariffs on it. Some customs brokers have been caught up in this, but the real issue here is that the sort of knock on effect, apparently mainland chinese carriers are starting to halt flights. Some long term charter contracts have stopped and some short term charter contracts have stopped. Taimie and Sheen apparently are very, very worried about this, very nervous, and I don't know quite what that's going to mean yet for the air freight market, but at the very least, we can expect backlogs, a lot more checking of cargo and a lot of nervous e commerce sellers.
[00:10:06] Speaker A: That's really interesting. I mean, I feel like that has been kind of a long time coming. It's been looming for a while, but seeing as how crucial Sheen and Timu have been to the air freight market, it'll be really interesting to see how that plays out.
[00:10:16] Speaker C: It really will. We're going to keep a very close on this. Everyone says it's a story that's going to go on and on for a while, so it'll be a very interesting one to watch.
[00:10:25] Speaker A: Well, keep checking the Lodestar and we'll make sure to keep you up to date. Gav, Alex, thank you both so much for joining me this episode.
So hopefully now you are all caught up with the main events from last week's supply chain news. And you might have also been aware last week, I think it was Tuesday, that the FMC's new detention and demurrage rules were implemented. And this changed things like who a bill can be issued to and the timelines involved. So now a bill has to either be issued to the consignee or the person who contracted with the billing party to provide ocean transportation or cargo storage, and it also requires carriers and marine terminal operators to issue invoices within 30 days, but it gives build parties 30 days to dispute any charges. The FMC said it's supposed to promote supply chain fluidity and provide relief to those who were never supposed to have been issued with a bill in the first place. So I'm going to be talking to some us supply chain stakeholders and see what they think of these new detention and demarriage rules, whether they'll bring positive changes, and whether they accurately address issues that we had seen with the detention and demarriage process before. And Zenitter put out a bit of insight at the end of last week that stated that ocean shipping spot rates are going to reach a level that we have not seen since 2022, when the Covid-19 pandemic was still, it said, wreaking chaos across ocean freight supply chains. So it'll be really interesting to see what happens with ocean shipping rates, whether they might have kind of reached their highest point and be plateauing out or whether they might rise again. So yeah, keep an eye on the loadstock and we'll let you know what happens there. I guess we'll also be keeping an eye on port congestion and container shortage. Hopefully things start to ease, but I would not say that was looking likely for next week. Some positive news, though. The week after next, the Lodestar is going to be attending multimodal in Birmingham, and I'm really looking forward to this because it's my first multimodal. So I'm hoping that I'm going to get to meet lots of new people and hopefully I'll get to catch up with some people that I've met before at previous events. So if you've got anything that you'd like to come and talk to us about, or if you'd like to arrange a meeting with us at multimodal or maybe, you know, you'd like to be on the podcast, I'm thinking about doing a multimodal in brief, so please do get in touch with me charlottehelodestar.com if you've got anything you would like to say or just to have a chat and catch up meet in person would be lovely. So yeah, definitely come and find me at multimodal. Thank you so much for listening and I hope you enjoy the rest of your week. See you next time.
