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 events from last week's supply chain news and giving you some insights on what you might see on the Lodestar this week. Now to kickstart this episode, I looked at the updates of the ongoing Canada Industrial Relations Board procedure between the TCRC Union, Canadian National Railway and Canadian Pacific Kansas City, and this is to decide if the rail service can be classified as essential. If it's not deemed as essential, then the union can go on strike and will likely do so at its earliest opportunity. And unsurprisingly, the union has argued that it's not essential. But CN and CPKC also both agreed that it shouldn't be classified as such, and they called to mind a similar procedure a few years ago between CN and TCRC that brought the same outcome, and the CIRB have given the date of the 14 June for the final argument submissions. So that kind of gives you some sort of insight in the timeline that we're looking at. But again, once submissions are received, we don't know how long the decision will take. Many stakeholders involved have asked for 30 days warning before a strike. Currently, only 72 hours is necessary, so we'll see if that changes. And staying on the rail freight news. Last week, catastrophic floods in southern Germany meant that rail lines in the region were really badly affected. Deutsche Bahn warned that Munich was inaccessible on many routes, so obviously this led to severe delays and cancellations. Die Guttebanen, a group representing 100 private, regional and international companies that handle 60% of all rail freight in Germany, told us that the situation had been difficult for its members and they reported their failure rates were up to 70% in total. And Alex, you reported on yet another incident with rail freight.
[00:01:58] Speaker B: Yeah. Very tragically, there was an accident in the Czech Republic on Wednesday last week when a passenger train collided with a freight train. It turned out to be Maersk's cargo, and Maersk has reported substantial delays there because it's going to take a few days to fix the track and so on. One of the things that people might start looking at, though, is about the rail infrastructure. Apparently there was meant to be a security device to fit it on the track, which would have alerted a driver, but it wasn't installed. So I imagine there'll be a bit more scrutiny over a european rail.
[00:02:30] Speaker A: Oh my goodness. So overly, it's not been a very positive week for rail freight.
[00:02:35] Speaker B: No, not at all.
[00:02:36] Speaker A: Gav, how are things looking for ocean freight stakeholders last week you said that rates might be kind of reaching a plateau or that they had stopped growing so rapidly. Did this week follow suit?
[00:02:46] Speaker C: Good morning, Charlotte. No, they didn't follow suit. I was wrong again. They actually resumed the previous trend of double digit increases on Drury's world container index. We saw Shanghai Rotterdam up 14%, Shanghai Genoa up 17%, Shanghai Los Angeles Angeles up 11%. There is a thing here that it's worth noting, though, is that on June 1 there was a whole load of rate increases, general rate increases, peak season surcharges that came into force. So that had an effect on the spot rate index compared to last week. If there hadn't been those increases, what the market would have done we're not quite sure about. However, you know, on the outlook, it looks like June is going to be another painful month for shippers who are forced onto the spot.
[00:03:40] Speaker A: Is it still to do with. I know before the high rates have kind of been caused by container shortages, port congestion, there was all of this mess going on with ocean shipping. Is this still contributing? Is this still the case or has it eased?
[00:03:51] Speaker C: Yeah, no, it's absolutely. It's still working its way through the system. I think the congestion reports from Singapore that's improved compared to this time last week, although there are reports of growing congestion in Tangerune, Pellepest and port clang. We've also got the continuing shortage of equipment for shipments ex Asia. So the box trading platform container exchange reported this week that the prices of 40 foot high cube units in key chinese ports rose by 45% in May over April. So, no, I mean, you know, the issues are still there. And, in fact, one of our forwarding sources here in the UK said that looking ahead to the beginning of July, he was expecting that the spot rates will probably hit the 10,000 per 40 foot mark from Shanghai to Europe. So for people who are sort of looking at this and thinking, oh, my gosh, is this a rerun of the pandemic? I mean, at the moment it kind of looks that way, although a lot of the commentators are saying that this is an early peak season as opposed to a restocking thing, and if it is an early peak season, then rates are likely to dip at some point. We would think sort of July, August, maybe September. The message you can take away from this really is that, I mean, people are just going to have to grit their teeth and get through the next couple of months.
[00:05:15] Speaker A: I have seen lots of people online calling it Covid Junior.
[00:05:18] Speaker C: Yeah, it's an unpleasant situation for everyone involved, I think.
[00:05:23] Speaker A: Is there any good news at all this week in shipping?
[00:05:26] Speaker C: I mean, there are signs that capacity may ease. MSC last week announced the launch of its new Britannia service will feature a direct call at Liverpool. That's probably an extra 10,000 tu capacity added to the trade a week element. City liners has started is going to do a couple of Asia Tilbury sailings. So there are people moving there to try and provide extra capacity. I mean, it's faint silver linings at best.
[00:05:53] Speaker A: Okay, well, fingers crossed for some good news this week. Now moving on to air freight. Alex, you said quite a while ago that you felt like something big was going to happen regarding chinese e commerce, and that kind of seemed to come to a head. Last week you actually broke the news. What happened?
[00:06:10] Speaker B: Well, a lot of people have contacted me since we started running stories on the customs and border protection crackdown on e commerce. Many of them were pointing out that technology could help with compliance. Also, people got in touch from CBP itself, saying that this was the plan all along. But others have noted that it's quite likely a political intervention before the us elections. And it doesn't do us politicians any harm to be seen to be defending us businesses against chinese ones and to ensure they get the right tax paid and to stop illegal shipments entering the US, especially fentanyl. Meanwhile, Seco Logistics, which lost its right to entry type 86, which is parcels below the de minimis threshold. They also got in touch to say that Seco is taking legal action against CBP, as it was still unclear of exactly what rules it had apparently breached. And this could to some extent perhaps be repeated in the EU.
Temu last week was certified as a very large online platform, which means it has much stricter compliance rules than before. However, the European Commission has not responded to our questions about what, if any, action it might take to ensure supply chain security. So watch this space because I will keep on at them.
[00:07:25] Speaker A: And onto the topic of taking legal action. You did some numbers of flexports battles last week after they found themselves in the midst of another legal proceeding. What did you find and what has happened this time?
[00:07:38] Speaker B: Well, we noticed flex support in a court case. I've been following court cases for years. I always find it quite interesting. And Flexport was there again, this time over warehousing charges that another company claimed it hadn't paid. But I did start to wonder whether we noticed these court cases just because it's Flexport or because Flexport has a higher amount of litigation than other forwarders. So I did a quick sort of back of the fag packet calculation. I compared it with Ch Robinson, seco Logistics and Crane worldwide. Obviously, the court cases include all the huge ones with hundreds of companies, you know, bankruptcies, ships that have sunk, all the insurance stuff, as well as where it is the plaintiff or defendant. And I do kind of think it speaks to the character of a company to see how often it resorts to the legal system. So of those fall, as I mentioned, best in class was seco, with an average of three cases per year, similar to Crane. Ch Robinson, which of course is vastly bigger than Flexport, had an average of eleven cases a year, but Flexport came in at twelve cases a year. One day I will do some proper analysis on it, but that's just my initial findings. Other companies that always seem to be in the news is Schippel. But Charlotte, you've now taken on the Schiphol news beat. It's always fascinating because it's such a key hub for the Dutch, and they take logistics very seriously. It's had something of an internal fight going on between various managers there. I won't get into the details, it's pretty gruesome, but it's roughly about the future of the airport. The new chief executive, which everyone has been waiting for, has now started, so perhaps things will begin to calm down. But what did you find out?
[00:09:13] Speaker A: Well, there's this kind of ongoing saga at Schippel at the moment because they're trying to reduce the noise and environmental impact of flights. But this has to be done obviously in the right way. That's going to balance the interests of the airlines, shippers, forwarders, local residents. That is one of the things that's causing a bit of contention there, and it has done since this process started in 2022. Now, last week I watched the online stream from the Dutch Ministry of Infrastructure and Water Management, who were introducing their amended package to reduce noise nuisance at Schiphol. And I felt a bit sorry for them. I mean, they looked so stressed, and I can understand why, because what they explained is that there's a lawsuit between the state and the foundation for the right to protect against aircraft nuisance, and that ruled in favor of the latter. I'm not going to say again, ordering the ministry to act within twelve months to reduce the noise. But on the other end, they have the European Commission, who reacted very critically to their initial proposal for noise reduction, which involved reducing overall traffic by taking away aircraft slots. And the European Commission were worried that it would be too damaging on reliant economies. So on the back of these conflicting rulings that they've had, the ministry has presented its updated proposal called the balanced approach. But one of the measures that were introduced that got the industry particularly annoyed that I reported last week was the night ban of noisy aircraft such as Boeing 747 freighters from November next year. But KLM told us that this was not enough notice for fleet renewal and it had ordered quieter aircraft, but they wouldn't be ready until 2026. And yeah, a lot of stakeholders were quite annoyed about this. The proposal isn't final, though. Stakeholders have until 21 June to share their feedback, so we'll have to see what happens there.
[00:10:59] Speaker B: I'm sure there'll be a lot of feedback. Thanks Charlotte.
[00:11:02] Speaker A: Thanks Alex.
So now you're all up to date with all the main events from last week's supply chain news. I feel like we went through a lot in that episode, so I'm hoping that we adhered to the name of the podcast and did it briefly enough. It's now time to jump into what you might see on the Lodestar this week. Well, last week the Panama Canal Authority said it was weighing up long term solutions to bolster the resilience of the key shipping route. We recently saw the El Nino phenomenon create severe drought in the area, which led to the authority reducing the number of slots from a usual 36 to, at their lowest point, 20. It's now back to full utilisation, but the authorities said it's now looking at long term solutions and they said that one of these might include opening a new reservoir which would add eleven additional slots. There wasn't much information given on this other that it would require government funding, so I'm going to try and figure out the likelihood of this, the timeline we're looking at, and how this would impact carriers and shippers alike. And as I said in last week's episode, the Lodestar will be attending multimodal this week, so you can expect a few stories to come from that. I've already got some meetings arranged with some carriers, including MSC one and element lines among others, and at the same time Gavin will be attending Tock Europe in Rotterdam, so you can expect some coverage from that too. It seems like the Lodestar is going a bit global this week, so keep your eyes peeled on the Lodestar and we'll make sure to provide thorough coverage of those events if you weren't able to attend. Thank you so much for giving me your time today and I'll see you next week.
