[00:00:00] Speaker A: Hello, good afternoon, good morning and good evening. Welcome to the Lodestar Podcast News in brief. Thank you very much for joining me today. In this episode we are going to be rounding up last week's supply chain news. This of course means the latest conflict escalation in the Middle east and what it means for supply chains. We are also going to be looking at what new CBP importer requirements will mean for shippers and what is going on in the shipper versus carrier power dynamics in ocean freight at the moment. Plus much, much more, including tech, tech startups, AI and air freight. So do stay tuned for all of that.
My first guest for this episode. To help me unpack the week's ocean freight news, I am joined by director of the Global Shippers Forum, James Hookham. Hi James, thank you so much for coming on the podcast.
[00:00:51] Speaker B: Hi Charlotte, Great to be here.
[00:00:53] Speaker A: So a lot of our coverage recently has been reporting on shippers complaining about price gouging from carriers in the form of opaque surcharges and spot rate rises. I'm sure we've had actually asked for your comment on quite a few of these articles, but what are you actually seeing from your members at the moment? Which trades is this most prevalent on and like, what can shippers be doing to mitigate against this?
[00:01:16] Speaker B: Well, I've been hearing a lot about this as well and reporting about this because once again we're in a prolonged period of intense disruption to what most shippers would consider normality.
And just like we saw last year with all the announcements on US Tariffs, shippers are having to make some big decisions, some short term adjustments and are seeing hefty increases in the costs that they expect to pay for the service that they're receiving.
So yeah, we're back in rather familiar territory.
I see two levels working here, Charlotte. There's obviously the huge disruption that's taken place to trades in the Middle east and in particular the Gulf states.
Obviously most of the media coverage is about the energy exports that aren't coming out of the Gulf.
But I'm rather hearing too much about all the essential imports, including food, pharmaceuticals, other everyday items that are not reaching the good citizens of those countries as well.
And some really busy ports in the region are simply inaccessible now. So a lot of shipper activity as exporters and indeed obviously as importers in the region is about how do we work around the absence of the Straits of Hormuz transits and somehow get these goods into the respective countries.
And that's taking up a lot of time, a lot of Extra costs and clearly carriers, logistics providers are adding those to the bill. So there's a huge uptick in costs of supplying that region.
One thing I will say, although GSF moan like anything about surcharges on behalf of their members, I must pay tribute and credit to those shipping lines and other logistics service providers that are really pulling out the stops to try and find a way around the Straits of Hormuz.
And I think it's commendable that once again the logistics industry is showing its flexibility and adaptability in trying to find a way in through other ports, through the Red Sea ports and indeed from the Mediterranean through Turkey now through Syria.
And that's what shippers want. They don't want surcharges, they want solutions.
So although inevitably there'd be a price to pay for that, it's good to see shipping lines and other forwarders going out of their way to try to find a way around this critical situation.
So there's impacts of the Middle east trades undoubtedly, but inevitably the hit on fuel prices generally has been passed on as well.
And rather surprisingly, perhaps not just through the established bunker adjustment factors, which is the mechanism by which shippers would expect to recompense their carriers for fluctuations in fuel price. That's what it's there for, it's always been there for that.
But we saw quite early on, within the first few weeks of the conflict additional surcharges coming in for fuel prices that were in the system.
But it was difficult to understand how the shipping line had actually had to pay that price for fuel in the previous three or four days.
And suddenly the shipper was being confronted with an increased cost. And that was across many trades, possibly all trades. But it's being shared, having to be shared around, because obviously eventually shipping lines will be needing to pay those higher prices to acquire the fuel they need. It's just some of us had difficulty believing that they need to pay it quite so quickly that they needed to pass those surcharges on as quickly as they did. So yeah, surcharges continue to be the scourge of shippers lives.
And not that we can do much about the situation now, but I think there is a need to look at this again because I would suggest it's one of the biggest factors in hindering productive relations between shippers and shipping lines going forward. But something to return to in the future maybe.
[00:05:51] Speaker C: Yeah, definitely.
[00:05:52] Speaker A: I do think it is important to note, as you said, that I mean this situation is difficult for everyone, carriers, forwarders and shippers alike. But it does seem like this power dynamic between shippers and carriers is becoming becoming a lot more evident. I mean at the start of the year everyone thought that the negotiating power would be in the shipper's favor and it seems to have kind of flipped as we've gone through the air. Obviously a lot has happened, but we had quite a good comment article from Gavin Van Marle who is the managing editor at the Lodestar. And he basically asked if container shipping lines are now kind of too big to fail. And this was based off some Alpha Liner data from this week that the 10 largest container carriers now control 84.7% of global shipping capacity and is just 0.1% off the all time record in January 2021. And he said that this is, this should be deeply concerning to shippers, especially those that are trying to build resiliency into their supply chains, which of course everyone is at the moment. So what are your thoughts on this? Is this largely the reason that carriers are getting away with some of this questionable behavior?
[00:07:00] Speaker B: Yes, is the short answer. I think in a very concentrated market it's difficult to see how the competitive pressures, especially at times of stress, are really going to work in the customer's favor. Now let's accept straight away of course that the cost of fuel is universal and many of the additional costs that carriers incur are going to be felt across all shipping lines. So for example, when shipping lines collectively decided they would not use the Red Sea a couple of years ago and started to sail around the south of Africa, then obviously the costs of that extra fuel, the extra crew costs and all the other on costs would have been roughly the same regardless of shipping line. So there is obviously some common cost factors there.
But to your question, the dynamic is obviously and always has been in shipping lines favor given the concentration of market power there. And that's why certainly GSF and others have been so focused on making sure that situation is not abused by abuse of dominant position and competition rules.
And that's probably a subject of an entirely separate podcast if we ever wanted to get into it. But come back to your original point Charlotte. I mean in the long run this has got to be of concern to everyone in the industry.
We shouldn't have a power dynamic, we should have genuine partnerships just as we have long term relationships in just about every other mode of transport and indeed every other aspect of procurement, which after all that's what shippers are. They procure a service for their business.
And what shippers really value are long term relationships where there is a degree of that wonderful word trust. But there is mutual benefit and interest and recognition of the needs, the costs, the challenges in each sector and we get away from this very binary, you know, win and lose and so on situation we got at the moment.
That would be, I think, the wish of most shippers, especially those with committed volumes, that they're going to need to have moved on a regular basis and try to get back to the point where there is this sort of better understanding and recognition of respective problems and more enduring and reliable contractual relationships can be relied on.
And that's again another big topic. But I think it's the elephant in the room and it underscores so many of the tensions and the frictions that you report on and that I deal with on behalf of shippers.
But just trying to get some kind of a better working relationship in the industry must be a long term goal.
[00:10:05] Speaker A: Yeah, no, definitely. I mean, if you're a shipper on one of the major lanes, you only. And you're like, when you look at alliances, you only really have four options.
So. Yeah, no, it is definitely an interesting one to look at. Do you see this similar power dynamic between shippers and forwarders or is it mainly from the carriers?
[00:10:24] Speaker B: Well, that's a good question. I imagine you were referring there to your interview with.
Is it Paul Chadwick? Mark Chadwick.
[00:10:35] Speaker A: Mark Chadwick, yeah. From the Global Shivers Association. Yes.
[00:10:38] Speaker B: Which, just for the record, no relation.
GSA are a buying collective and one of several that are now emerging.
So that's a very interesting new proposition into the market as well, by the way.
But GSF is obviously a trade association and doesn't sort of get involved in commercial transactions in the way that the buying collectives do. But his important point was that, yes, he's seeing a response from the forwarding community to the surcharges which they themselves are incurring from their carriers, from the shipping lines with whom they contract and they're passing them through. But the really interesting thing for me in that article, Charlotte, that you did was the fact that Mark recognized that you get a range of responses. You don't get this uniform, yes, it's $1,500 a box, take it or leave it kind of response as many customers as shipping lines sometimes receive. There was a range of some forwarders that were looking to pass costs on and others saying, well, we've got not got that need to take any extra money off you at this stage. That's the difference. That's the difference. The fact that there is some competitive pressure and elements in the forwarding market which drive those different responses. I think also traditionally shippers have a much greater degree of transparency and visibility of the costs with their forwarder or at least are able to obtain that transparency.
The get a bit of an itemized invoice if you like, and to actually see where these additional costs, if any, are coming from and the inevitable negotiations can take place and you know, longer term views can be taken if that's in the mutual interest of both parties. So yes, I'm sure forwarders are passing on a lot of the costs and additional demands for surcharges that they're receiving.
But it does seem to be a more transparent and therefore a better functioning market and dialogue than from what we're seeing from shipping lines.
[00:12:47] Speaker A: Thank you very much and I'm flattered that you read my articles. I very much appreciate that. And if anyone wants to go and read the article that James is referring to, you can go and have a look on the loadstart.com Finally, James, I want to ask you about this new executive order to strengthen Customs Enforcement into the US With a focus on undervaluation, misdeclaration and importer transparency.
The order directs cbp, which is Customs Border Protection in the US to tighten requirements for importers, including, and this is going to get very, very complex now, higher bond levels, minimum domestic asset thresholds and expanded data and ownership disclosures. So can you please outline what this actually means for US Importers and how big of an impact this will have?
[00:13:35] Speaker B: Okay. Well, I spoke to our members in the U.S. the National Industrial Transportation League, who are obviously on the front line of, of dealing with these and interpreting these executive orders and all the other tariff announcements for their members.
And I think the answer is it's a little too early to tell because the executive order has merely sort of commanded, if that's the word, the Department of Homeland Security to come forward with new regulations and requirements that do what you just said.
So we know what the objective is, where they want to end up, but how they get there and what new burdens or demands or requirements they actually place on individual importers. Shippers in the US that's going to come forward in the next. Is it 90 days or 180 days? I think it depends on which aspects they're dealing with. So there will be new detailed regulations and requirements which may well require higher bonds to be lodged with cbp. You know, that's a big cash flow hit certainly on smaller businesses may have higher standards that need to be achieved. I noticed that the glorious phrase good standing appeared in the executive order, whatever that means, and that's what will be defined and explained in the forthcoming regulations.
So until they appear, it's difficult to really understand whether this is just patching up some weaknesses in the current system or whether it is a wholesale step up in what regular US importers need to do.
And it's going to put additional burdens and pressures on shippers in the US to conform with the new rules. So let's come back maybe in November, I think is when the deadline is.
Can't think what else is happening in the US around about that time. But anyway, these regs will be in draft form by then and we'll be able to have a better, better understanding on what US shippers need to do and importantly, whether or not the exporters that supply them have got any new requirements that they need to meet as well.
[00:15:48] Speaker A: Just another layer of stress and uncertainty for shippers, which is exactly what they need right now. James, thank you so much for joining me and for recapping all of that. I really appreciate your help.
[00:15:58] Speaker B: Pleasure, Charlotte. Anytime. Thank you.
[00:16:01] Speaker A: My next guest for this episode. To help me unpick the air freight news and some other stories as well, I'm here with Alex Linnane. Hi, Alex.
[00:16:09] Speaker C: Hi, Charlotte.
[00:16:10] Speaker A: Alex, I want to start by asking you about a really interesting story you did last week. Well, I'm actually going to ask you about a few interesting stories that you did last week, but we'll start with this one.
As I'm sure many of our listeners are aware, there's been quite a few freight tech startups over the last few years. Not all of them stick around for very long. And this is something that you were looking at with a European lens in particular. So what issues are these European freight tech startups running into?
[00:16:36] Speaker C: Yeah, we've been running a series on freight technology which has been absolutely fascinating. But one of the angles that sort of has come up is the difference between Europe and America for funding, which, I mean, everyone kind of knows this, but it's been interesting to sort of drill down a bit into why the funding landscape varies so differently. So while Europe has actually produced quite a lot of startups in this area, turning them into sort of global giants is becoming something of a challenge. So they tell me that the startups I've spoken to have told me that Europe is essentially short of growth capital.
So funds tend to stop investing at kind of the series B and C stages.
That means the European startups tend to look at The US at that point and Texas in particular is coming up quite a lot.
But unfortunately American investors prefer American companies, partly because the path to exit is much clearer. IPOs are easier, and so on. The other difficulty for Europeans startups is getting to that scale because Europe is so much more fragmented in terms of languages and all the things that make up lots of different countries.
So yeah, it's quite difficult for these new startups to gather pace in Europe in the same way that they do in America. It's been really interesting.
[00:17:59] Speaker A: That's a really interesting comparison there between those two. And I mean, a lot of these freight tech startups are using AI to optimize supply chain processes. This is something else that you looked into last week and you spoke to Rinus the freight forwarder about where the real impact of artificial intelligence in supply chains actually lies. So what did they say?
[00:18:21] Speaker C: So, yeah, Rinus is really interesting actually. This is also part of our freight series on forwarder tech. They say that the biggest impact of AI isn't going to be chatbots or productivity tools.
It's going to mean a fundamental change in the role of the freight forwarder.
Rina says that AI will essentially oversee thousands and thousands of normal, ordinary shipments, but there are always exceptions and complexities and that's when you bring the humans in. So it'll be some sort of great big command center with everything working automated. And when things go wrong, that's when you're going to need the people making the changes.
But they also say it won't replace people. The people are going to be a very important part of this.
They say that logistics is a people business. Customers like dealing with actual people.
And so the competitive advantage isn't going to be actually from the AI model, but it's going to be from the best data, plus workflows, plus governance that goes with it. And human expertise, judgment and customer relationships are going to be the thing that sets companies apart from each other. Yeah, it was really interesting and at this point, actually I'd just like to say, if any other forwarder wants to talk to me about their tech requirements, what they're doing, I'd love to hear from them. Alexelowstar.com
[00:19:41] Speaker A: I was going to say you're doing like a whole series on AI at the moment, which I think is really important. It's such a fast moving industry and definitely one that's going to have a huge impact over the next few years.
I want to turn our attention now specifically to the air freight side of things, although we are also going to be speaking about AI as part of this as well. But I reported on announcements this week from both DSV and Kuna and Nagel and both large forwarders have announced that they're enhancing their air freight pharma offerings. DSV is going to be doing a dedicated corridor between Luxembourg and Indianapolis to transport temperature sensitive pharmaceuticals, while Kuna and Naga will be introducing a weekly Chicago, Frankfurt, Atlanta link between two major pharmaceutical manufacturing and distribution hubs, which they said is going to enhance support for time sensitive healthcare shipments. So it's clear that this is like a bit of a growth area for carriers and forwarders at the moment. And another big growth area for air cargo carriers is AI related shipments. While we're on the subject of AI, this is like chips, things like that. The data for this that you had this week was quite staggering. I mean, what, what have you seen?
[00:20:51] Speaker C: It's amazing. Yeah, it really is. So imports in the first quarter in air freight jumps, sorry, imports from the US, from Asia, of high tech cargo jumped 70% year on year. So yeah, this, this is a big thing this year.
And we're seeing demand right across the kind of AI ecosystem. So it's not just chip makers, it's memory chips, manufacturing equipment, processes, networking equipment infrastructure or anything that supports data centers is huge at the moment.
So Ashok Kumar from Morrison Express, which is a Taiwanese forwarder that specializes in this, really, he told us that his customers, his manufacturing customers are booked out until the end of 2028 and that they think demand will continue in the same vein up till the end of 2030.
So there's a lot of orders going in.
So data center relations, air cargo volumes grew 42% last year. And shipments of GPUs and AI accelerators, which I actually have to admit, I don't know what that means, but they grew 65% last year. So it's a big business. And we know it's big business because last week DHL said it was going to expand its dedicated logistics capacity for this particular sector. It's adding 160,000 square meters of warehousing in Asia Pacific.
And it thinks that the region, Asia will have about $800 billion worth of data center investment by 2030.
So it is investing in specialized handling and equipment services for the sector. It's huge. And so at a time when E commerce in air cargo in particular might be stalling a little, AI related cargo could well be the thing that completely replaces that. We'll have to see. But yeah, it's big business.
[00:22:47] Speaker A: That's absolutely Massive and AI accelerator. Surely that's just what it says on the tin. Surely just accelerates AI.
[00:22:54] Speaker C: I don't know what that means in
[00:22:55] Speaker A: physical terms, but yeah, hopefully someone can explain that to us in the comments.
Finally, Alex, I'd like to ask you about one of the news items from last week. This is effectively the breakdown of the ceasefire around Hormuz. We had attacks from both Iran and us last week. And while the Strait of Hormuz basically isn't being used for mass transit anyway, this conflict escalation kind of solidifies that. And it was still quite fresh as we speak. This happened towards the end of the week.
Do you have any idea of kind of what the implications are going to be on supply chain?
[00:23:28] Speaker C: I mean, the immediate impact is more uncertainty.
So carriers had already adjusted operations.
Yeah, we've covered this much in the last sort of. Well, since February 28th. But every single new escalation kind of reinforces that idea that certain trade corridors are just not reliable.
And that is going to continue, I think.
So this will mean continued high insurance costs, continued high fuel costs, continued caution from carriers, whether they're airlines or ships. Sea freight.
What we are seeing, we ran a really interesting story on this last week, actually, is the road network in the region is really sort of stepping up. So you've got increased congestion in Saudi Arabia's ports, and so there's a renewed focus on land, bridges and freight always finds a way, as they say, and it will do again. But, yeah, really what we're seeing is continued uncertainty, which is not good for anyone.
[00:24:32] Speaker A: Yeah. And I think basically there's been so many ceasefires and so many kind of ends to the conflict, and people think, right, are things going to return to normal? And then everything falls through. And we've seen that carriers are holding back even when things seem okay. Carriers are still kind of of waiting to put their networks back the way they were. And I think every time that the ceasefire breaks down, it probably means that when things do return to normal, it probably adds a few weeks or months onto the timeline that carriers would even feel comfortable going back. So, yeah, definitely. Heightened uncertainty, as you said.
Now, finally, Alex, I can't let you go without asking what was on Premium this week. Are you able to give our listeners a little snippet, please?
[00:25:11] Speaker C: I am. Premium's been having a cracking time of it, I have to say. After last week's exclusive on the new CEO of Siva this week, it's looked into what jobs the new CEO has ahead of him, which are many and varied as you might expect. There are also a couple of fascinating looks at the expediter's job cuts and the fact that it's broken. It's pledged that it will never make redundancies.
And there's also a look at the resignation of the Norfolk Southern COO John Orr.
But it's a really fun article actually. We don't need to worry about him if you were, because he will still get his partial bonus, bonus of 2.25 million if the merger goes through. So I think he's going to be all right. But yeah, lots on premium and lots of it quite fun at the moment.
[00:25:58] Speaker A: Alex, thank you very much for joining me. I'll see you next time.
[00:26:00] Speaker C: Thanks Charlotte.
[00:26:02] Speaker A: That is all we have time for on today's episode. I feel like we got through quite a lot there. So thank you very much for joining me. And of course thank you to James and Alex for helping me round up this week's news. We will see you next time for another installment of News in Brief. And if you're not watching on YouTube then do head over to our YouTube channel at the Lodestar podcast and please like subscribe share all of that good stuff. And if you would like to be featured on a future episode of News in Brief, then please reach out to me on
[email protected]. have a good week.
