Episode Transcript
[00:00:00] Speaker A: Foreign welcome to the Lodestar podcast News in brief. We're going to be rounding up last week's supply chain news and at the end we'll let you know what you might see on the Lodestar this week.
So last week saw lots of news stories about ship fires. Early last week The Singapore flagged 4300 Tu Wanhai 503 box ship saw explosions and an uncontrollable fire. Four crew members were unfortunately missing while five of the 18 others have serious injuries. The ship was apparently containing dangerous goods. And then at the end of the week, the Singapore flagged MV Interasia Tenacity caught fire again in a similar place off the Kerala coastline in India. That ship was built in 2024, so it was a very new model, but luckily this fire was quickly under control.
And meanwhile the MSC Elsa that sunk at the end of May was again in the news as India's Kerala State authority hit MSC with a criminal case. One local lawyer told the Lodestar that the case broadly involves rash navigation and negligent handling of hazardous goods. And these incidents, of course there were so many. In quick succession they've raised concerns of rampant misdeclaration of dangerous cargo, which just really highlights the importance of proper correct cargo declarations by shippers.
Last week obviously also saw the very distressing news about the Israeli attacks against Iranian military and nuclear leadership. We reported that this rapid escalation in tension could destabilize an already volatile region and lead to a potential blockade of the Strait of Hormuz. The full blown closure of this area would have a huge impact on shipping as it would cut off the transshipment ports of Dubai and Abu Dhabi and sever routes of Gulf gateway ports in Saudi Arabia, Bahrain, Qatar, Kuwait and Iraq. There was a very detailed analysis of exactly how many services would be impacted on the loadstart.com with EC data.
This is a very fast moving story and will likely come up again this week. We will continue to monitor the situation unsurprisingly. Now we have yet again more news on tariffs. You just can't escape it. I'm now joined by Alex Linane who has been monitoring the tariff legal battle that we gave the background to last week. Alex, what is the latest here?
[00:02:33] Speaker B: Let's start with a deal between China and the us so just so you know, at the time of recording this podcast, it's only been announced on Truth Social and not by the White House, which suggests to me it's not yet totally in the bag. But if Truth Social is Correct. Then the deal is going to go to 55% tariffs on China, which is actually 1% higher than what it was due to go to in August anyway, and 10% on US imports into China.
But our policy at the low start is to report on these things once they've become law and not before because there's been a lot of confusion and miscommunication in the market.
And talking of law, yes, there have been some updates here. They've generally fallen in the White House's favorite There are two sets of cases, one questioning the ending of the de minimis exemption for China, which I expect will remain in place as de minimis is pretty much in doubt all over the world.
The other case is on tariffs introduced under the ieepa, which is the Emergency Act.
That's the one that a court initially upheld, but the appeals court has allowed the tariffs to continue until the case is heard.
Somehow it feels unlikely that the shippers in this case will win, but we will find out, I think in July, by which time, say the shippers, they may have gone out of business.
What I'm finding odd about this though is that the apparent deal with China, which is under the ieepa, that is Emergency act because of the trade deficit that also seems to include provision for Chinese students debt study in the US other non trade related items or which I don't know, suggests to me that emergency is not entirely trade related. But that is one for a court to decide, no doubt.
Either way, all the uncertainty is, as one forwarding CEO told me, driving us mad. We'll be covering more on the total and utter lack of clarity in the market and where that is leaving companies and their forecasts. But you've been writing about tariffs too. What's the impact that you've been seeing?
[00:04:34] Speaker A: Yeah, I did a few reports last week on the impact of a reduced US demand and it seemed like the Middle east was becoming a bit of a hotspot for moving moving capacity. DHL announced it was going to be investing over 500 million euros across its divisions to strengthen its ability in the UAE and Saudi Arabia in particular. And they massively cited E Commerce as a really fast growth market there. Europe has also seen a strong surge in capacity. ROTATE data showed that total air cargo capacity growth from China to Europe between January and May was up 50% compared with the same period last year. But I also did report that cargolux had told me in Munich at Air Cargo Europe that they didn't think that the demand in Europe was going to be sufficient enough to match this capacity, at least it wouldn't match the US consumer. But what happened in rates last week? How's this all looking?
[00:05:24] Speaker B: Very little, actually. Dull is the word that has been used. Now that the front loading to the US has come to an end, there aren't many volumes about and there's quite a lot of wariness in the market.
There are of course, some pockets of movement, as there always are. China to Europe fell 5% in tonnages in week 23, although Hong Kong to Europe rose 2%.
Generally inbound to Europe fell 16% week on week, which is quite a lot.
The big one, China to the US saw tonnage fall sharply in the first week of June and spot rates fell too. And capacity World ACD said that last month's rebound was temporary rather than structural. Based on these latest figures showing declines.
Our article on Friday focused on how forwarders are feeling about it all and their concerns over air freight margins for the year, which unless there is some sort of shock to the system, which is not unlikely given the general state of the world, it could be quite a tepid overall air freight market this year.
[00:06:22] Speaker A: Now I'm heading over to the ocean side and I first want to look at ports first. Some good news is that European port congestion had eased and wait times had gone from an average of seven days to around one to two days, according to Flexport. But this relief might not last for too long, as in early July there's planned works on the railway at Hamburg port, where terminals will be disconnected from the rail in Germany over an entire weekend and so containers will have to be taken out by trucks instead.
Plus, in Rotterdam there has been an indefinite strike at a terminal since the 4th of June, so these things might lead to more port congestion later on. I'm now joined by Gavin Van Mul, who also did some port reporting last week. This was an update to the MSC Hutchinson acquisition. What is the latest here Gav?
[00:07:11] Speaker C: Hello Charlotte. Well, there's not been a great deal of development in terms of the actual deal negotiations. They're ongoing. The deadline is the 27th of July and I expect lots of details are still being ironed out. But you know, in general with the deal of the this size as remember by far the largest has ever taken place in our industry, circa $20 billion. It's always fun to delve into the details. Shout out to Drawer's Ports and Terminals team Eric Cooper and Eleanor Hadland, who did a great presentation last week with a couple of fascinating nuggets.
One although it was initially presented as a sort of til. That's Terminal Investment Ltd. And BlackRock, the massive fund manager. It was their consortium that was buying Hutch. Mr. Hooper's pretty certain it's actually MSC that will be acquiring the Hutchison equity in all the ports that are being sold.
Remember, the ones being sold are all the global terminals except those in China and the Pearl River Delta.
So all of those 43 ports, Hutchison equity in those terminals will go to MSC, except for Hutchinson's 90% stake in the Panama Ports Company, which he understands will be owned 51% by BlackRock and 49% by MSC.
And just on Panama, there are also comments last week the Canal Authority is worried about the concentration of ownership in Panama's terminals. I mean, personally I don't see how Hutch's exit changes that because it just seems to me that swapping one owner for another. But they may well be alluding to MSC's partnership with PSA, the Rodman Terminal. But more broadly, it does show just how many different jurisdictions that will have to be dealt with to get this deal across the line.
[00:09:04] Speaker A: Staying on this port theme, you reported that the U.S. trade Representative updated the proposals regarding Chinese built vessels code calling at US Ports. Can you give us some details, please?
[00:09:16] Speaker C: So it's an update, but not really a hugely major one. Nothing really changes for container shippers or container lines, but for the car carriers, the pure truck and car carriers, the USTR has recommended that the fee will be based on net tonnage, effectively the cargo carrying capacity of the vessel, rather than a car equivalent unit basis, which the USTR said was to address admin.
And in light of the potential for fee evasion, there was also some stuff about the LNG sector, but it's really not my market.
[00:09:51] Speaker A: Thanks, Gav. And while I have you here, can you give us a rate roundup for the ocean side?
[00:09:57] Speaker C: Yeah, I mean, in contrast to everything else that's happened, last week, it was calm waters, rate wise. Asia, Europe rates were completely unchanged before and there were very marginal gains on the Trans Pacific. Some interesting comments from Peter sand at Zenitha, who believes that this indicates that we have hit or are near to hitting peak rate levels on the Trans Pacific. In terms of spot rates. His argument was that the spread between the highest Trans Pacific spot rates and the lowest Trans Pacific spot rates has narrowed over the past week.
And at the beginning of June, right, there was a two and a half thousand dollars difference between the lowest spot rate paid and the higher spot rate paid.
Now that spread is down to $1,000 per 40 foot. So he thinks that is an indication that rates have leveled off. I mean with carriers reinstalling all those blank sailings and the opportunistic niche carriers in on the action for some short term profits, it would make sense that rate levels that they're not continuing to shoot up, that would make sense. But there are two things just to add to this.
15th of June was when a whole load of new gris would be effective in the Trans Pacific. They're the normal quantums between $1,000 and $3,000 per 40 foot. So if those stick, then rates are going to go shooting up again. Right.
However, and we've discussed before the sort of correlation between the Shanghai Containerized Freight Index and the World Container Index that Friday's CFI showed a 26% decline in trans Pacific eastbound spot rates, which could indicate that this week we'll see a decline in rates or perhaps those two factors would just simply cancel each other out and then we'll just go nowhere.
[00:11:49] Speaker A: We can all go home.
[00:11:50] Speaker C: We can all go home. That's all the Oracle of the Orwell has to say on it this week.
[00:11:54] Speaker A: Thanks, Gavin. And finally Alex, I'm coming back to you to give our listeners a sneak preview of what was on the Lodestar Premium last week. I believe there were some juicy details of the DSV DB Shenker takeover.
[00:12:07] Speaker B: Well, first of all, there's some really interesting analysis of C.H. robinson. It's definitely worth a read. It's looking at how the management think they can get ahead of the rest of the market.
There's also an article on how investors are being lured back into container shipping thanks to the Houthis. In large part.
And of course, as you always get with Premium, there are some exclusives this time on the DSV Schenke employee battles.
Apparently the integration is going very smoothly, but customers seem to be on the move as they are looking to diversify, which actually is in our lostar leader on Friday as well.
More interestingly though, Lo Star Premium found out that Shankar's senior management team are on their way out and will not be staying at dsv, but sort of rather enjoyably. When we asked dsv, they effectively denied it, only for us to then receive confirmation that all six of Shenker's top management will be gone by the end of this month.
Three were out by the end of May, another three by the end of June.
Anyway, we're still waiting for DSV's response to our question about whether they were entirely truthful first time round, but I think we may be waiting for some time.
[00:13:13] Speaker A: I don't doubt that. Thank you, Alex.
[00:13:15] Speaker B: Thanks Charlotte.
[00:13:23] Speaker A: So now we have wrapped up last week's supply chain news. Here is what you will see on the Lodestar this week and this is a busy one for the Lodestar crew as I will be headed to Birmingham for the multimodal exhibition and Gavin Van Maa will be in Rotterdam for TOK Europe. So you can expect lots of stories from the trade show floors and exclusive interviews. I'll also be looking to record some clips from industry stakeholders for a podcast. We've also started doing a very regular Lodestar Leaders where the Lodestar writes an opinion piece on a bit of topical supply chain news. So do look out for more of those next week. They are a completely different read to that of straight news stories so you've got lots of different content to get your teeth into. Thank you so much for joining me this week and I'll see you next time.
