Episode Transcript
[00:00:00] Speaker A: Foreign and welcome to the Lodestar podcast. News in Brief. Now, you might be wondering why we're releasing this at the end of the week rather than at the start of next week, and that is because I'm not here next week, unfortunately. So we're going to do a roundup of the week's news today and we won't have a section of what we're looking at next week because it's a bit too early to tell.
So we're just going to get straight into the news roundup. Obviously, we came into this week with a heightening geopolitical situation between Israel and Iran, which we spoke about a bit in Monday's News in Brief, as it had escalated dramatically just at the end of last week. And, I mean, it's such a horrible reality. So it does feel quite insensitive to talk about this from a kind of commercial angle. But we are here to look at the impacts strictly from a supply chain perspective. So I'm now joined by Alex. Alex, can you round up the impact, please?
[00:00:55] Speaker B: Yeah, sure. As you said, aside from the horrors of the reality on the ground, wars do make life more complex for everyone.
First off, there are airspace closures around Israel, Iran, Iraq.
Others aren't flying over Jordan. It's a changing situation.
Carriers have, in general, suspended some services in the Middle East. El Al, for example, has suspended all flights. Its aircraft, at the time of recording, was stuck outside of Israel. Lufthansa and others have reported that they are stopping bookings in the Middle east for a temporary period.
And there's been quite an interesting story about cargolux, which appeared to be flying in Iranian airspace. According to flight tracking websites, it is partially owned by the Chinese region where it hubs. So that has triggered quite a lot of social media speculation that it was bringing in Chinese weapons for Iran.
Now, cargolux has been forced to deny that it's flown into Iranian airspace and said none of its flights uses Iranian airspace. We won't be reporting this story because cargolux has denied it, but it's just quite interesting nonetheless. Even some quite senior people have sent me notes about it. So who knows? I, for one, am not going to be writing it.
And then there's concerns over whether the Straits of Hormuz may close. That has triggered worries about fuel prices.
So 20% of global fuel passes through the Strait. So if Iran chooses to close it, that could make some significant difference to oil prices.
And now it turns out that there's a lot of GPS jamming going on on the ships. Charlotte, you wrote about that today, didn't you?
[00:02:31] Speaker A: Yeah. There had been reports of persistent electronic interference in the Strait of Hormuz and Persian Gulf expected to be GPS jamming. The consequent navigation issues could be the cause of the collision between two tankers in the Gulf of Oman outside the Strait of Horrors. And this kind of raised alarms for the era of electronic wars. And we did publish a very good explain article for GPS jamming actually last week, which you can find on the Lodestar website. But I spoke to Cargo Golf global development director Hans Henrik Nielsen and he said that this is a perfect example of why seafarers should be trained for traditional navigation methods and why unmanned and autonomous vessels were a bad idea. But on the whole, he said that operations around the Red Sea and Hummers is business as usual and a closure of Hummers was extremely unlikely. I think there had been a lot of speculation and hysteria online about that. Now, on the air freight situation as a whole, I haven't actually been monitoring air freight too closely this week as I've been away from multimodal. So have there been any interesting updates other than what you've already mentioned?
[00:03:34] Speaker B: The market's still pretty quiet, to be honest. Globally, air freight rates edged up according to Tacindex, very marginally and on the busiest routes out of China, so to the US and to Europe rates fell, while the spot market out of Hong Kong was also down.
There are some expectations of rate rises out of India as Air India, which suffered its tragic accident last week, has suspended about 15% of its widebody capacity for now, which people think could lead to higher rates out of India.
But then you've got freighters searching for volumes everywhere at the moment. So India could be a good place to go. We've also seen Cathay Pacific expand its European offering recently and its Munich service looks like it's set to pick up products from Eastern Europe, where manufacturing is expanding as part of the near shoring trend.
And what has been interesting is the impact a weak air freight market is going to have on carriers and forwarders for their 2025 figures.
There is simply no clarity for the rest of the year, making forecasting impossible. Geodis told me that where previously you look at demand and capacity to determine rates, there are just so many other unpredictable factors now that you have to put into the equation. But you can't because they're unpredictable.
Nevertheless, that has not stopped investment by shippers into freight. So we've got two Asian carmakers have expanded their logistics arms. BYD in China is investing in ports and Shipping. And Hyundai's logistics arm, which is called Hyundai Globis, is investing in Air Incheon, which is due to take over Asiana's cargo business.
So that's quite interesting. We also had an interesting story about whether companies should bother training gen zers and millennials because they don't tend to stay at companies for very long as a gen zer. Charlotte, what do you think of that?
[00:05:25] Speaker A: That's quite interesting. You couldn't just not train someone because they might leave. That's insane.
[00:05:30] Speaker B: But if they're only going to stay for a year, then you spent loads on training them. They go to another company. You've just lost all that.
[00:05:37] Speaker A: Yeah, I guess so. I guess so.
[00:05:39] Speaker B: Anyway, what did you hear at Multimodal in Birmingham and how was it?
[00:05:42] Speaker A: Thank you so much for doing that roundup, by the way. Yeah, like you said, I was in Birmingham for Multimodal and it's very difficult to kind of follow the news cycle when you're at these events. It gets very busy. But the event itself was really enjoyable. Really lovely to see so many familiar faces a bit closer to home, but also because it's air, land and sea. I met a lot of new people as well, which was nice. It did seem a lot quieter on the Tuesday. Quite a few people had said that their stand wasn't seeing as much traction and everyone seemed a bit nervous that they had spent all this money and no one was going to see it. But on the Wednesday, it got a lot busier. And of course, the awards dinner on Tuesday was a lot of fun as well. I spoke to a few stakeholders for interviews. Stanley Smulders from Ocean Network Express spoke to me about how a major worry for carriers is terminal capacity.
And he said that in the next few years we'd see Europe in particular become a real choke point, as port expansion takes a really long time to complete. And he also mentioned that the main factor for deciding when to route through the Suez Canal is the insurance costs, obviously, as well as the safety and security element. I did actually chat to Embedded Cargo Insurance Platform Breeze about the risks and the remedies in supply chain. So more to come on that next week. I spoke to Keith Gaskin about his company Shift, which is essentially a kind of contracting consortium for shippers, but there are additional tech and consulting benefits as well. And it's kind of like an alternative to using a forwarder, which was really interesting, but I'll write more in detail on that next week as well. Law firm HFW gave best practice advice for Ocean Freight Contracting and noted how shippers have increasingly more demands and so contracting is becoming more bespoke.
[00:07:19] Speaker B: I read that was really interesting article. It's really good.
[00:07:21] Speaker A: Yeah, their speaker was really good. Catherine Emsalam wrote. Someone else who was absent from the office this week was David Van Mar, who was in Rotterdam for Top Europe, which I have to say is a slightly more exotic location than Birmingham, only just you were in Rotterdam, Gab. So how was it and what were people discussing?
[00:07:38] Speaker C: Terminal Operations Conference does what it says on tin. It's a tech event for the port industry, so a lot of the focus is on cargo handling equipment and the tech that supports it. So a lot of the talk was around terminal automation, how to improve efficiency. So just circling back to what you were saying earlier about your conversation with Stanley Small and his worries about port capacity. There is also a lot of effort, a lot of work. There's a lot of real cutting edge technology going into making the ports more efficient. You know, he's sort of right to the question whether there's capacity in terms of space, but if you can improve the utilization of that space, you can improve what they call velocity, the cargo flows through the port, then you can create extra capacity that way. And, you know, there were some really cool visions of the future. We had another look at the Box Bay terminal design as a prototype already in Dubai, which is basically like a bookshelf, the shipping containers. And then another company I came across called Eagle Rail, which is designed like a solution, transporting containers out container terminals without them even touching the ground. Basically they get carried out in what looks like a sort of ski lift, a ski lift for containers. That aside, there were also some container supply chain sessions where we talked about global growth in terms of container volumes, which has been surprisingly good this year, but it's probably declining for the remainder, apart from some rather hot secondary trades, you know, China to South America and China to Sub Saharan Africa and China to the Middle East. Container Trade Statistics chief exec Nigel Pusey made a very interesting point. That looks like China has been seeking to expand these markets for quite some time, actually at least a year. This is probably in anticipation of some form of tariff measures coming from Trump. So they've been preparing. And then there was all the other stuff that you would expect people to be talking about. The Hutch sale tariffs, Red Sea, Gulf formers, you know, the macro stuff, the geopolitics affects everyone, right? There's some decent sessions on supply chain excellence and also sustainability. But I mean, I couldn't get away from the impression that it's very difficult for shippers and forwarders to be thinking about, you know, their long term strategic partnerships or their environmental goals when you've got all the sort of current chaos going on. James Hookham from the Global Shippers Forum. This is a direct quote from James. It's all about the priorities of the day. Most shippers I speak to are just trying to get to the end of the week and at the moment supply chain excellence is only about getting stuff to the right place at the right time. So, you know, you can have these very laudable goals, but actually when stuff's as crazy as at the moment, they tend to get all to the wayside and it kind of makes talking about it seem, if not pointless, sort of edging towards that, very difficult to get away from the stuff that's staring us right in the face.
[00:10:40] Speaker A: We're towards the end of the week, so do you have any data on rates? I mean, we had reports that there was high demand for Asian exports and there'd been lots of gris. Have you had any, any data here yet?
[00:10:52] Speaker C: Yeah, well, hot news. So the Jury's World container instance just come out now. Normally when you and I speak, I've had about a day or so to digest what's going on, to talk to my sources, pick through the numbers, all that sort of stuff. I don't have that at the moment, so I'm very sorry, but spot rates from China to Los angeles have fallen 20% week on week and they're down 10% to New York. But at the same time they're up 12% to Rotterdam because of a load of peak season surcharges and general rate increases at the weekend.
And looks like they've stuck on Asia, Europe and they've failed miserably on the Trans Pacific. And so my very quick takeaway in this is just simply, is this the point that the front loading has stopped? We said last week that rates may have reached their peak. And I think what's surprising about today's data is that they've just, they've fallen so steeply. You know, they plateaued last week, but this week they're down 20%. That's a big drop. And one last thing is that it might well be also connected with the July 9 deadline because that's not very far away. We're talking, what, three weeks from now. And given that it's a two week transit time from Asia to the US west coast, the deadline for getting your goods on a ship so that it arrives in the US before the new tariff levels come in or whatever happens is right upon you. So it might well be that everyone's just cut the thing off.
[00:12:24] Speaker A: Early last week, before we both left for our respective events, you reported an update on the Hutchison Ports takeover. Can you give us the details please?
[00:12:31] Speaker C: Details are pretty scant, but according to Bloomberg, the Chinese government is pushing for Costco to join the TIL BlackRock consortium in some way or other. Now I was able to speak to a lot of people in the ports industry this week and no one that I spoke to had any real idea how this would work out or even why it should. The reality is that China doesn't actually have jurisdiction over Hutcheson selling its terminals in the uk, in Poland or wherever like that, and it's only the international portfolio that's up for sale.
But they are able to put a lot of pressure on Hutchinson's other businesses which include a vast property empire in China and telecoms, you know, so they can make life very difficult for Hutchison. What the consensus was however, was it does seem to be about face.
I mean anyone in the industry knows all the crap about control of the Panama Canal is just that crap, but the Chinese public don't know that. And Xi Jinping can't look like he's. I mean the Chinese government can't look like they're being pushed around by the us.
It's going to play out. But given the leverage that China has over Hutchison and the need for the Chinese government to retain its dignity, you would expect some kind of compromise to be reached. I would expect that.
[00:13:56] Speaker A: And there was also an update on this Win Canton GX story that I've.
[00:14:01] Speaker C: Been following for the best part of a year now. Yeah, so that just came in today as well. So this is here in the UK. This is the 1 billion acquisition of contract logistics provider called Wincanton by GXO.
And it had been held up basically because the anti monopoly regulator felt that it would hit the UK's supermarket sector.
So today they announced that they will allow the deal to go through, but GXO has to sell Wincanton's grocery related dedicated warehousing to an approved buyer. We don't know who that is yet and as far as I understand it we've got about a three month window for a deal the broker didn't take place.
[00:14:47] Speaker A: Thank you very much Kirk. Now finally Alex, back to you. To round up what's been on the Lone Star Premium this week.
[00:14:52] Speaker B: In Lone Star Premium there has been a fascinating article actually on the new global trade order and what it might mean for companies.
And there is an in depth look at cunanagel, which is which I'm quoting from it. Is it a lost cause? The article looks at whether it should change and become a pure sea and air player, which is quite an interesting prospect. And there is a comparison with DSV, which of course has hit the headlines for all the wrong reasons this week, with CEO Jens Lund accused this week of some quite tawdry behaviour. And there is a look into the US road freight sector, which continues to struggle. And LTL is also now falling by the wayside.
And of course, more on the permanent soap opera that is the ExpediTERS redundancies court case. So well worth having a look.
[00:15:40] Speaker A: Very interesting. Thank you very much, Alec.
[00:15:42] Speaker B: Thanks, Charlotte.
