Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar news. In brief podcast, 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. So we're going to jump straight into ocean rates. Gav, a few weeks ago you said that you thought rates were starting to level out, and then the week after, they shot up again. So what's happened this week?
[00:00:28] Speaker B: So just to go back there, when we made that analysis, what we'd identified was that in the week following the widespread application of peak season surcharges, or general rate increases or port congestion surcharges, which tend to take place either at the beginning of the month or in the middle of the month, we were noticing that there'd be a rate spike in the week following that. So obviously here we are just past the mid month period, and what we've seen this week on Drury's World Container index, we've seen rates increase 11% week on week on the Shanghai Rotterdam, that's the Asia North Europe lake. So they've gone up double digit, which we would have expected because of implementation of the various hikes by the carriers. Whilst on the other main east west trades, Trans Pacific Asia US east coast and Asia Mediterranean growth this week has been more muted. We've had up 2% on Shanghai Genoa, up 3% Shanghai New York. So relatively flat growth on the other east west trades. And when you sort of take a step back and look at the performance of the pricing curve, it looks like typically a short term demand spike that is front loading, trying to get your goods in before the peak season really gets underway. Shippers are scarred by what happened during COVID This is coincided with the stretch capacity due to the Red Sea and altogether has created a bit of, oh, shit, I hope I don't get ever given again, type of phenomenon.
[00:02:06] Speaker A: So I guess the question we probably should be asking now is, have we reached the peak of the rise or do you think there's going to be more to come?
[00:02:13] Speaker B: I mean, you're right. That is exactly the question I think we should be asking ourselves now. Okay. The flat answer to this question is don't know. There are still quite a lot of issues to sort out. You know, there's sporadic bursts of congestion in asian export ports as well as sort of some of the receiving ports, especially in the Mediterranean. There's also continuing container shortages. So given that there's still a number of issues to work through the system, I think it's not unreasonable to expect that the heightened rate environment would continue for at least another month. But under that scenario, I think it's also fair to assume that people could be looking for the situation to begin easing by the time August comes around, which would be entirely consistent with the thesis that this has all been an early peak season.
[00:03:04] Speaker A: Thank you very much. And unfortunately, the stress has just kept on coming for shippers. Last week, some of our most read stories were about the strikes that are threatening to break out all across the world. People are clearly very worried about what this means for their supply chains, and understandably so, because there are so many and all at the same time. Here's a quick recap and brace yourselves because there is quite a lot. So firstly, we've got the port workers affiliated with trade union Verdi that have threatened strike action across the country's key ports, including Hamburg, Bremerhaven, Emden and Bremen. And this is during their negotiations with the Central association of German Seaport Operators. Meanwhile, in France, labour unions representing dockers and other port workers engaged in several day long strikes and lots of four hour work stoppages this month in protest over a pension reform. Another 24 hours strike was scheduled for the 25 June across major ports in France, including Le Havre, Marseilles, Dunkirk and a few others. Now, if strikes at Europe's main hubs, Le Havre, Hamburg and Bremerhaven coincide, Antwerp and Rotterdam ports would be inundated with shippers looking to shift capacity to the fully operational ports to avoid long delays and congestion. But last week, a surprise announcement by French President Emmanuel Macron to call an election led to the french unions postponing their strikes because there's no one at government that they can negotiate their demands with. So this is postponed now until the new administration is formed. In Germany, though, Verdi announced that negotiations on the 18th and 19 June were unsuccessful. So the next round of bargaining will take place in early July. But there was no information about strikes that could take place in the meantime. Moving over to North America, the Teamsters Rail union in Canada have said that they will strike at the earliest available opportunity. This can happen once a decision is made by the Canada Industrial Relations Board about whether the canadian rail service can be deemed as essential. Final submissions for that argument were received on the 14 June. So that was ten days ago now, and so a decision could be made any second. If a strike breaks out, that's going to massively impact supply of goods in North America that rely on the canadian rail network.
And on top of this, gosh, I'm out of breath now. Tensions have been escalating between dock workers and their employees on american east and Gulf coast ports. This has put a halt on the negotiations between the International Longshoremen's association and the United States Maritime alliance. Gav, I understand that supply chain stakeholders are particularly worried about this one. The current contract expires at the end of September. So what is the latest here? Is a strike looking likely?
[00:05:46] Speaker B: I mean, my own personal view is not. But there's a few. There's a few factors to unpick here. Obviously, it's a massive area. It's every us port from Boston to Houston on that is Atlantic and Gulf coasts. A strike would shut down the entire range. So us importers are right to be worried. And as we've seen with other congestion issues, what happens in one part of the world can have all sorts of knock on effects elsewhere. A couple of things. So, firstly, the ILA, the International Longshoremen's association, they have a very vociferous president, rather aptly named Harold Daggett, which is like great onomatopoeia, if anyone remembers the sort of labor strife that we had in Britain in the 1980s. He reminds me more than anyone of Arthur Scargo. He's a very combative union leader. He uses very sort of combustible language. You know, what the hell are foreign shipping companies here doing telling american workers what to do and so on? And I think a speech earlier this year said, I've told my membership to be ready to walk out on strike the first day of negotiations. Balanced against that. We have a us election going on. Now. I had a very interesting conversation at the TPM show in Los Angeles with Peter Friedman, who represents the big us shipper body, the Agricultural transportation Coalition, in Washington. And he made the very interesting point that if you look at every labour management issue that's taken place in the US over the last four years during the Biden administration, and there's been some big ones, if you recall, back to the United States Autoworkers union strikes that they were having at Ford and the various other us automotive manufacturers, it was solved. Biden solved it. And he made sure that the agreement was in favour of labor. Biden said this publicly, that the us worker has no better friend in the White House than me. And actually his form book speaks to that. So, you know, it looks to me if everyone gets worried, you know, come, come sort of September, as the clock ticks down to the expiration of this labor contract, it just looks like a really easy political win for Biden to step in, what, two months, one month before the election, solve the issue and then head into an election saying, look, this is what I can do for your economy. I kept the ports open. I mean, it's interesting at the moment they've walked out. They've said one of the ILA's big things is that they don't want any automation in the ports at all. And the issue which led them to abandon the negotiating table altogether was they said there was an automation project in the port of Mobile in Alabama, which is operated by APM terminals, according to our information. I'm doing air quotes here for listeners. That automation project was a set of traffic lights.
[00:08:35] Speaker A: Yeah.
[00:08:36] Speaker B: Coming into the ports, you know, which previously had a dog worker there holding a stop go site like some sort of lollipop man from outside your local school, replaced by an electric light that shines red or green. I mean, I guess the dockers could argue that it's the thin end of the wedge.
[00:08:55] Speaker A: Well, it will be interesting to see what happens there. Yeah, I'm waiting to see it unfold. And now moving on to air. To help me with this, I'm joined by Alex Linnane. Hi, Alex.
[00:09:04] Speaker C: Hi, Charlotte.
[00:09:04] Speaker A: Alex, Atlas Air was in the spotlight multiple times last week. What happened?
[00:09:09] Speaker C: Well, there was an incident at Hong Kong airport. The aircraft had to turn around and go back and on landing some tires burst. But we don't normally cover sort of incidents like this just because they happen. And it tends to not be anyone's fault in particular. But what was noticeable about this is that it was about the third time in just a few weeks Atlas Air has had a problem. And normally you just don't see it very much. So I did a quick calculation and it's had six incidents reported this year. And last year I only reported two incidents altogether. So six and six months is quite a lot. I sort of did a comparison with other airlines, and Cargolux, which has about a third of the number of planes, has only had one incident this year. FedEx, which I think has six times the number of planes, had only two incidences so far this year. So Atlas, yeah, it's having some issues with its aircraft at the moment.
[00:10:03] Speaker A: Interesting. And the air cargo market as a whole, I mean, a few weeks ago we had the chinese e commerce crackdowns from the customs border protection in America and a few other countries I think, were quite hot on it. Has this impacted air freight at all?
[00:10:15] Speaker C: Well, what I did notice is that after we started running the stories on the e commerce crackdown, other publications started to look at whether that had an impact in the market, and they all went, no. But what I'd been told when we ran those chinese e commerce stories was that it was the second half year that was going to be more affected by it because a lot of new services were about to start. There were several small airlines gearing up for e commerce services, and those have been sort of put on pause. But as in terms of the actual market right now, nothing has really changed apart from the steady, strong e commerce volumes, which Neil van der Waal from Zanetta said was quite remarkable. So I think it's going to be a reasonably good summer for the airlines if there are no major hiccups. There is still some scepticism around e commerce. Quite a lot of people in the market say that it's taking up normal capacity and that it actually doesn't earn airlines very much money. So although they've got consistent volumes, the yields aren't great. So combined with a possible crackdown, maybe this will affect the market at some point. But right now it's still fine. You recently did a story on the fourth quarter. Is that still going to be strong, do you think?
[00:11:28] Speaker A: Yeah. Well, I spoke to air partner at Multimodal in Birmingham, and they basically said that in the fourth quarter it's going to be almost impossible to charter aircraft because the peak season is going to kind of coincide with this mad rush of e commerce. And, yeah, they're saying it's going to be quite crazy, so.
[00:11:44] Speaker C: Okay.
[00:11:44] Speaker A: Look forward to that. Yeah. Thank you, Alex.
[00:11:47] Speaker C: Thank you.
[00:11:54] Speaker A: Okay, so now we've highlighted all the main points from last week's supply chain news. It's time to take a look at what might be coming up on the Lodestar this week. Two weeks ago, when I was at multimodal, I spoke to japanese ocean carrier one, and we had an interview about the state of the ocean market at the moment. So I'm hoping that I might be able to give you a bit of insight from that this week. Like I said before, we're probably also going to have some updates from the strikes. German trade union Verdi might announce that they're doing some warning strikes before discussions with the employers resume again in early July. And then also the Canada Industrial Relations Board will probably make a decision on whether canadian rail can be deemed essential. I'm assuming that's going to happen any day now. But they did say that the timeline is unknown, so, I mean, it could be months from now, but they did also tell us that they would try and expedite the process, so who knows? Plus, of course, we are inching closer to the deadline of the current deal with port workers on the US east coast and Gulf coast ports. So we might see some movement there and we might have some announcements on whether discussions are going to go ahead or whether they're going to kind of continue this stalemate situation that we've been seeing. Last week I also did an interview with a company called Road to Logistics and they are trying to find solutions for the truck driver shortage that we're currently seeing in the UK. I mean, this is a huge issue. It's been spoken about for a few years now. It was really exacerbated during COVID So I spoke to them about what they're doing to try and encourage people, specifically minority groups, to get into the truck driving profession. So that was really, really interesting and I'm hoping to do a write up of that this week. And of course, we always have to factor in black swan events. We're not sure when this Red Sea situation is going to end. A lot of industry stakeholders have said that it's probably going to be quite a long time. Obviously, that is a big unknown, so we will keep you updated on the loads of any updates there. And we've also seen rising protectionism, particularly around electric vehicles. And there's been more barriers against chinese e commerce from the EU and the US. So we might have some more stories around that for you. But like I always say, with logistics, you never can tell and there's not much you can really predict. So all you can do is keep checking the load star and we will keep you updated. Thank you so much for joining me and I'll see you next week.
