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. One of the top stories of last week was that container fleet capacity is at full utilization and the idle fleet is back at pandemic levels of 0.7%. Carriers are kind of scrambling for any tonnage that is available at the moment, as we saw Maersk set in new record for charter rates at $150,000 a day. Gav, I know you're sick of talking about rates now, but is this extra capacity easing rates at all?
[00:00:41] Speaker B: No. In a short word, no, it's not. We've got a really good analysis of the capacity situation being published today, which has been contributed by Daniel Richards at Maritime Strategies International. So I'd urge readers who are interested in what the capacity is to go and have a look at that. But in a nutshell, what Dan says is that since November, there's been around 1.7 million tu of new container ship capacity. 1.4 of that was immediately soaked up by the extra vessel diversions around the Cape of Good Hope. The carriers have also got other tools at their disposal. Like as you mentioned, they've taken out vessels that were idling. They've also pushed forward repair jobs for vessels that are in repair yards. You know, those have been done as quickly as possible and they've stopped other ships that were due to go into scheduled maintenance repair. Those are still operating for a bit longer, so they're really trying to do whatever they can. It is a situation at the moment that capacity is pretty much fully utilised and there's not a great deal that can be done now. Okay, this week's rates. Here we are. We've got moderate increases, senators. XSI was up 2% on its Asia Europe routes. Drury's WCI saw a 7% increase from Asia to north Europe, but a 1% increase to the medden. You're broadly looking at Asia Europe rates of around $7,000 per 40 foot. Broadly similar over on the Trans Pacific, where rates to both the US east coast and the US west coast grew by about 4% last week.
[00:02:16] Speaker A: Oh my gosh. Okay, so another round of increases. Is there any good news in ocean shipping?
[00:02:22] Speaker B: Well, it depends what your timeline is, but there has been. I mean, the silver linings are very far away. I mean, the light at the tunnel is a long way away, but we've had we've had quite a few developments. One of the problems that obviously people have been dealing with in recent months has been port congestion. So we had new concession in a port in Morocco called Nardor west, which is going to try and emulate the success that Tangier Med has had. That's a 3.4 million teu terminal that's due to begin operating in 2027. So the concession for that was signed over to Marsa Maroque, the local operator there. That's good. Although, you know, some way away for that capacity to hit the market. Over on the US east coast, there was news this week that the ILA, the International Longshoremen's Union, and the South Carolina state ports authority, which is the owner of the Port of Charleston, come to an agreement over the port's recently built Leatherman terminal. They announced that they've agreed a way for labour to accept whatever automation is in the port. I don't know whether it's going to be disabled or what, but basically the Leatherman terminal, which had effectively been shuttered since its opening, is going to be open again. So that basically gives the US east coast another 2 million teu odd of capacity. So that would be, you know, after the shocks that they've had in Baltimore and so on, that would be. That'll be good for them. Over to the south coast, we're going to the port of Chiang Kai, which is in Peru. Big, big port that Costco is building there, $1.3 billion. That development had been held up by a legal dispute between the government of Peru and Costco. The peruvian president is currently in China meeting with the Xi Jinping. Anyway, that's been resolved. So construction of Chiang Kai is now resuming and is set to open, I think, later this year. Also, we have big news in India that they're building Vardhaven. That's given the go ahead, you know, that'll ultimately add another 23 million tEU capacity to India's west coast. And then finally in South Africa, the state owned port operator, Transnet, is pressing ahead with the concessioning offer. Its container facilities in Richards Bay, which is coal terminal, there's a small container facility.
Grindrod, a local company, has been named as a preferred bidder, and they're going to be building the capacity up there by a factor of four. So a few bright spots on the horizon for the capacity conundrum.
[00:04:52] Speaker A: Wonderful. Thank you so much. And now moving on to air freight. And as always, to help me with this, I'm joined by Alex Linane. Hi, Alex.
[00:04:58] Speaker C: Hi, Charlotte.
[00:04:59] Speaker A: Alex, transport intelligence put out a report on airfreight and it noted that demand was on the rise. It's kind of been spoken about for a while now, and everyone knows it's because of e commerce and excess red Sea capacity. But now also, according to Ti, it's being driven by consumer optimism from easing inflation. How are carriers responding to this?
[00:05:16] Speaker C: Yeah, well, air freight rates are steadily solid at the moment. The trans Pacific in particular is attracting carriers, which means it's profitable. Last week, Etihad said it was adding capacity into North America via partner airlines. China Cargo Airlines has announced block space agreements with Air France to go into Brazil. So it appears that they're expecting this trans Pacific strength to continue and probably to get stronger. Often what happens is if you put in extra capacity, the rates drop. But I don't think at the moment there's enough there to move the needle on rates. Yet on Asia Europe, Zaneta data shows that demand has risen through June and there has been a slight uptick in spot rates. Challenge is another carrier which believes in the longevity of commerce. It's just signed an agreement with Zhengzhou airport in a bid to add more e commerce volumes. So, yeah, the airlines are pretty confident that this is going to last.
[00:06:12] Speaker A: Also, you reported at the start of the week that UPS has sold Coyote Logistics, the freight brokerage it acquired in 2015 for $1.8 billion, and it sold to RXO. What are the details there?
[00:06:25] Speaker C: Yeah, well, the us truck brokerage market has struggled in recent quarters. We've seen a few exits from that market, and UPS has been trying to get shot of Coyote for a while now. As transport intelligence told us, Coyote sat uncomfortably alongside contract logistics and freight forwarding in UPS's supply chain solutions division. So they've offloaded it and it's been bought by Rxo. So it'll be interesting to see how that all works out for both of them, really.
[00:06:52] Speaker A: Finally, us logistics solutions, formerly known as Forward Air Solutions, filed for chapter seven bankruptcy with the loss of a significant number of jobs. What happened there?
[00:07:04] Speaker C: Yeah, well, this is another interesting case, but a bit of a sadder one. So private equity company Ten Oaks Group bought forward air solutions from Forward Air in 2021, but they told the lostyle last week that its third party lender had turned off the financing tap. So us logistics solutions had to file for liquidation. It gave staff no notice at all. It looks as if it's been having a tough time for several years now. It mounted a court case against former employees and management who it claimed went to arrival and took business with them, resulting in the loss of some quite big contracts and uncertainties over others. So, yeah, it's a sad tale.
[00:07:43] Speaker A: That's awful that they gave employees such little notice. I mean, is this even legal?
[00:07:47] Speaker C: Well, under the US Warn act, companies with more than 100 staff must give employees 60 days notice in the event of mass layoffs. Us logistics solutions didn't do that. So one employee has filed a potential class action to get 60 days worth of pay and benefits. There's been another interesting development. Rider truck rental now has millions of dollars worth of trucks in yards around the US, which in theory can't be touched until the bankruptcy proceedings complete. But Ryder is understandably worried about security and what may now be unmanned yards, and has asked the court if it can get its assets back for now. So, yeah, the us trucking market is quite an interesting place to be at the moment.
[00:08:27] Speaker A: Yeah, sounds like it. Thank you, Alex.
[00:08:29] Speaker C: Thanks, Charlotte.
[00:08:37] Speaker A: So, hopefully, if I've done my job correctly, you now have last week's supply chain news fully refreshed in your memory. And now I'm going to let you know what you might see on the Lodestar this week. We'll probably be seeing some more warning strikes in Germany from trade union Verdi in their ongoing dispute against the central association of German seaport Operators. At the end of last week, they called for a 16 hours strike at container terminal Willemshaven and announced that the next round of bargaining would take place in Bremen on the 11th and 12 July. Now, Verdi said that the strikes at the end of last week were to increase the pressure on the employers before the fourth round of negotiations. So likely we might see a few more warning strikes this week as we get closer to the 11th and 12 July. And speaking of strikes, we might also have a decision from the Canada Industrial Relations Board this week as to whether canadian rail can be deemed an essential service and whether the TCRC union would be allowed to initiate a strike. It was pretty quiet with updates there last week, but we could probably assume that a decision will be made sometime very soon. And we are of course inching closer to the end of September deadline for the current deal to expire between the International Longshoremen's association and the United States Maritime alliance. If there's no deal reached before then, that would mean we would see strikes along us east and Gulf coast ports. So we might have some updates there for you regarding negotiations happening or not happening. Obviously, we will also be covering ocean shipping rates, which are every week. I'm assuming we'll be seeing yet another rise there as the pattern that we've kind of noticed is it's usually the first and the middle week of the month that we see those rate increases. MSC have already said it's going to charge $9,800 for Asia to north Europe from the 1 July. And so we might see some other carriers following suit as well. Finally, Alex Linane will be looking at the freight payment market in particular IATA's CAS, which stands for cargo account settlement system. That is if she gets a response from IATA. So you can look forward to that. Thank you so much for giving me your time and I'll see you next week.
