[00:00:00] Speaker A: Hello and welcome to the Lodestar podcast News in Brief. I am your host Charlotte Goldstone and as always, we are going to be recapping this week's supply chain news. And coming up on this episode we are going to be Looking at IATA vs FIATA in a case of Ford liability changes relating to direct airway bills. We're also going to be looking at Maersk's updated earnings guidance and an insight into ocean rates, including the latest round of bunker adjustment factors. And we are also going to be taking a brief look at port and the impact that that is having on service.
My first guest for this episode is managing director and founder of ShiftX UK Keith Gaskin. Hi Keith, thank you so much for joining me.
[00:00:49] Speaker B: Hi Charlotte, thanks for having me on.
[00:00:50] Speaker A: Keith, can I first briefly ask you to introduce ShiftX and what you do, please, for anyone who might not be familiar.
[00:00:57] Speaker B: Yeah, of course, be delighted. So, Shift X, although we just started in April last year in the UK, we're celebrating our 10th anniversary this year. It's a company headquartered in Germany, but we'd actually started it's on behalf of our members. So it's almost like a cooperative stroke consortium for shippers and bcos. And very simplistically it's really pooling all of the volumes together from individuals bcos to give them preferential terms, which has been very beneficial for I'm sure points that we come to shortly around some of the things happening in the market. But it's giving annual pricing and preferential terms.
[00:01:34] Speaker A: Great, thank you. Well, it sounds like you are the part perfect guest to answer my following questions.
We're going to get into the news from this week and obviously a big part of your operations involves rates and trying to negotiate a price.
Rates have been a bit of an area of contention so far this year. I mean, you don't need me to tell you that. Something interesting that happened this week though was that Maersk raised its full year EBITDA guidance to 8 billion to 10 billion. This was up from the 4.5 billion to 7 billion range that it gave as recently as the 7th of May.
And it also also raised its EBIT forecast from a previous range of minus $1.5 billion to $1 billion to 2 point to $2 billion to $4 billion, if that makes sense. Maersk also increased its forecast for global container market growth to 4% from its previous guidance of 2 to 4%.
Now, I know you can't comment on the actions of one carrier in particular and it is important to note that they are just reacting the same as many other carriers but are under greater scrutiny because they are a listed company. So they have to financial guidance. But in general Keith, this update left a pretty sour taste in shippers mouths and as director of the Global Shippers Forum James Hookham pointed out to me, surcharges are only supposed to recover additional costs from the carriers, not inflate their profit forecast. So what have you been witnessing so far this year in terms of carriers ability to inflate rates through various charges?
[00:03:07] Speaker B: Yeah, I mean look it's a wider, you know, to reiterate your point, this isn't just Maersk in the market. Obviously their results are publicly available but it is an industry situation.
So yes, I think we all understand there's driving costs increases from fuel and it's not just the fuel increases that have driven up prices, it's actually the availability of where to get it from maybe repositioning the vessels. So I think in principle people understand the pricing has to go up even on some long term contracts. There's always been a BAF mechanism in place to reflect that. Not in that quarter but in the following quarter there are BAF mechanisms to recover that. I think when the initial surcharges came in it caused a lot of discussions between shippers, forwarders and the shipping lines really as to what that was for and would it be then added on top of the BAF recovery through the normal mechanism in the following quarter which we're now entering into now we're in July, obviously we're into quarter three. So whilst I do appreciate there's been huge increase in costs and I think there has been an increase in operational costs for the carriers because they necessarily couldn't have gone to where they normally refilled for fuel. They've been having to go to other areas.
It has been a big discussion for us and for our members on what's a fair recovery cost on that.
So I guess really from our model it's been beneficial for our members because if you're a smaller importer, 500 TEUs. A thousand TEUs, it's very difficult to push back on some of these increases.
But as we pool our volumes we have over 70,000 TEUs that we manage for our members. We have been able to negotiate with the carriers on that. I think in terms of we all understand we're shipping, it's supply and demand, demand has rocketed.
So I think, you know, we always know the spot prices go up but it has been something that we've been trying to discuss with the shipping lines openly because we do feel there's a mechanism in place. There's always a balance between paying a market price to get it onto the vessel but also making sure in our instance that we're looking after our members on that. So it's not a surprise to see the increase in Maersk's ebit and I think that'd be reflected all across the industry.
And to be fair we know that spot prices has been driven up hugely. I don't think there's been a huge, you know, we're not seeing Europe in this booming economy of, you know, sales like for like sales are going through the roof I think as well as the fuel. I think what it has done is a lot of bcos are trying to bring forward stock because they're worried about availability on the ship.
And one thing that we have seen that's talking to our members is not just the increasing direct fuel prices, for example the cost of trucking and the cost of per TEU on a ship. Manufacturing costs have been rising rapidly as well. So there's been inflationary pressures on the factories in China and we've actually seen a lot of Chinese factories applying reasonable pressure but saying look, could you take stock earlier before these fuel prices keep driving up our operating costs? So whilst it's been very tight in getting the goods on the ships, the factories certainly in China and Asia are actually asking the importers to bring in the stock early because their operating costs, manufacturing costs are increasing rapidly. So you know, if they've got a contract they're trying to adhere to their manufacturing cost contract.
So I think there's differing pressures in there.
[00:06:55] Speaker A: I mean something that you mentioned in your answer there was about the fuel costs and this is something that I wanted to ask about specifically from this week as well because on the 1st of July we saw new bunker adjustment factors which see carriers seeking to recover their extra fuel costs in the previous quarter.
But these are also going to coincide with a new round of general rate increases, peak season surcharges and freight of all kind, spot rate hikes that all came in on the same day. So what did you make of these and what do you expect to kind of happen to rates as a consequence?
[00:07:28] Speaker B: So we know the spot prices has been rapidly going up. Interestingly there's different mechanisms by carriers. Some applied emergency baf. We were because of our membership model and we really just did in long term contracting we were able to negate or mitigate some of those for a our members. But there are increasing costs as we know on the fuel.
But we've also seen the price per barrel come down to 80 or even sub $80 a barrel. So that should be reflected in Q4. But you know, a lot of this is going to be around whether the ceasefire holds.
Yeah, there's a lot of questions around that.
But the price of fuel, the raw price of fuel has come back down again and we can be up to three months behind the market the way that the general mechanism works in the following quarter to adjust to the bunkering charges. But there has been some huge increases on the spot price.
I think people thought this year it could be sub $2,000 on spot pricing and obviously we're way ahead of that now.
So I actually think the spot pricing will level out fairly quickly.
It may drop, certainly not to numbers that we saw at the turn of the.
But I think on the spot pricing it's going to stay high. There's huge demand currently out in Asia.
I don't see that dropping immediately, but I think maybe by September some of this big backlog that we've seen should have cleared. But I've given up guessing on what happens in our industry a long time ago.
So to answer your question, I think pricing for us, it's around the BAF mechanism because our long term pricing is fixed.
But that's coming down and I think the spot pricing will start to soften a bit during latter part of July and into August.
But as we know, everything is supply and demand.
[00:09:21] Speaker A: Yeah, I mean, you kind of touched on that. I want to ask you about the supply side of things because I think at the beginning of this year and probably at the end of last year, I mean everyone thought it was going to be in the shipper's favor because of this kind of oversupply that everyone has been talking about. And I mean you also said that everyone's given up predicting things now. I think everyone's smashed their crystal ball to pieces because, because you just can't, you just can't make any predictions. But it's been quite remarkable the carrier's ability to control their capacity in this famously oversupplied market. I mean, this week again we saw MSC reportedly place orders and options for 20 ultra large container vessels with a shipyard in China.
Are you noticing this capacity management from the carriers impact the service that you're receiving for your bcos?
[00:10:06] Speaker B: Not as quickly as I thought we would. I think if we didn't have the current crisis that we've got in the Middle East, I think this year could have looked Very different.
You look at the order books, you look at the supply. There's not been a huge amount of scrapping on container vessels.
So as I say going back to October last year, I think the expectation from a lot of bcos doing their contracts or trying to do their budgets for 2026 is a lot of people thought the Suez Canal would reopen. There was a huge over or potential oversupply of capacity in the market, which ordinarily points to the fact that there might be either a rate war or certainly a softening in the prices.
I think with the shipping lines to sort of a direct answer to your questions. I think through Covid, the carriers could see that the demand side is going to be what it's going to be. But the supply, if you can control the supply reasonably and previously when new vessels came in, there was a huge oversupply and pricing bond they've seen over the last five situ is that that supply and actually usable supply is probably a better word is if they have control on that, then we won't necessarily see rates bombing. But I think for us as we, you know, we negotiate on behalf of our members as we go to the latter end of the year and into next year, again, the overcapacity's there, but it's not really usable. I don't think at the moment.
Certainly if the Suez opens a lot of that capacity will definite be oversupplied because it's taking two weeks longer, for example, to go around the cape. So you have more vessels available from the existing fleet without the additional capacity.
But that's a big if. I don't foresee the Suez being fully open anytime soon and maybe they will constrict some of the new supply coming in, but I think there will be some scrapping because the new vessels are more efficient, lng, et cetera. So there can be some cost reductions from the carriers in terms of operating costs. But the big questions are when's the Suez going to reopen? None of us know.
And really when that effective overcapacity is going to come into the market.
[00:12:29] Speaker A: Yeah, I mean, it's interesting to hear that it hasn't had too much of a knock on effect on service yet that you're seeing. Anyway, something that we have heard that is having a bit of a knock on effect on the service that shippers are receiving is port congestion.
Obviously this varies port to port, so I'm not sure if it's something that you've seen, but we had an article based on on Linalytica Data this week that congestion in container ports has now risen to its four year high, with nearly 3.7 million TEU, or 11% of the global fleet, currently tied up awaiting berths. So that's kind of some unintended capacity management there from the carriers. But Lionelitka's report shows that North Asia's ports are the most congested, followed by gateways in North Europe and then in Southeast Asia, the Mediterranean and Africa.
Is this something that you've seen as a big problem? I mean, how is this translating into operations?
[00:13:21] Speaker B: It definitely has been, I guess I'll just use the term on the previous question, usable capacity. It's only usable if it can be deployed, removed at the port and loaded at the port efficiently and on time. And it's been a huge issue.
You know, we've had this year. I think some of the alliances are trying to work really hard to bring their schedule integrity to a much higher percentage.
So on the one hand they're trying to improve schedule reliability.
But if you're a customer that delivered your container on time, as it should be, did all your customs clearance through no fault of your own, you may have faced rolling boxes because the carrier is trying to improve their schedule reliability. So it's very difficult balancing act. Whilst we've been sort of looking at all These huge ships, 24,000 TEU vessels, the infrastructure at the ports hasn't replicated the growth in the vessels.
So it's great having a 24,000 TEU vessel, but if you can't unload or load the containers in a timely fashion because the port infrastructure hasn't been bought up to the same capacity, it's a real issue because your vessel cannot operate to maximum capacity. So it's a real problem. I know a lot of people around the globe are looking at this.
Like I say, there are some new, modern ports with the cranes, very new architecture around it, but it's a real problem around that usable capacity. I think last year we saw Maersk and Hapag with really impressive performances on or against their schedules, if you like, and the other carriers suffered. But to really, unless you start doing feeder vessels across everything, if you've got the large vessels during direct calls, it's an issue because the ports just can't unload in the timeframes that's needed to keep that vessel on track. So I don't see any huge changes for the foreseeable.
[00:15:19] Speaker A: Yeah, definitely. Keith, thank you so much for your time and for going through all of those topics in very, very detail. I really really appreciate everything that you have given our listeners today and it was great to speak to you, my second guest for this episode. To help unpack all things air freight news, I'm joined by the Lodestar publisher, Alex Linnane. Hi, Alex. Great to have you back.
[00:15:40] Speaker C: Hello, Charlotte.
[00:15:41] Speaker A: Alex, there was quite a big story on air freight last week. One forwarder described it to me as a game changer for the industry beyond comprehension. They said that nothing had occurred like it in the past century. And this is to do with a new direct airwell airway bill change from IATA that basically now means that forwarders are the liable party for damages. And according to Brandon Fried of the Air Forwarders association, they are potentially on the hook for things that they never even controlled and often can't see, such as how the car goes packed, what's actually inside the box, concealed dangerous goods, or even a misdeclaration by the shipper. These changes were put in place by IATA on 1 July or for 1 July, but Fiata requested it to be deferred until October. And they claimed that the amendments adopted by the IATA Cargo Agency Conference under an expedited procedure had been allowed to take effect before the formal review process could be completed.
I mean, this theme of IATA versus FIATA kind of continues on from an article that you wrote last month, what are your thoughts on this new change?
[00:16:52] Speaker C: Well, yeah, this has turned into quite a big story, really. We first heard about it in March when apparently, according to my sources, this was decided by IATA pretty much in a closed room in Peru at their cargo symposium event.
Now, I think most people at the time thought it was so stupid that it wouldn't possibly come into effect.
And yet here we are.
So it's about legal risks, as you say, and who carries a legal risk. And forwarders obviously don't want to be on the hook for things they can't control.
But what we are hearing is that implementation of it is quite inconsistent. So forwarders are being advised to talk to all their airlines, which is a complete waste of time for both forwarders and airlines. Obviously, we are going to try and find out as much as we can about what airlines are doing and how forwarders can manage this change. But it's another example of IASA's unilateral decision making and it's sort of arrogance in the way it treats its customers, really. The phrase the customer is always right has not been said, said byasa, ever. In fact, they're now saying the customer's always liable and at fault?
[00:18:03] Speaker A: Yeah, definitely. I mean, something that I am going to look into is the insurance side of things because one forwarder said to me that if you're liable for, I mean, damages, if it happened mid flight, those damages could, I mean, that could encompass like all of the packages on the flight and then the plane itself. The costs that that would incur are just kind of limitless. And who's going to ensure that? 1st of July also marked the official implementation of the EU's de minimis exemption for low value imports, meaning parcels valued at less than €150 will be subject to a flat customs duty of €3. It's very new. Have we seen any impact yet?
[00:18:39] Speaker C: It's a bit too early to say, to be honest, but there's a couple of interesting early signs. I had a quick look on Rotate's capacity database and Asia Europe freighter capacity is down about 11% over the past 48 hours compared with a week earlier. So sort of two days after it came in. Whether that's related or not is. It's as yet unclear, but we'll be watching it very closely.
It could suggest that some shippers are pausing while they work out an alternative.
That said, I don't know if it's going to be as dramatic as it was in the us. Shane and Temu and those E commerce platforms have been planning for this for quite a while. They've already started to shift things so that they're doing a bit more B2B than B2C. So they're keeping inventory more in Europe now and trying to source as much as they can there.
So they're not really abandoning the supply chain, they're just adapting it. So it could be that we see something like the US with a bit of a drop off, but it's likely to pick up again shortly after that, I would think.
The other issue is that The EU has 27 different customs authorities and there is uncertainty about whether they'll all be consistent. So you may find some shippers trying to get round customs authorities that are on it and going through customs authorities that aren't. But I'm pretty sure it will all level out sooner or later.
[00:20:02] Speaker A: Next week on the podcast we're going to be joined by Craig Strickland from Box C and he's going to talk us through all the kind of customs implications of this and the knock on effects that we've seen so far. Alex, I also wanted to ask you about a recent trip to Paris you took with Hachdel. What was that for? And did you speak to any of the team while you were there about any perhaps operational updates that they're looking at?
[00:20:25] Speaker C: One of the more unusual stories we've come across, but such an interesting idea. Axel took Air Cargo to Paris Fashion Week in partnership with the Hong Kong Trade, Trade and Development Council and various Hong Kong designers who upcycled Ha's workwear into new clothes for a fashion collection, which is amazing. I was made a jacket which actually I couldn't wear because it was way too hot, but that's now joined the Hatal fashion collection. It's such an interesting concept because as we all know, fashion and air cargo go hand in hand and as we all know, fashion sustainability go hand in hand. So this is Hackel's way of, one, bringing Hong Kong to the sort of Western fashion markets and two, showing that fashion can be sustainable and it's showcasing Hong Kong's sort of design talent.
[00:21:21] Speaker A: Finally, Alex, I want to ask you, as always, what did we see on the Lodestar Premium this week?
[00:21:26] Speaker C: Well, Premium, as ever, has had a really cracking week. They were first with the news that Patrick Mobil, who was at FedEx, has gone to head SIVA Logistics.
And Premium also said that there would be a big deal in the offing, which, as we all know now, turns out to be that CMA CGM is buying FedEx supply chain for $1.4 billion. So quite a big deal there. And Premium was the first to know, which is incredible.
They also have done a really good piece on the US CBP's new Force label labor rules, which, and spoiler alert, they're going to be challenging for many importers.
So essentially, if an importer can't produce documentation for even a single supplier in their chain, the entire submission and shipments will be treated as deficient and denied entry.
So it's quite a big thing.
And it's irrespective of whether there is forced labor in this priority or not. It's about the documentation. So, one to watch out for.
And among many other things that Premium did recently was a really interesting article on what we're calling the Fortnight brace, which is where shipping lines increase fak prices roughly every, well, every two weeks and the effect that that has on various indices. Now, the result of this sort of research has been that we think that shipping rates will peak in mid July.
It'd be interesting to find out if we're right or not. But it's. If you ever wanted to understand the indices, this is a really good article to look at.
[00:23:04] Speaker A: Thank you. So much. Alex yeah, I would definitely recommend our listeners go over to Lodestar Premium and have a look at what has been on there recently. That brings us to the end of our episode. A massive thanks to Alex and Keith for joining me. I feel like we covered quite a lot in that episode. Hopefully we kept it in time to still warrant the title News in Brief. And if you enjoyed this episode, then please like share, comment, subscribe, all of that good stuff. And if you'd like to feature on a future episode of News in Brief, then please reach out to
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