Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: Hello and welcome to the Lodestar Podcast. News in brief. Thank you so much for joining me. This episode after a brief break from the podcast, we are back. So this episode before I start is sponsored by Avery Aviation Software. And Avery Aviation Software powers digital transformation in air cargo from booking to billing and everything in between. Streamline your operations with one smart platform.
So for the last few weeks I think everyone was expecting a little bit more clarity on what the tariff rates would be, but perhaps we were stupid to assume that because the deadline was yet again extended to the 1st of August. We did get a little bit of clarity through the publication of some letters that Donald Trump sent to the EU and Mexico. He posted this on Truth Social. So actually I'm not sure if this gave us more clarity or more uncertainty. Who can tell anymore? But what the letters outlined was that he was threatening 30% on both the EU and Mexico. And there was also some news that he was threatening 25% on South Korea. This is all from what's been posted on his social media, so perhaps take it with a pinch of salt. The EU did say it would prepare countermeasures. Mexico said that it was confident they would be able to reach a deal before the 1st of August. All this uncertainty we saw led to frontloading to the US yet again and it was a record month in June for the Port of Los Angeles. But despite this front loading, the vacancy rate in US warehousing climbed to its highest level in over a decade in the second quarter of this year. And this was reported by commercial real estate services firm Cushman and Wakefield. Tariffs have been widely cited as one of the drivers of this, as while they did trigger a surge in front loading, firms are now bracing for a drop in traffic. The US Government's move to withdraw de minimis exemption on E commerce imports from China has also been mentioned as an additional factor. But I'm now joined by Alex Linnane. And Alex, you had reports on impacts of all this tariff chaos last week. I mean, it seems to be the case for quite a while now. But what, what did you find last week?
[00:02:17] Speaker C: Yeah, it's very hard to know what the tariff impact really is, but an Indian forwarder told us last week that there's been really strong demand from the Indian subcontinent. There are additional charters and rates went up 10 to 15% in key trade lanes, but then demand's high both to the US and to Europe, so it's harder to tell if it's a tariff related bounce or possibly just an Indian export bounce.
Personally I think Brazil is one to watch. So tensions between Brazil and the US Are really high at the moment, and not just because of Trump's threat of 50% tariffs.
The U.S. trade Representative has launched an investigation into Brazil's possible unfair trade practices. So a forwarder told us that some shipments have already been paused and Brazilians are pretty upset about the whole thing. And in the meantime, China is making a lot of overtures to Latin America, including with visas and various investments, and Brazil might be poised to seek new opportunities elsewhere for its exports.
Anyway, it's a country we're going to be watching really closely.
[00:03:20] Speaker B: You mentioned there about the high demand from India, but what are cargo volumes looking like in general and rates?
[00:03:27] Speaker C: If you have any data, the market's really dull. Still, frankly, one interesting point made by Forkites the visibility platform is about shadow inventory. It thinks lots of inventory is being held at various sort of transshipment points and near shoring points. It cited Vietnam, Laredo and so on, and that somewhere along the line this is going to cause some issues for the companies that are holding this inventory.
But it could of course work out well for air freight, which is used as a sort of quick supply solution, although at some cost, obviously. Otherwise in air freight, points of interest have been sort of at individual companies.
One story we ran was about the handler alliance Grand International, which plans to buy handlers in Europe to finally get some market share there after what we've heard has been rather a long time of frustration for them. There are some independent handlers left in Europe, so we'll be keeping an eye on that. But as one person commented on theloathstar.com, it's also worth watching the dollar, which has fallen steadily since January, making it harder for US Companies to invest in Europe. But MA does appear to remain of interest for both private equity buyers and industry buyers.
So in June, for example, Menzies Aviation bought Norway's Spirit Cargo handling. Last week we heard that Eussen Logistics is buying Walden, a pharma and healthcare logistics company. So there are quite a few deals about and we're expecting to see more.
[00:04:52] Speaker B: Well, as we've highlighted before on this podcast, M and A is one of the topics that the Lodestar Premium is quite hot on, as well as often breaking company news stories. So for those who aren't subscribed to premium or why not? Alex, what could readers find on there last week?
[00:05:07] Speaker C: Well, they should subscribe because for one thing, Lowstar Premium broke the story on DHL Global Forwarding's head Tim Shalworth retiring. Although to be fair, DHL released it publicly pretty shortly after low Sell Premium broke it, which was quite annoying.
[00:05:21] Speaker A: But there you go.
[00:05:22] Speaker C: Also on Premium, there's a fascinating look at Kuhner and Nagel and how company culture is different from leadership.
Now, that's a topic we're going to be exploring in the Lodestar over the next month or two as we look at dsv, its acquisitions and company cultures.
There's also an article in Premium on Prologis, the real estate company, which apparently is seeing three PLs look to work with it in a different way.
And there's also insight into everyone's favorite that's in air quotes, by the way, freight software firm Wisetech and its bid for E2open.
Oh, and there's also a story on what's really going on at Antwerp Bruges.
[00:06:00] Speaker B: Thanks, Alex. And before we move on to Ocean Freight News, I want to remind listeners that this episode is sponsored by Avery Aviation Software. Avery Aviation Software delivers end to end digital solutions for the air cargo industry, helping airlines, GSSAS forwarders, air charter brokers, OBC providers and more to automate everything from quoting and booking to tracking and invoicing. They are trusted by some of the biggest names in aviation. Avery's customizable platform boosts efficiency, visibility and control.
So discover how Avery's ERP platform can transform your business at Avery Aero.
Now, as has been a theme for the last few weeks, last week we still saw this ongoing congestion problem at European ports. I'm now joined by Gavin Van Mark Gav, you reported what was happening at one particular port and that it was a factor in MSC's decision to alter its network. So could you give us the details, please?
[00:06:56] Speaker A: Okay, well, obviously we're talking Asia North Europe and this revolves around Antwerp. MSC dropped Caller Antwerp on its Swan service, moving that to Felixstowe, and it also dropped an Antwerp together from its Britannia service. These are both Asia North Europe strings.
From an MSC perspective, it sort of looks like to us anyway, that they're in the sort of first stages of developing a dual hub strategy for Northern Europe using both Antwerp and their very substantial operations in Felixstowe. Obviously a background to this. There's the possible acquisition of Felixstowe by MSC as part of that big global Hutchison deal. But it does seem that the world's largest shipping line is able to flex its services depending on congestion levels and demand. And it can switch calls from Felixstowe to Anto. I mean, they're only about 70 miles away, so it doesn't have a huge impact on their sort of supply chain. From an Antwerp perspective, there's quite an interesting story here because last week it also released its first half results for 2025, where it saw box traffic was up by 3.9% to 6.71 million TEU. And I don't mean to single out Antwerp here, but it can't not. You know that it pretty much has been the sort of epicenter of European port congestion. Yes, there's been congestion in Braemerhavn, London, Gateway, Hamburg, Rotterdam and so on. But really, Antwerp seems to have borne the brunt of it, which is why seeing them Post a near 4% growth in volumes was sort of impressive. Well, then we looked into it and here's the thing.
So in the first quarter of this year, Antwerp overtook Rotterdam to become Europe's largest box port. But it's only done that since the 2022 merger of Antwerp and Bruges port authorities and Bruges. What comes under that is the container facilities at Zeebrugge. Now, for liner terms, Antwerp and Zabruger are different ports, right? They host different strings, they're just different ports. But from a port authority accounting perspective, they're now one port, which means it makes Antwerp the biggest. We did this analysis last week of looking at volumes and how capacity and all that sort of stuff has varied at Antwerp versus Zabruger.
And it's really interesting because what you actually see is that most of the growth that Antwerp Rouge has seen this year has very much largely come from growth at Zabruca. There's twice as much monthly capacity offered by carriers at Sabrucka this year than there was at the same time last year. There's like a 40% increase in sailings there compared to last year. So basically, a lot of the growth actually that we're seeing in Antwerp, we're not actually seeing in Antwerp. It's actually taking place in suburb.
[00:09:54] Speaker B: I mean, this theme of congestion is not exclusive to Europe. As we reported last week, it's also emerging at ports in Africa.
And carriers were beginning to impose congestion surcharges on shipments into African ports. So cma, CGM and MSC announced surcharges on services between India, the Middle east and Africa.
And there were reported delays averaging between two and five days from Congo, Angola, South Africa, Tanzania, Algeria and Morocco. And I think one reason for all of this congestion that we were speaking about is just the amount of market growth that we've been seeing, especially with all this new capacity coming in. There was a report from Braemar that the supply and demand curve will just keep widening before hitting a peak in 2028. So due to the lag between order and delivery of a ship, Brehmer kind of calculated that there's about 3.3 million TEUs scheduled to be delivered in 2028 alone.
And container fleet over capacity is going to average 27% annually to 2028. And this is also expected to be the year that the line of fortunes hit a bit of a low point, because at this point it's expected that the Red Sea transits will resume, although who knows? But Alpha Liner also reported that in the first half of the year, the number of container vessels being sold for demolition fell to negligible levels, they said, and there was only 5,454 TEU being recy.
And just to put that into perspective, across the same period in 2024, this figure was 48,600 Tu. I mean, very long way to go until 2028. And Braemar did highlight that there were many factors of play, including obviously the Red Sea reopening and demand, which no one can really predict.
[00:11:39] Speaker A: No. And I mean, there are a lot of assumptions going on in those positions. Yeah. I mean, 5,000 TEU, I mean, it's one panoramic ship. It's teeny weeny. I mean, I have to say, even 48,600 in the same period of 2024 is a speck when you compare it to sort of global capacity. And this is very interesting because I talked about this during the week, Charlotte, didn't we? You go back into the history of liner shipping, tend to find that scrapping levels tend to show a correlation with new building deliveries. You know, new ships, come on. That allows certainly older ships that need to basically stop operating. It allows carriers to rationalize capacity depending on demand levels. And I would say that from here till 2028, we would expect, if there's any sense in the world to see some sort of return to the levels of scrapping that I'm normally used to, which is 300,000 to half a million tu. I mean, that's the level we normally see. I mean, you've never, since you started working, you've never seen anything like that level of scrapping, have you?
[00:12:50] Speaker B: I haven't, no.
[00:12:51] Speaker C: No.
[00:12:52] Speaker B: Since I've joined, it seems that carriers are just kind of holding on to capacity and like post Covid and now all of these tariff shocks and everything, it's like shippers are front loading and then, you know, it's very Hard to predict.
[00:13:01] Speaker A: And then the Houthis come along.
[00:13:04] Speaker B: At the moment, it kind of seems no wonder that carriers are holding onto this capacity. But OOCl reported its Q2 operational update last week. Are they still good fortune?
[00:13:14] Speaker A: It's an operation update. It's become something of a bellwether for industry observers such as myself because they basically produce their revenue numbers and their liftings and it tends to come in about a fortnight before the listed carriers such as Maersk actually reporting their accounts, as it were.
So what did it tell us? Half year?
I mean the volumes are good. Half year volumes were up 6.8% on the first half of 2024. If you put that against the market growth as measured by container trade statistics, who are Looking at a 4.3% market growth, it's clear that 00 has won, has won. Market share revenues are down though, and especially in the second quarter, they went very soft. So what we are seeing there in a nutshell is the overcapacity is now starting to have a profound impact on rates irrespective of the Red Sea crisis.
[00:14:12] Speaker B: You also did one of your trade routes story looking at this kind of supply demand imbalance on the Asia to West coast, South America trade in particular. So what did you find there?
[00:14:22] Speaker A: It's an absolute classic story really. And if you want to understand the sort of cyclicality of line of shipping, this could be an almost textbook example. So you've had very strong growth from Asia into Latin America, a lot of bullishness by both carriers and forwarders, a few external factors. Costco opened its new port in Chiang Kai and Peru. You've got strong consumer growth in Latin America. There was obviously a certain amount of cargo being diverted that might have been US bound and going into Latin America instead.
Another backdrop to this of course is the trade war and these countries, the west coast Latin America exports a lot of food stuff up to the US and being hit with high tariffs, they start looking at other markets and actually there is a ready made market in China for these countries. Nonetheless, what we've seen is that very strong volume growth and what looked like high demand led a lot of capacity to be injected into the trade. And now, as often happens, too much capacity was injected and that led to rates falling. Just by way of example, this is from the freighthouse terminal in January 2025. The freight rate from Shanghai to Kiao was double what it had been in January 2024.
Right. And then you've got this capacity buildup over six months. We've just had which has had the effect that in July 2025 the freight rates are under half of what they were in July 2024. At the same time, according to CTS stats, volume growth on that trade has been around.
So you've had big volume growth and plummeting rates. That only means one thing, there's too many ships. And the result of this is that the carriers who launch these services sort of since you know, the back end of last year and this year under vessel sharing agreements, now they're starting to extricate themselves from that.
And you offer standalone stuff. So principally CMA CGM is going much more standalone than it was, as is Evergreen. And you would imagine that the services which they ran in corporation with double OCL and Costco will be looking to sort of trim their capacity offering to Latin Americans. Certainly the forwarders we spoke to want this. Right. They told us that they really fear that rates will continue to drop if more capacity isn't removed. So I would say it looks like it's reaching a sort of critical point. I would expect to see more action going.
[00:17:04] Speaker B: Well Gav, now you've so wonderfully set the stage for the contextual factor.
[00:17:09] Speaker A: Segue is my middle name.
[00:17:11] Speaker B: What were the rates doing last week?
[00:17:14] Speaker A: Trans Pacific was 1% down on the previous week.
Middle of the week saw a range of GRIs ranging from $1,000 to $3,000 per 40.
They acted like a seat belt to what had previously been crashing rates. We've been reporting double digit rate declines in the last three or four consecutive weeks.
They're down 1% this week is probably just due to the GRI effect.
And Asia to North Europe they're also fat, again 1% down.
But it appears that loading activity in Asia is quite good for North Europe.
Maersk have announced a $500 per 40 peak season surcharge to begin on the 1st of August. And they just had a vessel delivered 15,000 to South Korean built Beijing Maersk which is just recently just doing some sea trials in South Korea at the moment. That's going to be deployed as an extra loader sometime in August. So that will be running a dedicated Asia, North Europe, scooping up any cargo that's been rolled over. We have heard actually short term contracts are going to find it quite difficult to get their allocated space. It seems that carriers prioritize higher paying spot where you can't go and short term contracts, we'll see how that plays out in the next few weeks.
[00:18:40] Speaker B: Charlotte, thank you very much Gav.
[00:18:42] Speaker A: Thank you foreign.
[00:18:49] Speaker B: So now we are all caught up on last week's supply chain news, here is what to look out for this week. We are now heading into Q2 earnings season which usually fills me with dread because numbers are very much not my thing. But it's quite interesting at the moment actually because we're going to see how all of these external shocks and this lingering uncertainty is impacting carriers, troopers and forwarders bottom lines. And this week we'll see Kuhn and Nagel report on Thursday as well as US Road freight and contract logistics company Ryder.
But before that, on Wednesday, US railroad union Pacific will be announcing their Q2 results and they were in the news last week for reportedly holding talks to acquire their rival company Norfolk Southern. This deal would create the largest rail operator in the country. So hopefully we might get some more insight into what is actually going on there.
Thank you so much for joining me this week and thank you to Avery for sponsoring this episode. I will see you next time.
