Episode Transcript
[00:00:00] Speaker A: Good morning and welcome to the Lodestar podcast News in Brief, where, as always, we are going to be recapping last week's supply chain news. And coming up in this episode, we have an update on the ocean and air freight rates. We have a little look at tariffs, of course, and we have a status update of what is going on with the Suez Canal. So let's get straight into the episode.
And joining me this episode, I feel like I don't need to do guest introductions at this point. I have the same guests on every episode. I'm going to do it anyway. For continuity purposes, I'm joined by the Lodestar publisher, Alex Linnane. Hello, Alex.
[00:00:33] Speaker B: Hi, Charlotte.
[00:00:35] Speaker A: And the Lodestar managing editor, Gavin Van Mul.
[00:00:38] Speaker C: Good afternoon, Charlotte. Good morning, Charlotte. Sorry.
[00:00:41] Speaker A: And before we get into last week's news, we should give a little shout out to the event we were just at, which is probably why Gav and I might be a little bit slow in today's episode. That was the BIFA Freight Services Award. It was a great event, so thank you so much to Bifa and congratulations to all the winners. Gav, what did you think of the event? Did you have a nice evening?
[00:01:00] Speaker C: Well, it was cracking. They always are. They're always really good. I always really enjoy the Biffa Freight Service Awards.
You know, they come in sort of mid January. It's really dark and cold and it's. Yeah, it's nice to sort of.
To use the old cliche to see old friends and make a lot of new ones. I had a lovely time. How about you?
[00:01:18] Speaker A: Yeah.
[00:01:19] Speaker C: It was your first one, was it not?
[00:01:20] Speaker A: It was really good. Yeah, it was my first one and it was really nice. There were so many young people there, which is just like not what happens at logistics events at all.
So, yeah, it was very, very refreshing and nice to see young people being celebr.
[00:01:32] Speaker C: Yeah, I was actually on the. Sitting one seat across from the. From the. From the young guy who won the Young Freight Forwarder of the Year.
And.
Yeah, yeah, no, I was.
[00:01:45] Speaker A: I was sat on the table with people who.
I sat on the table with people who did apprenticeships for young people trying to get into the industry. So that was really good to talk to them and perhaps more on that coming up next week. Alex, last week we still didn't get any news from the Supreme Court on the rulings whether Trump's tariffs are illegal or not, but there was some good news for regarding refunds. So what's the update?
[00:02:07] Speaker B: Well, yeah, so the Supreme Court doesn't tell you which case it's currently reviewing, but it issues results. I think it's twice a week.
So we've been watching it like a hawk, but it's just the wrong cases coming up.
So I mean it has to be before July. I think that they finally rule on it, but everyone's hoping there'll be a bit sooner. But one thing as you say did happen that was good was that the lower court has confirmed that unlawfully paid tariffs will be refunded even to those companies that haven't filed court cases.
So Baker Tilly's Director of Global Trade Advisory Services, that's Pete Mento, used to be dsv.
He explained that if SCOTUS ultimately rules that these tariffs were unlawfully collected, then customs will refund them full stop. So that's some nice good news to start the episode with.
In other sort of tariff news, tariffs on Taiwanese imports to the US have been cut from 20% to 15% based on Taiwan's commitment to put in $250 billion worth of direct investment into US server production.
I don't think it's been made law as we speak, but that's definitely on the cards.
And there was also a tariff on AI chips, but only those going into the US of strategic importance. Not something that's going to be re exported or is apparently not important in the administration's eyes.
Interestingly, this was done via a proclamation under section 232 and not under an executive order and IEEPA tariffs.
So if tariffs are ruled illegal by the Supreme Court, these ones won't be included in that.
Which I think is quite an interesting change of development from the White House.
[00:03:59] Speaker A: Yeah, it's going to be really interesting to hear the court's verdict eventually because I mean last week we saw yet more evidence of Trump using tariffs to counter non trade related issues on Truth Social, he wrote, effective immediately, any country doing business with the Islamic Republic of Iran will pay a tariff of 25% on any and all business being done with the United States of America. And he added, this order is final and conclusive, but it's not because it's not not been on the White House website. So it's not final and conclusive.
That was a threat in response to Iran's violent treatment of demonstrators in mass protest that evolved from complaints about economic hardship and have developed into widespread calls for political change. And we also had an article to say that protests in Iran could expedite a return to the Red Sea services as a regime change could remove support for the Houthis meaning obviously a quicker path to normalization and it could also end sanctions on the country. So speaking of this gap, where do carriers currently stand with a return to the Suez Canal? I think there was some noise last week that Maersk is trialing.
[00:05:03] Speaker C: Yeah, it feels like it's gaining momentum. Certainly the headline news from last week was Maersk's announcement that it's India Middle East. India Middle east to North America. MECL1 service is to resume full Suez transit from now on. The departure of the Cornelia Maersk From Dubai on the 15th of January will be the first vessel to in the string to mark the official return. Although we previously reported that a couple of other ships in the same rotation have undertaken trial transits and particularly they did it after what they call going dark, which is, you know, you switch off all your AIs and stuff when you, when they enter the Red Sea.
Obviously prior to this we've seen several transits undertaken by CMA cgm, although often that is within the context of their vessels having a French naval escort.
What happens next?
Still open to question. There are so many variables. I mean the question that everyone wants to know is will other carriers follow suit? Ultimately they will, but when? And I would suggest that the current uncertainty in Iran that you've just been talking about, Charlotte, and what the US might or might not do is likely to delay a full scale return.
Imminent or rather likely to delay an imminent full scale return given the Houthis relationship with Iran as you've mentioned and fact is that their ability to shut off the Red Sea is one of the few big levers that the regime in Tehran has left.
[00:06:47] Speaker A: Do we think with Maersk going through with just this one service that it might mean that port congestion won't be as bad as people think? Or is it only a matter of time before everyone starts resuming services?
[00:06:57] Speaker C: Well, so this service doesn't actually have any calls in Europe, it just, it transits Suez and then goes to the US east coast. I mean to be fair, you know the, the two, the two main trades that are sort of three if you want to, but the main trades that are affected by the Suez Canal closure, obviously the ones from Asia and, and the Middle east et cetera into Europe but also Asia to the US east coast if you're going via Suez rather than via the Panama Canal, I mean to be honest, volumes into the US and we'll be discussing this in a little bit, are quite weak at the moment. So I mean I don't think the one service will it will on its own be enough to cause congestion.
And you're right to bring it up because the real worry about the congestion is in Europe, you know, and it's the sort of congestion that we, we'll probably see if carriers return to using Suez en masse.
[00:07:57] Speaker A: Well, the Suez Canal and the Red Sea was something that took up quite a lot of our editorial coverage last week. We had quite a few stories on this. But another little theme that I noticed from our stories last week, there was a few stories on M and A amongst airlines, which is quite random. But Alex, could you give us an overview of what's going on?
[00:08:12] Speaker B: Yeah, sure. So we looked at the Atlas Air deal and I have to remember before Christmas, Apollo said it wanted to sell Atlas for $12 billion.
Do remember that it bought it just less than three years ago for something like $5.2 million. So that's quite a high markup.
So sources told us that Atlas Air's fleet isn't quite young enough for that kind of price tag. So that we should expect to see an order in the first quarter, probably a Boeing order, given that geopolitical nature of the world at the moment. Sources also told us that an $8 billion price tag is much more likely than a $12 billion price tag. But even so, there's still quite a lot to justify there.
In other M and A news, we saw that Allegiant was buying Sun Country Airlines. Now that's really a passenger thing, but everyone will know that sun country does quite a lot of Amazon flying. So we had a look at what that might mean for Amazon's relationship with sun country and whether Amazon has any get out clauses. So I'd adv to look at the website if you need to find out more on that.
[00:09:19] Speaker A: Also, on the air cargo side, you wrote last week that UPS was in a bit of trouble. So what's the situation? What's caused this?
[00:09:25] Speaker B: Well, actually, the UPS redundancies have been around for a while. There's been various headline figures, sort of 48,000 redundancies, something like that, but there's a lot of information about it and it's been going on for a while. But what was different with this article was that we spoke to Stan Raitt, who's a consultant at saseworld, and he says that the, that this is the sign that integrators changing and resetting their business model is a sign of things to come in air cargo.
He said that it amounts to a broader shift in air cargo economics and it's giving airlines Actually not a threat, but a rare strategic opportunity to market their services better in a new distribution model. Again, well worth the read. It's a really interesting look at what the integrators reset might mean for air cargo.
[00:10:17] Speaker A: Now to round off the episode, I want to take a look at rates in both ocean and air because I read some analysis last week from Sea Intelligence that said container spot rates were showing unusually early signs of peaking ahead of next month's Chinese New Year holiday. And analysts at Braemar also said that they were starting the year on firm footing. So what happened last week with the rates?
[00:10:38] Speaker C: Yeah, I think C and Tell might be right on this one.
So we did see a correction in pricing last week. There were quite significant declines on the Trans Pacific.
Drury's WC World container Index showed the spot rate to the west coast down by 7%, to the east coast down by 10% which meant that sort of 15th of January GRIs that were introduced just failed to stick entirely.
And there's definite, there's a real sense of low demand on those trades into the us. I mean freightos did a survey late last year which showed that well over half of small and medium enterprise shippers are withholding shipments basically until they've got more clarity on the tariff situation.
On Asia Europe the declines were much more gentle, down 3% to Rotterdam, down 1% to Genoa.
But I think they're right. It does suggest that that this pre Chinese New Year cargo peak that we've been talking about for about the last month or so looks like it's beginning to level off now, Charlotte? Yeah, and you know, blank sailings are being starting to be rolled out accordingly over the next few weeks.
[00:12:06] Speaker A: And how are things looking in air, Alex?
[00:12:11] Speaker B: Rates have really firmed up in air actually and really quite quickly.
According to new data from Avian, which is an analyst, there's been a rush on aluminium coils going into the us. Now this had happened before Christmas, we reported on it then, but apparently it's still going strong. So so far 70 widebody freighters worth has gone into the US which as anyone who knows air cargo will know that's quite nuts because you don't tend to fly aluminium coil where you can avoid to.
And more interestingly, it's mostly coming from Switzerland. I just thought Switzerland made cuckoo clocks and watches and chocolate. I didn't realize they made sort of industrial products like that. But apparently they do really niche specialized aluminium coils for aerospace. So normally you wouldn't expect Switzerland to make sort of industrial products like this. I Thought it was just cuckoo clocks and watches and chocolate, but apparently they do very specialized aluminium coils for the automotive and aerospace industries, so that seems likely. And you also use them for servers and other high tech, so that could explain some of the rush there.
So on rates briefly, the freight off air index is up from a low from the first week of Jan.
It's back to where it was just about the week before Christmas. So that was quite a high rise as I said in quite a short period of time.
Capacity is also flooded back into the market.
If you look at rotate slide capacity database you can see it's all green again up from last week's all red. So I think it's 15% up week on week capacity in terms of the rates on various lanes. I don't have the latest numbers right now, but it'll be one to watch because we don't know whether this is just a one off or whether this is the start of a rush before Chinese New Year.
But anyway, rates are up and that's good for airlines, bad for shippers.
[00:14:09] Speaker A: And before I let you go, Alex, could you give our listeners and me a little bit of insight on what was on premium last week?
[00:14:16] Speaker B: Of course there was a lot as ever. We did an analysis of JB Hunt which is reporting a fragile freight market.
We had a look at the future for tri engine jets after the MD11 crash.
We had a look at the fast group, that's a Californian company, their bankruptcy and various nightmares.
There's an article on whether it is crunch time for DSV and cyber concerns at Cunanagal, which as you might remember was affected by some sort of cyber problem last year. Cyber concerns at Koonnalagal, which you might remember last year was hit by some sort of problem.
So we've had a look at that.
[00:14:57] Speaker A: Yeah, it all sounds very interesting. I do encourage our listeners and watchers to head over to Lodestar Premium. Looking to the week ahead now obviously we are still waiting for the Supreme Court's decision on tariffs, which hopeful will come this week. Do either of you have anything else on your radar for the week ahead?
[00:15:13] Speaker B: So after last week's News and Brief podcast, I was inundated with people who want to comment on cargo wise alternatives to cargo wise, how they feel about cargo wise and true to form, as I mentioned, the CEO Supinapu who's been really involved in social media, he got in touch, well his people got in touch.
So I've got an interview with him this week plus numerous others on other software so I'm going to be a bit of a software expert by the end of the week, I think. Anyway, if anyone else wants to join in, please get in touch with me. But, yes, we'll be covering that next week.
[00:15:50] Speaker A: Thanks, Alex. What about you, Gab?
[00:15:51] Speaker C: Oh, I've got various presentations and webinars and interviews and meetings scheduled. Yeah, and follow up with some of the contacts I made at Bifur and Normal stuff, really. Nothing? Nothing that stands out. Nothing. Nothing in the diary?
[00:16:06] Speaker B: Nothing.
[00:16:07] Speaker A: You're really driving traffic towards your articles there. You've made it sound so interesting.
We'll leave it there. Thank you both so much for joining me this episode. It's been great to chat to you.
[00:16:19] Speaker C: Thank you very much, Charlotte. It's been great.
[00:16:21] Speaker B: Well done, both of you, for getting through it under such difficult circumstances. Thanks, Charlotte.
