Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: And welcome to the Lodestar podcast News in Brief, where as always, we're going to be recapping last week's supply chain news.
Coming up in this episode, we're going to be unpacking some challenges for the proposed merger between U.S. railroads Norfolk Southern and Union Pacific. We are going to be looking at possible alternatives for forwarders rethinking their CargoWise subscription. And we're also going to be looking at what the impacts might be on some major ports with the resumption of Suez Canal transits.
And joining me this episode, I am with Alex Linnane, Lodestar publisher. Hello, Alex.
[00:00:44] Speaker A: Hey, Charlotte.
[00:00:45] Speaker B: And of course, Lodestar Managing editor Gavin Van Mull. Hello Gav.
[00:00:50] Speaker C: Hello, Charlotte.
[00:00:51] Speaker B: Alex, I'm coming to you first. At the end of last week's episode, you mentioned you would be looking a bit more about the cargowise alternatives for any forwarders who are rethinking their use of this platform. So are there any viable options or is what you mentioned about their monopolistic like hold on the market proving to be true?
[00:01:10] Speaker A: Well, yes, we've had a lot of interaction with the market over this story.
Do they have monopolistic like hold? Yes, to some extent. If you're a really big company like dhl, it would probably cost about the same to develop your own as you're going to pay for cargo wise, but it would also take a really long time if you're a small afforder. There's, as it turns out, many, many options on the market and I think every single one of them has got in touch with me.
I'm just sort of sorting through what's what's what we've got really.
I've become something of an unwilling expert on this subject, but there's so much more to come out. We've got the interview with the CEO of Wise Tech Global who was reasonably honest but still kept a little bit back. I'm excited to be publishing that this week and with Magaya, we had a really interesting interview with them. Lots of other companies getting in touch.
We've looked at Self Build, whether Flexport might sell its software itself.
But yeah, I think this is going to go on and on, possibly for the rest of my life. I suspect we will see.
[00:02:18] Speaker B: Well, I look forward to reading more about that and I'm sure it will be the talk of the town at Manifest next month. So I'm looking forward to that as well. And carrying on to something else we spoke a bit about in last episode and I mean we've Been speaking about it for over a year now. Last week's news gave us a bit more indication of what's happening with the return to the Suez Canal. So Gav, what is the latest here?
[00:02:40] Speaker C: Well Charlotte, I mean it's been a lot of toing and froing. In short, as you said in the last podcast, we talked about maersk redirecting its MECL1 service back through Suez between India Middle east and the US east coast following on the heels of CMA CGM which has clearly been the front runner in terms of Suez transits up to now. However, last week there was an announcement out of CMA's CGM HQ in Marseille that saying that three of its Asia Europe service would be returning to the Cape of Good Hope transits in the light of the complex and uncertain international context was the direct quote from cma.
Now I mean whether the security situation actually has worsened in the last week is hard to tell. I mean things seem to have calmed down a little bit in Iran perhaps, but I mean everything's so, so uncertain. You can, you can, you know, you can understand the reluctance. That said, the insurance costs definitely seem to have lessened. Simon Heaney from Drury last week said that they understood that ship, the ship insurance, the hull insurance was now for the waris premium was now down to 0.1% to 0.2% of the value of the ship's hull whereas they were previously at at 1% of the ships hull during the height of the crisis. So you know, a decline in sort of 90% is 80 to 90% in insurance premiums for transiting the Red Sea area would certainly indicate that the insurers are pricing the risk lower. But I mean, yeah, there's not going to be a large scale resumption of sewage transits in the next week. Let's put it like that.
[00:04:33] Speaker B: Yeah, I mean everyone that you speak to about this, they always say that insurance is a big factor, if not the main factor. But you had some analysis Sea Intelligence about what might happen on the port side once transits occur. So what did they have to say?
[00:04:49] Speaker C: Yeah, I mean it's pretty straightforward analysis really. What Sea Intelligence did was they took the line of connectivity data run by unctad, which is what the UN Commission for Trade and Development. That's right. And so they did. What they did was a pre Red Sea crisis comparison for a range of Red Sea ports and med ports and how many connections they have today. This is the number of liner port to port connections which you can do on a port basis.
And clearly for ports in those two regions, they're a lot less today for the very obvious reason.
So once Suez reopens, a lot of these connections will be restored. And so the question then is whether the ports will be able to cope with the increased numbers of vessels calling, etc. They did a further bit of analysis, so I'm just going to mention very briefly, which is looking at north Europe and they come up with a. We've talked about this before. Where you've got the problem once you redirect ships to go back through SE is there'll still be other ships sort of on the west coast of Africa. And. And basically, yeah, that stuff. So you basically get these two vessels on the same stream, but they're supposed to be weeks apart, arriving at port at the same time. Well, C have termed this the double influx problem, which I just love because it sounds like the name of a sci fi book.
So I'm going to be using that in coming weeks whenever it happens.
[00:06:18] Speaker B: Alex, there's something else that we've been monitoring quite keenly. I mentioned it in the introduction. That's the looming merger between Union Pacific and Norfolk Southern. This hit a bit of a hurdle last week. So what is the latest there?
[00:06:32] Speaker A: Well, I think in the previous podcast we talked about the rivals complaining that Union Pacific and Norfolk Southern had put in what they felt wasn't a really complete proposal.
And it turns out that the stb, the Service Transportation Board, who regulates this, it has agreed with them and it said I need to check my notes, but it said that they haven't put in enough details on the obligations, its ability to cancel the deal, and there is an absence of market share projections.
So the SDB has effectively rejected the merger as it stands, but has said, why don't you reapply putting in all the full proper filings and make it a complete application this time. So it's just a mild setback. I don't think it will change the dial, really. Unless of course, they're trying to hide something that they didn't want to put into the filing.
Or maybe it's just that the donation that Union Pacific put into Trump's ballroom wasn't quite enough. We'll have to. We'll have to see. But I think it's only a minor setback.
[00:07:36] Speaker B: Yeah, it's. It's interesting because we also had an interview with the director of the Global Shippers Forum, James Hookham, last week. This is a bit of a random aside, but he was talking about mergers and acquisitions but on the ocean freight side and he was saying that by June we would see the beginning of a period of reckoning for the carriers. He said there'd be a lot of pressure on some of the less resilient lines, meaning possible further mergers or even business failures if rates get into loss making. He was referring to kind of all that excess capacity and new orders definitely putting pressure on the market. And we recently reported that MSC have been acquiring yet more second hand tonnage. I think they're the only carri to have done so, the only container carrier to have done so this year. So it seems like none of the other major carriers can get a look in with the secondhand tonnage at the time of recording. But Alex, I want to stay on the overland sector for a moment. You wrote last week that FedEx has moved closer to separating its less than truckload business. What's the latest and what does this mean for the industry?
[00:08:35] Speaker A: Well, this slightly follows on from an article we did a week before about UPS and the sort of long term impact on air cargo.
But with Fede really about one of the problems is it's got a lot more competitors than it used to do. Partly through E Commerce.
It has decided to split off FedEx Freight which is its LTL operation which will be a publicly listed company from June 1st.
Really it looks like it's focusing on profitability, the main FedEx one because the LTL market as we all know is pretty soft at the moment and profitability might be quite difficult. But.
But FedEx itself, the reorganization looks like it's focusing on margin health to be honest.
And it's done quite a lot. This is I think sort of the final stage in its reorganization.
[00:09:29] Speaker B: Well, also in road freight news, to end this little segment, I had a report from Apply that things might be looking up for hauliers in Europe. They said that demand is going up due to easing inflation and lower unemployment rates. They said that an uptick in automotive and E commerce purchases is mainly driving demand. But still there is that factor looming in the background of driver shortages and this increased pressure to upgrade fleet to net zero, which is going to cost a lot.
Gav, we're going to come back to Ocean Freight now. We're starting to get an idea of carriers and Alliance's 2026 networks. So what's been happening there?
[00:10:06] Speaker C: So last week, yes Charlotte, there has been some, some moves on that. Last week the Ocean alliance published ITS network for 2026. It's so called Day 10 product.
Rather misleading name but there we go.
And I've been through it took quite a long time. And what I did was that I compared the port rotations for this year with the ones that are currently existing for the 2025 network. I used the EC database to do that. And.
And really there's very little change for meaningless exercise. There was, I mean literally on I would say, about half the services there is absolutely no change whatsoever. The port rotations are identical and the ones where they have changed, it's basically been a port dropped or a slight rotational change. Or on some of the Trans Pacific services they've swapped a call at Haiphong in Vietnam with a call at Kai, Mexico.
On the Europe stuff from the Asia Europe trades, which tends to be my focus.
Big losers Gothenburg lost its direct connection to. To Asia. Gdansk used to have two direct calls, now has one. There's an extra call for Felix. So probably the most interesting thing of all of it on the Asia Europe side would be the neu7 string at 7th string which has had two calls. Head hall and back call inserted a. An Egyptian port called Abu Kir Q I R which has never really come up. You know, that's the first time it's been on any of the. The main.
It's been a portfolio on the main services and. And I suspect this is an Asian North Europe service, right. So it goes, you know, up the coast of Africa and into North Europe and. And instead you Abu Kir, which is very close to the entrance to the Suez Canal. So.
And it's not part of the Suez routings. So I suspect that when the Ocean alliance does resume transits that the first service to do it will probably be that one because it's already got these ports on its routing.
So yeah, that's it. We had the premier alliance. I think they published their network shortly before Christmas, if memory serves.
So we're just waiting to see what Gemini comes up with and MSC with its standalone networks now.
[00:12:42] Speaker B: And have these networks got any correlation to rates? I mean, presumably the carriers are deploying their capacity on the most profitable lanes.
I'm not sure there would be any correlation at this current moment, but do you have the latest rate data for us?
[00:12:55] Speaker C: I've got the latest rate data just in answer to that though. I mean, one thing that hasn't been done with these networks is that the vessels themselves haven't been assigned. So you've got total numbers. They know how many vessels it would be needed to maintain the weekly strings, et cetera, but they haven't actually assigned the actual vessels. And that obviously Quite important because that could range from 1,000 TEU to 24,000.
[00:13:20] Speaker B: Yeah, I mean, they've got enough of them at the moment, don't they?
[00:13:24] Speaker C: Yeah, they have. Although interestingly, just as a thing, when you were talking earlier on about the capacity additions this, this year, I was. I've just been writing a story based on some jury research and actually the ship, the fleet will actually is only expected to grow about 3% in 2026. And that's largely due because there was a. There was a sudden drop off in orderings during 2023.
During 2023. So. That's right. So bless you.
During 2023. So that meant there's actually going to be a small lag this year. So weirdly, if you look at demand, which is at the moment, I think Drew is forecasting 1.82% this year, fleet growth of 3%, almost imbalance.
[00:14:15] Speaker B: Does that mean that we've got another few years to write over capacity stories then?
[00:14:18] Speaker C: Gav, we'll always be right. We'll always be writing over capacity stories, Charlotte. I mean, I could. I think the only time in my career that I've ever written an under capacity story was like during the pandemic.
It's sort of always. It's. It's the nature of the business. It's the way that, you know, ships take two, three years to be built and who knows what the demand's going to be like at the time they hit.
[00:14:42] Speaker B: Anyway, we've gone on a bit of a tangent here. Let's go back to rates. Let's get back to what we were talking about, back to race about four hours ago.
[00:14:48] Speaker C: Okay.
Yeah.
You asked me just in, in our prep for this broadcast, you asked me just to look at a couple of the Inter Asia stories that have been running recently. Because those, those have been quite interesting. I've got a sort of open question for readers, for readers, for listeners, which is how do you define Intra Asia?
Is it. Does it include Australasia and Oceania? Does it include the Indian subcontinent? Does it include the Middle East? You know, you know, we, the carriers would talk about Far east and Middle east trades, but Intra Asia traders, it's. It can be quite difficult. I remember APL used to include it all the way from Nava Shiva to, to Yokohama.
Anyway, this is.
[00:15:36] Speaker B: If you are listening at the moment, drop a comment down below. If you're listening on YouTube about how you would define Intra Asia. Sorry, Gav, continue.
[00:15:45] Speaker C: No, no, that's right. Perhaps we could run a poll.
[00:15:47] Speaker B: I don't know if YouTube allows you to do that. But we'll work on it.
[00:15:50] Speaker C: Wisdom of the mob.
Yes. So anyway, Intra Asia rates have been declining in recent months, both sort of between, in the core intra Asia trades between China and, and, and Southeast Asia and Northeast Asia and also between China and India and, and, and largely it's been a result of too much capacity being added and I think capacity out of Southeast Asia to China has gone up 22% in the course of a single month or something. So there's been quite a lot of dynamism in those trades.
On the deep sea trades out of Asia to North America into Europe, it was a week of, of quite of, should I say, steepening drops?
Yeah, it's.
They were down 9% to Rotterdam, 8% to the Mediterranean. This is as always via Drury's World Container Index. And then we were down, I think it was down 12% to Los Angeles and 11% to New York. So double digit increases on decreases on Trans Pacific and very close to double digit decreases on the Asia Europe trades.
Space isn't a problem for forwarders. I've been hearing just shortly before coming on the call, rates are expected to further drop. So that sort of pre Chinese New Year bump that the trade started with really appears to have evaporated.
[00:17:30] Speaker B: Now you did mention last episode that you thought we were at the peak or just past the peak.
Alex, I'd be interested to know how this compares to what's happening in air. Do you have any air freight rate data for us?
[00:17:42] Speaker A: I'm not going to be very specific about it, but very broadly speaking, rates fell in week one, rose in week two and fell again in week three.
Now that happened as a lot more capacity was introduced. So Vian said last week that something like 4% extra cargo capacity in air so far this year.
So the interesting thing will be whether demand manages to keep up with that.
Currently predicted to be 2 to 3% growth, which looks like we're going to have some low rates this year if that capacity, extra capacity stays in through the year.
One thing I thought was quite interesting was that I saw that the European aviation safety organization EASA has told airlines not to fly through Iranian and Iraqi airspace. Now that's added between, according to KLM cargo, between 10 and 30 minutes per flight, flight from certain points in Asia to Europe.
Obviously that comes with additional fuel costs because it's more fuel and it said it may play havoc with its scheduled arrival and departure time and therefore airport slots.
So although it doesn't seem very much on the face of it. It could have some sort of little staggered effect on airline operations. Sorry. So that was quite interesting and I imagine there'll be more airspace closures around the world at various times this year, but that's the one happening. Right.
[00:19:14] Speaker B: And while I've got you here, Alex, could you give our listeners a little tease of what's been on Premium last week, please?
[00:19:21] Speaker A: I certainly can. So we looked at CMA cgm which as our headline will tell you is Sniffing. Sniffing around Le Havre with something in mind to buy there. I'd read the story.
We. There's also actually a really good article on now I'm all into TMS systems. Really good article on DSV and cargo wise and what's likely to happen happen there and whether they're going to develop their Tango Shakers Tango system.
We had what probably is essential reading on mandatory cyber attack reporting, which you should probably know about.
We've got an article on UPS and robots and also look at how investors in the transport and logistics space might be reacting to geopolitical shocks. So yeah, as ever loads there lots and lots.
[00:20:14] Speaker B: And you mentioned a bit at the beginning that next week you were going to be looking at cargo wise. Is there anything else on your radar next week?
[00:20:22] Speaker A: Yeah, like I say, cargo wise will be. Will be keeping me busy. But also we've. We're working with Avian on looking at how air cargo might fare in 2026 based on the enormous amount of data points that they have. So we'll be. We'll be bringing you something about that.
[00:20:39] Speaker B: Wonderful. I look forward to that. We're still waiting for the tariff decision as well. I feel like we're going to be saying it for quite a few episodes. Right. Tariff decision this week. Tariff decision this week. But hopefully it will be coming soon.
[00:20:48] Speaker C: What do.
What's the thinking on when that. When there might be some notice on that?
[00:20:55] Speaker B: I genuinely have no idea.
[00:20:56] Speaker A: It. It has to be before July I think is the current rule. But they released the. They release it.
I think they release results or not results. They. They release their decisions two times a week but they don't tell you what it is that they're going to be ruling on.
Anyone who is interested, there's a great little Supreme Court blog and journalists there who are giving you up to the minute stuff on what's going on. And yeah, when everyone thought that they were going to release the decision last week, it was absolutely full of people waiting to hear about tariffs from all over the world. It's quite a nice little chat room. If Anyone wants to have a.
[00:21:37] Speaker C: And and does these. These decisions, they're released on the same day each week. So is it like every Tuesday and Thursday?
[00:21:44] Speaker A: It's something like that, yeah. I think the last one was. I think it's Tuesdays and Fridays. I'd have to check.
[00:21:49] Speaker B: But yeah, I've got Mondays and Wednesdays in my head for some reason.
[00:21:53] Speaker C: But either way, we should start running a book or something.
[00:21:58] Speaker B: It's either a Tuesday, Friday, Monday or Wednesday between now and July. So that.
[00:22:04] Speaker A: But if you keep reading the Lodestar, we will keep you updated.
[00:22:07] Speaker B: Exactly. Thank you, Alex. It's like when you're waiting for a parcel and they say it's going to be delivered between like 10am and 6pm so. Brilliant. Anyway, we will leave it there. Thank you both so much for joining me this week for another episode of Recapping Supply Chain News. It's been wonderful.
[00:22:22] Speaker A: Thanks, Eric.
[00:22:24] Speaker C: It's been an absolute pleasure. Thank you, Charlotte.
[00:22:26] Speaker B: And thank you to everyone watching. If you are over on YouTube, please like subscribe, comment, share, all of that. And if you're not watching on YouTube, then go over to YouTube and like share, subscribe, comment, all of that. Thank you very much for joining me and we will see you next week.
