Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: Good morning and welcome to the Lodestar Podcast. News in brief, we are going to be recapping all the main events from last week's supply chain news. That's air, land, sea and everything in between, all in one neat little podcast. So if you weren't paying attention last week, don't worry. That is exactly why we're here. And we are also going to be giving you some insight on what you might see on the Lodestar this week. At the start of last week, the Ocean alliance announced what will be its 2025 schedule. Now, the Ocean alliance is the only major alliance that is not undergoing a significant reshuffle this year. And actually in its press release last Monday, OOCL revealed that carriers Cosco, oocl, cma, CGM and Evergreen, which are the members of the Ocean alliance, have signed to continue their partnership for at least another five years so their customers can expect some stability there. Its schedule was largely the same, which will be a huge bonus for it as the other carriers are likely to be hit with delays as they bed into their new networks. But it did introduce three new services, that's two from Asia to the US and one from Asia to Europe. Its schedules included both a Suez Canal and a Cape of Good Hope version. It confirmed that the vessels would continue to be diverted around the Cape of Good Hope for the safety of crews, cargo and vessels. But this could all change, and a lot sooner than we all thought, because as things stand at the time of recording, it appears that a ceasefire agreement between Israel and Palestine is still on for Sunday. So that will be yesterday when you're listening to this, I'm now joined by Gavin Van Marl. Gav, do you expect this to have a big impact for shipping in the near future?
[00:01:43] Speaker A: Okay, in the near future, probably not. I mean, there's three things to note, right? First is the Houthis. According to the Economist, the Houthi are earning around $2.1 billion a year in sort of security assurances for those ships that are still transiting the Bab Al Mandab Straits. So that's a serious earner for them. So financially there's no incentive for the Houthis at all. And probably also politically there isn't, but they have said that they would. For the shipping line side, insurance costs are just through the roof. I mean, if you're a bona fide carrier and you want to do a Suez transit today, it's going to be costing you about 20 times the amount in terms of insurance premiums than it would have done prior to the crisis. And then finally on sort of point of resumption of I mean, because this is what we're all looking at, right? We're all looking at when, when people start resuming Suez transit and who will be the first carriers. A really interesting analysis by Easy last week by Destine Ozega, the head of forecasting and operations, who noted that over the course of last year there were some cma, a couple of COSCO ships that performed Suez transit. So she thought that on balance, the most likely carriers that would first resume Suez transit would probably be some combination of cma, Costco, zero ocl, probably in non Ocean alliance services. But she also noted that currently on the Gemini Corporation's schedules for the Middle east to Europe services, the published schedule still suggests a Suez transit. So in the near term, if there is a dramatic cessation of hostilities, then you could possibly see the first Maersk or Hapag Lloyd vessel transiting sewers on the 4th of February. It very much depends on the sort of political assurances that the carriers have had.
[00:03:46] Speaker C: Right.
[00:03:46] Speaker D: I'm sure people are going to be keeping a very keen eye on who's doing what in the next few weeks. But another thing that stakeholders are watching pretty closely at the moment is the rapid escalation of the trade war. Now, updates to this from last week included Pentagon officials confirming to the Lodestar that China Cargo airlines and Costco face being blacklisted from US Government related contracts. And that's after they were included on a list of Chinese commercial interests considered military assets. And then also Adam Lewis, who's the president of cleric customs brokers, raised that Donald Trump may use special legislation to speed up implementation of the tariffs. And he was talking about the International Emergency Economic Powers act, which could bypass lengthy negotiations in Congress. He warned that the timeline for tariff implementation could be weeks. And we've now seen this ripple out way further than just US China as recent export controls imposed by China have created a crisis situation for India's electronics manufacturing. We reported, and this is due to a shortage of key components and machinery that are usually sourced from China into India. Now, are we seeing a rush of cargo before this uncertainty enters the White House?
And what is it doing to rates.
[00:05:00] Speaker A: GAV as far as US Cargo goes into the US the rush has pretty much all taken place. There really isn't the time left now, whether we're talking Donald Trump's inauguration today or the beginning of Chinese New Year, which is at the end of this week. The, the, you know, the time to Ship cargo in advance of those two milestones is way in the rear view mirror, so. And missed the boat, literally, if you didn't get it on the boat. And we said this before, right, like last year, you needed to get your stuff, really, you needed to get your stuff on the boats before Christmas. We're down on both the Asia Europe trades. That's a continuing trend that we've seen for the last month or so. And we saw the first declines on the routes into the U.S. east and west and Gulf coasts for the best part of a month. So Drury's Shanghai, Los Angeles leg was 5% week on, week down into New York was 4% week and week down. Shanghai Rotterdam 3% week and week down. Genoa 2% down. I had an interesting exchange with senators head analyst Peter sand that, you know, they've seen a fair amount of discounting happening on Asia Europe trades. I'm just going to quote a couple of numbers here. So Zenita market average for the Friday just passed is $4,488 for a 40 foot on the Asia North Europe trade. So that's 600 less than the year end. That's the average rate. But at the lower end of the market they've got rates of like $2,700 per 40 foot. So there's quite a large spread going on amongst the trade and that normally indicates that there's some sort of rate war going on.
[00:06:44] Speaker C: Can I just butt in at this point and say if you're interested in the outlook for 2025 shipping market, we just published a really good podcast with Hapag Lloyd. It's really interesting on about Red sea optimism for 2025 and a lot of.
[00:06:58] Speaker A: Stuff on Gemini and the 90% reliability.
[00:07:00] Speaker C: Yeah, no, no, it's definitely worth a listen.
[00:07:02] Speaker A: It's a cracking listen.
[00:07:03] Speaker D: And that is Mike King's the main Lodestar podcast.
[00:07:05] Speaker A: Yes.
[00:07:06] Speaker D: And so, yeah, Alex Linnane is also here. Hi, Alex. Alex, how does this compare with the air freight rate?
[00:07:12] Speaker C: Well, air freight rates, I'm not going to go into as much detail as Gav just did there, but there's quite a lot more capacity in the market. In fact, rotators say that the belly capacity is now finally back to pre Covid levels. That took a long time. Rates seem to be, broadly speaking, holding. Of course they're slipping a bit because it's January and not December, but they're still much, much higher than they were a year ago in general. Week two, weirdly, did see a little rebound in tonnage from Asia to North America, maybe that's tariff related. Perhaps. It's as yet unclear though with all this extra capacity whether or not the market can support all of this. I mean, Emirates for one has said that it thinks there's enough demand to cope with the extra capacity and it's just added in fact another two wet lease 747s to its fleet. And then Qatar, China, Southern China, Eastern Cathay, Turkish, Qatar, they've all increased capacity. But there has also been taught this week that probably in line with the ending of the holiday season that E Commerce is on the decline. Is that right?
[00:08:15] Speaker D: Yeah. Well, we had reports last week that there had been an unexpected drop in E Commerce. One forwarder told the Lodestar that volumes had fallen off a cliff. Kind of exposing now the sector's dependence on this vertical. But it doesn't seem like carriers are put off by this. And we reported the South Korean low cost carrier Eastar jet, not EasyJet, is moving into the air freight business primarily to capitalize on this E Commerce demand that's kind of going up and down and it's going to be selling belly capacity out of Asia. Now this is obviously, like I just said, a very fast moving vertical and likely to undergo major changes very soon with the introduction of the new administration in the US Promising to impose heavy tariffs on China. So it's going to be really interesting, I think, to see how E Commerce responds. But on this topic, Alex, you reported that the US Customs and Border Protection Agency had finally unveiled its much awaited proposals to amend the de minimis rules last week. So, so what are the new rules and are they going to have a significant impact?
[00:09:14] Speaker C: Well, first and foremost, there is no suggestion of changing the de minimis threshold of $800, which quite a lot of people thought would happen. What will change is that CBP wants far more information and data on de minimis shipments than it did before. It's trying to eliminate things like fentanyl from the supply chain and sort of shipments from perhaps corrupt parties. There are 60 days to comment on the proposed changes if anyone wants to. But it's a 90 page document, so brace yourself.
And just briefly on that around tariffs, Trump suggested there should be an External Revenue Service for the tariff money. A lot of people have commented on the fact that the CBP already does that job, so we're not expecting to see a change in that.
[00:10:02] Speaker D: You also reported on a Q and A that expediters recently did and you touched upon its staff retention policy. What did you find?
[00:10:09] Speaker C: Well, this has been quite an interesting story which was picked up by Low Style Premium according to at least one court case, and there are more expected to follow. Expediters, which has always prided itself on a policy of no layoffs, has actually had, according to these claims, a covert termination program in place to, and I'm using quote marks here, secretly reduce headcount without resorting to layoffs. Now, essentially what the claimants are saying is that they were let go for no good reason. At the same time as according to internal emails seen by Low Sale Premium, the management decided that it wanted to secretly make cuts to staff numbers. It all seems to boil back to the cyber attack on Expediters in 2022, after which Expeditis found itself in a spot of bother in terms of its results. So we'll have to see what happens here, but I think this story might run for a while.
[00:11:08] Speaker A: Can I just add that we had a really interesting article on Premium a couple of weeks ago by our contributor Bill Paul, who was writing about non compete agreements, clauses in forwarding employees contracts.
[00:11:21] Speaker C: Oh yeah, I saw that.
[00:11:22] Speaker A: And interestingly, the one company he was aware of that didn't insert non compete clauses was Expediters.
[00:11:31] Speaker C: Well, they're meant to be very staff friendly and all the rest of it, but if they have been secretly cutting people then that's definitely going to be exposed, I would think.
[00:11:40] Speaker D: Keep an eye on the lodestar.com Hell.
[00:11:43] Speaker A: Hath no Fury like a scorned employee.
[00:11:46] Speaker D: Well, so as not to end on a mass termination and layoffs, we're going to end with something slightly positive, a win for the environment. Last week Amazon placed the UK's largest order of electric trucks around 140. And it also said that it's going to be delivering a significant amount via an electric rail service from Scotland to the Midlands. So hopefully we're going to see a lot more initiatives like this in 2025.
[00:12:09] Speaker C: Let's hope so.
[00:12:10] Speaker D: Thank you both for joining me.
[00:12:11] Speaker A: Thank.
[00:12:18] Speaker B: So now, hopefully you are all caught up with the main events from last week's supply chain news. Here is what you might see on the Lodestar this week. Well, last week we reported that an imbalance in Bangladesh's rail capacity could cause chaos in the run up to Ramadan and the April peak season, which also coincides with this year's eid. This is because over EID rail operators prioritise passenger services and this is going to result in around 3,000 tu of imports idling at Chittagong's Inland Container Depot by the end of April. Bangladesh's Container Shipping association are urging to take proactive measures as soon as possible. So that's definitely an area to keep an eye on. Perhaps there will be reports of either action or the impact of inaction coming up this week. Similarly, the port of Colombo was also dealing with congestion issues as volumes increase. So hopefully the situation there begins to improve. And finally, while we're talking about port congestion, the Canadian port of Vancouver was struggling with congestion. According to operators, it is on the course to clear congestion by next month. But this could change this week if the incoming US Administration were to act swiftly on its tariff threats. So perhaps some more coming on that. And Alex Whiteman is also working on a piece looking at tariff impacts in Mexico. Obviously, that brings us on to the inauguration of Donald Trump as the 47th president of the United States. That will be today. As you're listening, the 20th of January, Monday.
Will he introduce tariffs straight away? Is he going to implement them exactly as promised? Who knows what he's going to do? But stay tuned on the load start and we will keep you updated on exactly what is going on. Thank you so much for joining me this week. And I will see you next week.
