Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast news in brief, where, as always, we're going to be recapping last week's supply chain news and giving you some insight on what you might see on the Lodestar this week. Now, Gav, I reported last week that spot rates might have reached their peak after some data from Zenita indicated that that might be the case. And we had some confirmation from uk forwarders AFS Global that they had seen rates starting to ease as well. So does this all echo with the rate increases that we saw last week? Are they still slowing down?
[00:00:36] Speaker B: Yeah, they are. So basically we've had the second consecutive week of single digit increases on most of the east west trades. I should say that the spot rate on Drury's Shanghai Los Angeles leg was actually 3% down week on week. And on Zenita's Xsi Asia US west coast reading, it was also 1% down. So there's actually a slightest decline on the trans Pacific indices. The Asia North Europe indices were up sort of one, two, 3% depending on which index you look at. Mediterranean, also very flat. So the fact that this has happened for the second week row would certainly support the idea that rates, they're starting to level off. We've reached the peak. And as you reported last week, Charlotte, the feeling you get right, the market sentiment seems to be that that rates are levelling off. People have already started to talk in terms of the bargaining power, switching over to shippers, that there's more space becoming available. I think my story last week I made reference to a Linealytica figure which showed that a Maersk vessel departing tangent pelopus at the end of last week was only 80% utilization. So that would indicate that not only are the rates coming or rates are sort of levelling, but also the thing that's been hitting a lot of smaller shippers and smaller forwarders is the surcharges that have been applied to them. You know, the space guarantee surcharges, those sort of things are likely to start dropping by the wayside. So it's the extra thousand dollar charges that have been applied on top of rates that we should start. Hopefully I'm putting my shipper cap on here. Hopefully we should start seeing the back of those.
[00:02:29] Speaker A: Yeah, fingers crossed. Something that I did think was interesting. I went to a freightos webinar last week and they mentioned that we could see the peaks that we're seeing now in February next year if the Red Sea crisis hasn't ended. And it kind of coincides with chinese new year. Do you think that this is going to happen? I mean, does this not change peak seasons forever now then?
[00:02:50] Speaker B: Well, we've certainly argued, I think we talked about this in the previous podcast, that if you've got that extra two week sailing time by virtue of the Red Sea diversions, then necessarily the peak season has to change slightly by at least half a month. It has to be brought forward half a month because it's taking you that extra time to get there. I think what freighters might also be influenced is traditionally you get a mini peak just before the beginning of February, depending on when chinese new year is, because the country shuts down for two weeks. And so there is normally a sort of mini rush to get your cargo out of the country before this shutdown happens. I mean, I'm not going to sit here and predict what's going to happen in next February. You've got to be mental.
[00:03:34] Speaker A: It'd be interesting to see how it plays out.
[00:03:36] Speaker B: Well, I just can't. I don't know. I can't see that far ahead. Who knows where we'll be sort of six, seven months from now. It's sort of inconceivable.
[00:03:45] Speaker A: Thank you very much, gav.
[00:03:47] Speaker B: No, you're welcome.
[00:03:48] Speaker A: Some perhaps good news this week is that german trade union verdi and the Central association of German Seaport Operators seem to be one step closer to an agreement they methadore on the 11th and 12 July, and the employers offered two different deals that the Verdi members are now assessing. They're going to meet on the 22nd and 23 August to decide how to move forward. And with two offers on the table, it does seem likely that they are going to accept one of them. But this does mean that if it gets to this day and they do reject the offer, that we could potentially see strikes break out during the traditional peak season. On top of this, potential strikes are looking more and more likely to break out come October across US east and Gulf coast ports, as the International Longshoremen's association said this week that they are willing to hit the streets on the 1 October if contract demands were not met. So far the discussions haven't even started, so the tensions are definitely rising there. On Friday, though, the United States Maritime alliance did say that it remains willing to negotiate and that there have been forward movement towards resolution on local issues. So maybe some sliver of hope there. And now to talk all things air freight, I am joined by Alex Linnane. Alex, your coverage this week has been pretty focused on cargo payments. In particular, IATA's CAS I know this has spanned across a few articles and it's been in the works for quite a while for you but can you kind of summarise this for us?
[00:05:08] Speaker C: Yeah, sure. I mean as you know, charlotte, I have been working on this for quite some time. The general issue is that for new forwarders or forwarders who are changing names or forwarders are opening new offices, IATA put in a rule in October 2022 that they have to give. There's quite a big calculation but roughly 20% of their air cargo revenues has to go to IATA in a deposit or a bank guarantee. The issue with this is that these are lots of small companies or tending to be lots of small companies and that's an awful lot of capital to have tied up frankly. And even if you get a bank guarantee they charge you something like 4%. So it's a very expensive thing. So lots of them are now talking to competition authorities to find out whether this is unfair or not. Because if you started your company in September 2022 you don't have to do this October 2022 and you do. So it's quite an unlevel playing field for one thing. The other thing is it's quite a barrier to entry for new companies who want to get into the air cargo space. So forwarders are sort of up in arms about it. And what's made it worse I think is that IATA is so, so hard to contact. Now they told me that they would pledge to respond within 8 hours and they may well have responded within 8 hours but they don't respond with a sensible answer in 8 hours. So forwarders have told me it's taken dozens and dozens of emails and phone calls to try and work out what it is they owe when they have to pay it by and how you get your deposit back which apparently is quite a big issue.
So it's really about sort of IATA's position in the market. It's rather sort of monolithic power that it has and whether that's the right thing for the cargo industry because frankly it sort of stymies growth and IATA doesn't seem to be responding in any kind of sensible way to it.
[00:07:07] Speaker A: Well that really does sound quite, quite messy. And speaking of which, I understand there's been some contention over at Schiphol airport regarding its ongoing mission to reduce noise pollution. What happened there last week?
[00:07:18] Speaker C: Oh, poor old Schiful. You always know when a company is having troubles because that's when they start to get quite leaky, as it were and people start telling you things. Dutch communities are really quite tight knit. So everybody has got an opinion on this which means that they're very happy to talk to media about it. The issue has been that Schiphol seems to have supported this government idea that it should cut slots to cut noise pollution around the airport. But there is actually a legal framework which IATA and the European Commission promotes which is called the balanced approach. And a Supreme Court in the Netherlands has now said that this is what they have to do, the balanced approach. Now the balanced approach means that you can only tinker with operations as a very last resort. The first thing you should do is try and cut noise at source, which is sort of getting better planes and so on and so forth. So Schiphol has got a lot of rethinking to do about what it's going to do with its cargo community and of course there's a lot of sort of personal stuff going on there as well, which I won't go into. Suffice to say it is a bit messy. So talking of messy and companies that tend to leak a little bit to the press, what's, what's happened with you and yodel, Charlotte?
[00:08:31] Speaker A: Yeah, well, I actually got some really interesting information land in my inbox a few weeks ago from an anonymous email address and they told me to keep my eye on Yodle, which is a UK parcel delivery company. They said that the company that bought them shift, had been making some risky m and a moves and that the parcel delivery company was majorly loss making at the moment and this was indeed reflected in its 2023 financial results. Express delivery is a really interesting place at the moment in the UK with every and Royal Mail both up for sale. Transport Intelligence said that these companies are often attractive but they're quite hard to make profitable. So one to keep an eye on definitely. But yeah, it was really exciting to get this anonymous tip in my inbox. So please, if you have some juicy industry goss you'd like to share with us, then do get in touch with any member of the Lodestar team.
[00:09:18] Speaker C: Yes, please do do that, people. And thanks very much. Salad?
[00:09:22] Speaker A: Thanks, Alex.
Hopefully now you are all caught up with the main events from last week's supply chain news. And now to give you some insight on what you might see on the Lodestar this week I'm going to be attending Farnborough International Airshow, which is tomorrow actually, and I'm hoping to speak to some air cargo stakeholders about aircraft part procurement because I know there's been some issues with that sustainable aviation fuel and also the pilot shortage, so you might get some stories from that. We also have some companies releasing their second quarter financial results this week. Kuna and Nagle are reporting their Q two figures on Tuesday and DSV on Wednesday, so we might start to see the Red Sea crisis have some effect on the major forwarders numbers. Although banking sources have told Lodestar Premium that the real effect won't be seen until Q three, so we'll have to wait and see. We'll be covering that. And also Gavin will be doing some conference call redux on premium, which are always highly entertaining, so definitely keep an eye out for those. Ups are releasing their financial results as well, and this will be really interesting because it's just sold coyote logistics American Airlines will also be putting their second quarter results out too. Rail companies Norfolk Southern and Canadian national will be putting theirs out and we might see some strike information in canadian nationals earnings calls. Hopefully we are still waiting for that decision from the CIRB on whether canadian rail service can be deemed as essential or nothing, and if it's deemed as not, then we will likely see a nationwide rail strike which is set to have a huge impact on north american supply chains. Speaking of that, we might also get some updates from the looming strike on the US east and Gulf coast ports from the International Longshoremen's association. So keep checking on the Lodestar to stay up to date with all the latest supply chain and logistics news. Thank you so much for joining me and I'll see you next week.
