Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast. News in brief, we're going to be recapping all the main events from last week's supply chain news and giving you insight on what you might see on the Lodestar this week. Now, we've been reporting for a while that we might start to be at the peak of ocean shipping freight rates. So what's happened this week with the rates? Are we still on that peak? Have they gone up? Have they gone down?
[00:00:27] Speaker B: No, they've gone down. We're past the peak. I mean, you know, a lot can still happen. We're in sort of end of July, so we're still August. But at the moment, last week they were down. We've got Drury's WCI down for Asia, the US west coast, which doesn't actually have a great deal of spot rate trading on it. It's largely carried under contract, but nonetheless, as an indicator, the spot rate into Los Angeles from Shanghai was down 5% week on weekend, and Zenita recorded it down 6% week on week. So clear declines there, Asia North Europe was flat. So on that trade, it's sort of holding at the peak now, although Fretos had Asia North Europe down 2%. So on balance, one would think there's a pretty good chance that we might start seeing these rates further decline over the course of August. In terms of the causes behind this, just the sheer amount of capacity being added to the fleet was going to sort of take effect, and we think it has done. Now, I've been talking to some forwarders, and what I was told was that in comparison to sort of the heady days of May and June, where it was increasingly difficult to secure any space on vessels, certainly over the past fortnight, it's been much easier to secure space as perenna, your allocation with the shipping line. So pricing is, it's easing for shippers.
[00:01:54] Speaker A: Well, that is good news. You've also done some financial reporting this week. You looked at DSB and Kuno Nagal's Q two report.
[00:02:01] Speaker B: Yes.
[00:02:02] Speaker A: Are we starting to see the impact of the Red Sea crisis show up on the forwarded balance sheet?
[00:02:06] Speaker B: Not really. Not really? No. This lag is still seems to be in effect. I'm not going to go through the financial figures. It's just too boring. But I mean, the headline thing is Cunanagul released results pretty much in line with financial analysts expectations. I mean, my colleague Ali Possessi just called it dull, dull, dull. But there were a couple of differences.
Kuna Nagla clearly lost a bit of market share in ocean and EbIT was down, but they are predicting quite a strong rebound in Q three, as the higher pricing that we've seen in recent months will come onto its balance sheet in the form of receivables taken. DSV did better. Actually, DSV surpassed expectations and its results held up by winning market share both in air and ocean. Also worth noting that it had a very good quarter for its contract logistics division. Which brings us onto the big news from last week, which was the IPO of lineage Logistics, which has gone under the radar. Lineage Logistics is a us based cold storage warehousing distribution. So it basically deals in one vertical that is perishable foodstuff. It's about 15 years old, and it was originally owned by a private equity platform which had the goal of becoming the world's largest cold store and logistics distribution operation. Fast forward 15 years and this week they ipo'd on the Nasdaq for a massive amount. I mean, they sold, it was a $4.4 billion IPo. So it's a big deal, especially given that actually ipos on Nasdaq haven't been very popular recently. They announced their prospectus on the 16 July very quickly, and then it started trading on the 25th. That's just nine days. Yeah.
So they raised a load of money, valued the company 18 billion in terms of market cap, which is really big, and caused a lot of excitement on Wall street. The Wall street analysts were like, what is it? Is this a tech stock? But actually what it really for our purpose is a pure play contract logistics operator. And I think the presence of it now as a public listed company with all the new sources of finance that that gives, it could make for some very interesting merger and acquisition activity over the next few years in the contract logistics sector, one to one, definitely want.
[00:04:34] Speaker A: To keep an eye on.
[00:04:35] Speaker B: Yeah, very much so.
[00:04:37] Speaker A: Of course, another big story from last week was that the owner of the cargo ship Maersk Frankfurt has declared general average after a fire on board. Not that long ago, we had the same thing happen with cargo on board the MV Dali after it allided with the Francis Scott key bridge in Baltimore. So this general average thing has come up yet again. And if you're not familiar, that means that every stakeholder has to split the cost of damage to the cargo, the vessel, and any other associated costs. I spoke to cargo insurance company Breeze last week and they said that around 60% to 80% of shipments are under or uninsured. CEO of Vespucci Maritime, Lars Jensen, said that shippers moving cargo on vessels through Houthi risk areas really need to make sure that their cargo insurance covers them for general average, because obviously, if they have to chip in for some major salvage operation in the Red Sea, then it's going to be huge. Now, surely this has got to be a wake up call for shippers. I mean, general average, this many times.
[00:05:34] Speaker B: Worse things happen at sea, right? You put ships out to sea and stuff goes wrong. General average is a very well established principle, but in today's age, we have far, many more cargo owners than you did say, back in the day. So lots of people don't know what it is. Effectively, a small bit of cargo insurance before you ship, your products will cover you, but people don't seem to bother, to be honest. Most freight forwarders worth their salt should be offering their shippers insurance solutions, and they should be pretty much convincing them to buy them, because the insurance really isn't a very big portion of the all in freight rate. I mean, it's the old familiar thing with insurance. You know, you pay, you think, why am I paying this? I don't need it. But of course, when something goes wrong, you do need it. And in this case, when general average is called, you can be facing some massive costs and you won't be able to retrieve your cargo until you settled your portion of the general average.
[00:06:36] Speaker A: I mean, 60% to 80% of uninsured cargo. That's a lot.
[00:06:39] Speaker B: Yeah.
[00:06:40] Speaker A: I think Breeze was saying that so many people either think they're insured for something that they're not insured for, or they just. It's too complicated for them. They don't want to get involved. So, yes, hopefully, this is a reminder to everyone, check your insurance. Make sure your insurance, and if you're.
[00:06:52] Speaker B: Forwarding, you know, these kind of instances are great. They're a great selling tool to sell on extra services.
[00:06:59] Speaker A: You know, every cloud.
[00:07:00] Speaker B: Yes.
[00:07:01] Speaker A: Thank you very much, Gav.
[00:07:02] Speaker B: You're welcome. Thank you.
[00:07:03] Speaker A: And now I'm joined by Alex Linnane. Hi, Alex.
[00:07:06] Speaker C: Hi, Charlotte.
[00:07:07] Speaker A: Alex, one of the things that I thought was interesting was the DB Schenker second half year results that you reported on, because they weren't great. Why was that?
[00:07:15] Speaker C: Well, Schenker's results are pretty interesting at the moment. You're right, they weren't great, but they were enough to prop up its failing parent, Deutsche Bahn, which actually itself made a loss of more than a billion euros in the first half. But it's once again sort of put the spotlight on whether Schenke is worth €15 billion or whatever that may have been bid for it. So there's only two bidders left in the race for Schenker, which is CVC partners and DSV. And one of the concerns over a purchase by DSV is the number of job losses you might see in Germany, which the german government probably won't like. But now Deutsche Bahn, who's Schenker's parenthood, has said it will cut 30,000 jobs over five years anyway. I don't know. We're starting to wonder whether this sale will ever go through, to be honest. But onto sunnier things. You just went to your first air show. How was it?
[00:08:07] Speaker A: Yeah, well, I went to Farnborough Air show on Tuesday last week, and it was crazy. So much bigger than I was expecting, and a lot noisier, too. I stood near this huge plane just as it was taking off, which that was complete accident, and that cannot have been good for my eardrums. But I also looked around loads of cool tech stuff, and I went to a talk on sustainability, where they debated about who should be funding SAP. I went and also looked at Embraer's new e freighter, which is smaller than most freighters, and that makes it ideal for fast and decentralized e commerce deliveries. I just think it's so interesting to see the impact this one vertical is having on the air freight market that they've designed a whole plane specifically for it. So, yeah, so that was really interesting. And I'm not sure. I'm not sure I could spend a whole week there, but I think one day was.
[00:08:51] Speaker C: No one needs a week in it.
[00:08:52] Speaker A: There was also a big story from Bangladesh last week. There's a huge cargo backlog after the Internet was cut at ports and airports. Why did this happen in the first place, and how long is it going to take to get back to normal?
[00:09:04] Speaker C: So, I'm funny, it's slightly surprising, but I've not read very much about it in the main sort of media, but student protests in Bangladesh over government jobs have led to huge riots. About 200 people have died. The government is enforced a curfew and Internet restrictions, which, of course, has led to delays and backlogs at the Porton airport, as even customs is struggling to get online. I don't know how long it will last for, because it's Bangladesh and everything's very, very hard to predict there. The whole thing can come to a stop just on a broken airport scanner, so it's very hard to know, but in my experience, it probably will continue for a little while. But now we're hearing that companies are being charged detention and demurrage for boxes which are stuck at the port, which is going to cause another load of protests, I imagine. So things are looking a bit tough for bangladeshi exporters and importers.
[00:09:57] Speaker A: Well, hopefully we see some good news there. Thank you very much, Alex.
[00:10:01] Speaker C: Thanks, Charlotte.
[00:10:02] Speaker A: Now, I mentioned in last week's news in brief that we might see some extreme weather cause supply chain disruption. And unfortunately, I was right. On Thursday, typhoon gaming swept through the Philippines and to Taiwan, where high winds and strong waves caused the general cargo vessel fu Shan to sink. Nine crew members from Myanmar fell overboard and three have been rescued, but six are still missing. And as well, an oil tanker, the Mt terranous, also capsized. The vessel was carrying 1.4 million litres of oil. The Philippines authorities were reportedly trying to contain the oil spill around Manila Bay and it has the potential to be the biggest in Philippines history if all the oil does spill. Reports last week were that the storm had weakened but was on its way to mainland China. So well have to wait and see if that leads to operational impacts this week.
Hopefully now you've got last week's supply chain news fully refreshed in your memory and you're ready for the week ahead. Now, talking of the week ahead, here's what you might see on the lodestar. Over the next few days, we're going to be launching our series of articles on pharmaceuticals and the pharma supply chain. If you can recall, a few months back we actually did a series on e commerce and this will be similar in that we're going to release around six articles, each looking at a different aspect of pharma logistics. We're going to be covering topics such as modal shift, what pharma shippers want from their logistics provider, and how to manage a pharma supply chain as well, just to name a few. I'm also going to be reporting on emissions calculations in the supply chain and how different standards for calculations that exist in the industry have led to some companies being complicit in greenwashing without even realizing. Last week. I also did an interview with cargo insurance company Breeze, like I mentioned earlier, so you might see some insight from them pop up. I would assume now that as we head into the summer holidays, everyone's a bit more relaxed as supply chain updates might start to slow down a little. But you never can tell with logistics. And of course, Black Swan and extreme weather events can happen at any time. Keep your eye out on the loadstar and we will keep you up to date with everything you need to know. Thank you for joining me, and I'll see you next week.
