Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Lodestar podcast News in Brief. I am your host Charlotte Goldstone and as always with the help of my guests, I'm going to be recapping this week's supply chain news.
Now coming up on this episode, we are going to be taking a look at the financial results of some major forwarders and carriers. We are also going to be looking at the latest impacts of the conflict in the Middle east, an ocean freight rate update and details into what Project44's CEO said about a potential cargo wise shift foreign.
My first guest for this episode is chief analyst at Zeniter, Peter Sand. Hello Peter. Great to have you back.
[00:00:41] Speaker B: Hi Charlotte, always a pleasure.
[00:00:42] Speaker A: So at the start of this week we saw certain carriers including Maersk msc, cma, CGM and one seeking a new wave of emergency fuel surcharges. I mean, as you'd expect, they said that the escalation of hostilities in the Middle east had made bunker fuel more expensive and availability increasingly volatile.
But we did also report that despite the Houthis blockade on Saudi Arabia, shipping lines are still sending their vessels through the Bab El Mandeb Strait because they're delivering containers to Jeddah and other red seaports. This was based on some Linalytica data that noted several carriers including Maersk cma, CGM and Wan Hai were sticking to their renewed Suez transits and they tracked 54 container ship transits through the Bab El Mandeb Strait in the past seven days. So there's been no change to vessel schedules despite this conflict escalation. Why do you think carriers are so confident here? Do you think everyone's kind of used to this new normal?
[00:01:40] Speaker B: I think you, you, you, you put the finger right on it, right? They are super duper confident. And we can also see in, in senescence data that they are successfully pushing for surcharges with various names, right? As they always do. Emergency fuel surcharge, recovery of revenue surcharge, you, you name one, they got a surcharge for you, right? So, so, so that prove successful with shippers, but also because shippers have now been through a number of months, we know that from, from conversations we have with our customer base all day long that they have actually been giving some pushback to some of the surcharges supposed proposed by the carriers. And then they have seen cargo being rolled like it or not, full ship or not. It's the reality out there, right? But the reality is also that if you look at marine bunker fuels, they are flat three months in a row. Now actually they've been a little bit down over the past coup of weeks. Right. Only somewhat establishing themselves to the level that we saw in April, early May recently here in the past week or so. So it's a little bit of a time where definitely shippers should also gain their confidence. They should look at the market. They can see and Senator data also that carriers are really ready to push more capacity into those trade lanes. But clearly shippers are not asking for it and that's why we see rates also going down. So I think that's probably that in a nutsh.
It is by far not the next normal that we see right now, but cocky and apparently also courageous carriers still engaging in business in and out of Babylon.
[00:03:17] Speaker A: Well, for the last few months we have seen rates be quite high and obviously the kind of conflict has been quite profitable for some of the carriers. I mean this week we saw CMA, CGM post its Q2 results and its shipping business second quarter revenue rose 22% to $9.96 billion and average revenue per TEU climbed 15.
What is the latest in terms of rate movements at the moment?
[00:03:42] Speaker B: Yeah, all of the four out of five main shipping lanes that we talk about and inform you guys about every week is down most of July. The one exception here as far as to US East coast that has basically flatlined, but also around $9,000 per FVU. So that's pretty staggering high.
But we have seen a decline into the west coast, we have seen a decline again out of Asia, Far east into North Europe and Med. So something is weaker right now. And I think it's also a little bit of a breathing space for everyone working in logistics and supply chains over the summer here. That Q2 was actually more busy than they expected and now they take in some oxygen and prepare themselves for what comes about next. But let me just go a little bit say off lane also because we talk so much about the main trade lanes all the time and for good reasons. But one trade lane that is also, I would argue, a very interesting and developing trade over the past couple of quarters and arguably also years, of course, when carriers adapt to the de risking of supply chains set up by shippers, it involves also more shipments out of India. India to US east coast is set to be at all time high next week. If we see early indicators from cylinder data, we could be as 7,400 from West Coast India to US East coast next week and that's just still climbing. So as always, there's more to it than the main trade lanes if you ship anywhere but out of Shanghai, you need Senator data to cover out of India, for instance.
[00:05:30] Speaker A: On the whole, rates have been going down and we did report last week that the SCFI has now witnessed three consecutive weeks of spot rate declines.
But we looked at some Braemar data as well that said that if 2026 holds the pattern of early PE seasons that we've seen across the last three years, it expected the summer slide to find its floor sometime in September, followed then by the usual Q4 pickup timed around Golden Week restocking and pre lunar New Year positioning. So is this similar to what you've witnessed and are anticipating at Zenita?
[00:06:03] Speaker B: If any such thing as a normal peak season is still around this year, it actually may just be, but. But also one peak season that may just be a little bit weaker than than what we say, tradition, prior Covid and stuff like that. Right. So it's a long time ago now. It seems as if peak season surcharges are applied to contracts all year long.
But in real terms we look at where volume is being moved the third quarter and inching into the fourth quarter as well. That's where we are expecting more volume to be moved. If we look at Asia into Europe in the early days of August, we're probably seeing rates come down somewhat, whereas they are still on a slight rise into North America. So if you look at it from a global perspective, it could just be a little bit of undecided territory. But I think what we need to focus on still is of course not only the Middle east disruption, but more so also the fact that Chinese exports have been all time high in May. So clearly they are also somewhat in a breathing space right now. And it may just be one thing to consider also when you look at where trades are moving higher in terms of rates and capacity as well as demand in the third and fourth quarter. Always the say, the random walk of those living in the White House these days.
So China, US trade war and US trade war against anyone else. Right. Clearly also a curveball that everybody needs to handle.
[00:07:41] Speaker A: Peter, thank you so much for joining me. It's been great to chat to you.
[00:07:43] Speaker B: A huge pleasure. Take care and stay cool.
[00:07:45] Speaker A: My next guest for this episode is the wonderful Alex Linnane. To kick off the air freight section, I wanted to talk about market factors in general because IATA reported that air cargo demand was up 8.5% in June, which seems like quite a big jump. And they said that North America was the strongest contributor to growth, but demand in all regions was positive. Compared to last year, demand growth also outpaced capacity at a global level in all regions except Latin America and the Caribbean. Demand also grew faster than global trade, largely due to high value technology products and urgent shipment. It seems like carriers are in quite a good position because of all of this, which we also reported means fewer long term contracts and more dynamic pricing. But you look, you took a look at how CMA CGM did in its financial results and I've already mentioned with Peter about the stellar performance in their shipping division. But how did they do in the air cargo up?
[00:08:39] Speaker C: Well sadly for us and for the world really I would say CMACGM break out its air cargo results. Unfortunately it labels them under other and that includes ports and terminals. So it's really not a very meaningful number that they give us and it's such a shame because I'd very much like to see how they're getting on.
The other thing it didn't mention was its new deal with FedEx supply chain and its overall deal with FedEx which involves airline procurement. So the interesting thing about CMA is when it does this deal with FedEx we think it will have a lot more airline capacity at its disposal. But as I said they didn't say anything. Unfortunately other forwarders have reported this week though Geodis actually barely mentioned any numbers at all let alone an Air Freight.
C.H. robinson however did report air and it reported adjusted gross profit up 23.4% which was driven by 33.5% increase in gross profit per metric ton shipped. So all good except it did actually fly less tonnes than it did a year earlier.
Kuhne Nagel also broke out its air results. Air Q2 air volumes were up 3% year on year and 13% quarter on quarter. And as with everyone else it credited that with semiconductor shipments, cloud infrastructure and so on. So its air half year EBIT was up 15% so it did pretty well.
What will be interesting to see is if the stories are right that it will be considering spinning off its apex logistics arm which is heavily air freighty.
So that might affect affect Koonaga results in the future. But generally speaking we didn't learn very much from the forwarders results about air.
[00:10:24] Speaker A: To be honest CMA CGM doesn't kind of separate really annoying. That would be very interesting to see.
Something else I wanted to ask you that is perhaps a bit juicier than the financial stuff is an article you wrote on Project44 and how its CEO believes its AI is beginning to undermine Cargowise's dominance of the Freight forwarding software.
So what are the details and what do you make of this claim?
[00:10:44] Speaker C: Well, it was quite an interesting interview. I interviewed projects 4044 CEO Jet McCandless and he isn't saying Cargoise is about to disappear tomorrow, but he made the argument that AI is making it much easier for forwarders to build their own application layers on top of their existing systems. So rather than relying on one sort of single monolithic platform for everything.
So Project44 obviously wants to provide the connectivity, the APIs, AI capability that sits alongside these core systems. And so he described that as sort of a pretty dangerous trend for cargo wise.
So it's more about AI shifting where the innovation is happening and where the future of freight forwarding software really lies.
Is it going to be one giant platform? Is it going to be a combination of specialized AI services? It's going to be a really interesting debate to watch actually over the next few years to see who alights on what.
We're starting to see far more forwarders talking about AI.
For example, C.H. robinson in its results, devoted a lot of time on its AI and how it's helped with productivity.
Koonagle also focused on that, said it hadn't quite done it yet, but next year it hopes to see costs saved from AI.
I should say that I spoke to Jack McCandless about Project 44 because it's well known as a visibility platform which as everyone now knows isn't really what everyone needs.
So it has developed quite significantly, but it's now splitting the two things. So Project44 be for shippers and it's launching LSP44 which is much more forwarder focused.
So that was really the big story there.
[00:12:27] Speaker A: That's interesting that they're making that pivot. Really important to watch that kind of cargo wise story because that's something that we spoke about a lot a few months ago that was quite a big topic on the News and Brief podcast and something that you covered quite a lot.
[00:12:37] Speaker C: I've got an interview in August with them, so I'm really hoping to get to the bottom of what they're up to. But they're, they're not always willing to talk. Although the CEO Zubin is very amenable to customers from what I hear. But yeah, hopefully at the end of August we'll find out a bit more about how wisetac's getting on.
[00:12:54] Speaker A: Finally, Alex, I wanted to ask you what was on Lodestar Premium this week?
[00:12:58] Speaker C: Well, it's been earnings week, so there's a lot of that so there's been deep dives into UPS, C.H. robinson and of course C.H. robinson's broker lawsuit, which has become rather a hot story.
And some exclusives on msc. I won't reveal them here, but very much worth following up on. And a look into freight fraud, which obviously affects everyone.
[00:13:20] Speaker A: I do encourage our listeners to go over to Lodestar Premium and check those out. Alex, thank you so much for joining me. It's been great to chat to you.
[00:13:25] Speaker C: Thanks so much Charlotte.
[00:13:27] Speaker A: And that is all we have time for on today's episode of News in Brief. A huge thank you to Alex and Peter for helping me round up this week's news and a huge thank you to you for watching and for listening. If you are not watching then please do head over to our YouTube channel channel at the Lodestar podcasts and like comment, share, subscribe, all of that. It would really help us out. Now we are taking a short break from the News in Brief podcasts for the month of August. This is just due to a usual kind of summer news slowdown and we're just going to give our regular guests some time off to enjoy the summer. But we will still be uploading regular podcasts. We're just going to be deep diving into specific supply chain topics. So if you do have anything you want us to cover, then don't hesitate to email me. Charlotteheloadstart.com I would love to hear from you. Okay, well we will see. See you next episode. I hope everyone has a very good summer.
