Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast news in brief, where as always, I'm going to be recapping the main events from last week's supply chain news and giving you some insight on what you might see on the Lodestar this week. This episode is going to be slightly different because I'm all on my own today, so strap in because I'm going to be monologuing for the next ten minutes and I hope it's not too boring. And so I'm going to start this week by looking at the ocean freight rates and this is when I really.
[00:00:31] Speaker B: Wish Gavin was here because this is.
[00:00:33] Speaker A: His area of expertise and not mine, but I'm going to do my best. So ocean freight rates last week showed another slight reduction from what we think is the peak, but they're still remaining very high. The latest Drury World Container index showed.
[00:00:46] Speaker B: A 1% decrease to what is now.
[00:00:48] Speaker A: $5,736 per feu, and that's still elevated well above the year's average of $3,946 per feu. While the world Container index generally moved little, Shanghai's Los Angeles saw a 3% drop to $6,740 per feu, and Drewry thinks that spot rates have peaked. But they said that the continued shipping disruptions will keep a flaw under the spot rates for some time. And Zenita reported that the volatility in spot rates is now spilling over into the long term rate and the global Zenita shipping index measure increased 2.5% month on month from June for contract rates. Senator did say last week the market is at a tipping point, so it'll be very interesting to see how that plays out. Last week we also reported on Ocean Network Express's first quarter financial results, which is April to June.
[00:01:42] Speaker B: So everyone else is Q two its.
[00:01:44] Speaker A: Revenue was $4.2 billion, resulting in a $779 million net profit, up $266 million from the same period last year. EBIT was $667 million and EBITDA was $1.2 billion. Global volumes grew 11.2% and one reported 100% vessel utilization on both Asia to North America and Asia to North Europe front haul routes. So with these substantial profits from the hefty Red Sea surcharges that we've seen and the volume increases, one adjusted its full year earnings forecast to $2.7 billion, up from $1 billion announced three months ago. So a huge increase there. And danish carrier Maersk also adjusted its financial expectation for full year 2024. Maersk previously edited its guidance in June from the initial projection in February. So this is the second adjustment. Both EBIT and EBITDA was increased by $2 billion. Compared to their previous guidance, EBITDA is now expected between nine to $11 billion, and EBIT between three to $5 billion. So compared to the initial guidance that MERS provided in February, the increase is huge. At that point in time. They expected 2024 EBITDA of between one to $6 billion and EBIT in the range of negative $5 billion to zero. In February. The expectation for cash flow in 2024 was negative $5 billion and in their new guidance, it's upwards of $2 billion. So a huge increase there. CEO of Vespucci Maritime, Lars Jensen, said that this implies they would expect not only the spot market to remain strong, but also an increase in the contract rates, which haven't yet increased to the same degree as spot rates. But this is also what Zenita noted.
[00:03:39] Speaker C: Last week, too, that the gap between.
[00:03:40] Speaker A: Spot and contract rates was narrowing as the spot rate declines and the contract rate rises. Zenita's senior shipping analyst Emily Stauspel said that this was a pivotal time for the market.
But she did question how high long term rates would climb before their growth is stunted by the falling spot market. And she said shippers will be hoping the spot market crashes down hard and fast, while carriers will be doing everything possible to keep short term rates elevated for as long as possible. One of the main stories last week was the announcement that forwarder Ch. Robinson is going to sell its european.
[00:04:15] Speaker B: Surface transportation subsidiary to European Digital road freight.
[00:04:19] Speaker A: Forwarder sender and Ch Robinson said this was a strategic move to get fit fast and focused. It said it's going to turn its attention to its global air and ocean businesses as well as its north american trucking business. EST has been part of CH Robinson since 1994 and it provides logistics services across Europe. Combining EST with Sender will make it a top five full truckload player in Europe with a combined revenue of €1.4 billion, 1700 employees and a footprint in 20 european locations. After the sale, 6500 shippers and more than 15,000 carriers will become part of the sender network. That's a lot of people, but an analyst from transport Intelligence told me that whilst there are many people selling out of the brokerage space, they were surprised to see that sender was a major buyer. And a source from Lodestar Premium said that this is clearly a paper deal with very little money changing hands, driven.
[00:05:19] Speaker B: By sender's needs to show it's growing.
[00:05:21] Speaker A: Regardless of the underlying profits so very interesting, and I'm sure there's more to come on this story as it unfolds. It's yet to be determined actually how much sender paid for EST. The transaction is expected to close in Q four, so I'm sure there will be more stories to come on this one.
[00:05:37] Speaker C: And now looking at air freight, we reported that demand out of Asia Pacific was above the global average in June and that there were suggestions that the momentum will continue potentially into 2025, according to IATA and the association of Asia Pacific Airlines. And I think we all know by now this is due to maritime disruption pushing volumes to air and of course the ever present e commerce demand. Zenita said that rates had surged 20% year on year last month, with a 13% rise in volumes, which it put down to buoyant e commerce and the comparatively low demand base of July 2023. So it all seems to be pretty healthy there. But air freight two was not without its disruptions. Last week we reported that the air freight rates from Bangladesh to major western destinations had risen sharply as the country's main air freight gateway, Dhaka, became piled.
[00:06:32] Speaker A: Up with export cargo and it's still.
[00:06:34] Speaker C: Recovering from the Internet shutdown that we saw the week before last. Exporters claimed that carriers were taking advantage of the demand spike, raising rates by as much as $1.50 per kilogram.
[00:06:45] Speaker B: To Europe.
[00:06:46] Speaker C: They were charging close to $6 per kilogram from the previous rate of $5.20. And actually in last week's news in brief, Alex Linane did say that she.
[00:06:56] Speaker A: Expects this to go on for quite.
[00:06:58] Speaker B: A while, but I do always like.
[00:07:00] Speaker C: To finish with some positive news on this podcast.
[00:07:03] Speaker B: So last week heavy rainfall in the Panama region meant that the Panama Canal returned to near full operating debt.
[00:07:09] Speaker A: I it experienced severe drought last year.
[00:07:11] Speaker B: And that meant that vessel transits had to be cut. But water levels in the Kattun lake reached 84.4ft on Wednesday and that means that 36 vessels will be able to transit the canal per day from September.
[00:07:25] Speaker C: And they predicted that the water level.
[00:07:26] Speaker B: Will return to 86.1 foot by October.
[00:07:30] Speaker C: So fingers crossed that we see that happendenne. Hopefully now you are all caught up.
[00:07:40] Speaker B: With the main events from last week's supply chain news and now for what you might see on the Lodestar this week.
[00:07:46] Speaker C: So all the major forwarders have now.
[00:07:48] Speaker B: Released their Q two financial results apart from expediters who will be reporting on Tuesday. Maersk is also releasing its first half report on Wednesday the 7th and as previously mentioned, they updated their full year earnings guidance. So it's going to be interesting to.
[00:08:04] Speaker C: See what their first half totaled up to. And on top of that, we have.
[00:08:08] Speaker B: A roundup report of the north american intermodal rail operators first half results. So lots of financial reporting for you this week. And speaking of North American Rail, it should be noted that we are still waiting for a decision from the Canada Industrial Relations Board about the possible nationwide rail strike they took their final arguments of missions on. I think it was June 14, around.
[00:08:31] Speaker C: Mid June, so it's been about seven.
[00:08:33] Speaker B: Weeks now, so a decision could be made any day. But then I did say that about a month ago and we haven't heard anything so we have no idea how long this process takes. Our pharma article series is officially starting.
[00:08:45] Speaker C: This week too, so keep your eye out for that. From a few chats I've had, it.
[00:08:48] Speaker B: Seems like Pharma is one of the verticals. It's really changing at the moment and there's lots of new requirements coming to the sector as pharma shipments get more developed. So yeah, definitely a few interesting articles coming out about that.
[00:08:59] Speaker A: It's going to be really interesting as.
[00:09:00] Speaker B: Well this week to see how the.
[00:09:02] Speaker C: Ocean freight rates play out and whether.
[00:09:03] Speaker B: We see any more narrowing on the.
[00:09:05] Speaker A: Contract and spot markets.
[00:09:06] Speaker B: Zenitas Emily Stausball said that shippers should have cautious optimism because at the moment it feels like there's more room for.
[00:09:13] Speaker C: Spot rates to fall than there is.
[00:09:15] Speaker B: For the long term rates to rise. So fingers crossed.
[00:09:18] Speaker A: But of course with logistics anything could happen.
[00:09:20] Speaker B: We are now in the month of August. Happy summer everyone, and it finally does feel like it in the UK.
[00:09:24] Speaker A: We've had some nice weather, although I think it is going to be quite.
[00:09:27] Speaker B: Short lived throughout summer. It's usually a bit quieter for company announcements, but the market is so volatile.
[00:09:32] Speaker C: At the moment that I don't think.
[00:09:33] Speaker B: Any logistics stakeholders are really holding out for a restful summer holiday.
[00:09:37] Speaker C: But of course it is going to.
[00:09:38] Speaker B: Be a lot easier to keep up with the ever changing supply chain news if you are checking the load, start daily. Thank you so much for joining me this week and I will see you next Monday.
