Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: Good morning and welcome to the Lodestar Podcast. News in Brief. Now, if you're a regular listener, you.
[00:00:12] Speaker C: Are going to be so sick of.
[00:00:13] Speaker B: Hearing this introduction, but if this is the first time you've joined us, then we're going to be rounding up the last week's supply chain news and giving you insight on what you might see on the Lodestar this week. We saw quite a few big changes last week relating to government policy and the impact that this has on supply chains.
First we saw the US follow through with its threat to hit Indian imports with an additional 25% tariffs on top of their already 25%, bringing the total duty rate on Indian imports to the US to 50%. And this is said to be a penalty for using Russian oil, but it obviously throws a huge curveball in many companies China plus one strategy Last week we also saw the Turkish government announcing that vessels owned, managed or operated by an entity related to Israel and any ship carrying Israel destined military cargo would not be permitted entrance to Turkish gateways. So then obviously Israeli carrier Zim had to reroute its vessels away from Turkish ports. And this just kind of re emphasizes how much more exposed DIM is than its competitors to geopolitical and regional tensions, with it also having been designated as one of the explicit targets by the Yemen based Houthi militia. There has also been the news that postal services for business shipments to the US from many countries lot in the eu, Singapore, India, there's quite a few others were halted due to new processes required by US authorities. This is in relation to its de minimis exemption. There is no timeline as to when these services will resume as the rules on how to collect duties and transmit the right data for the postal shipments.
[00:01:50] Speaker C: In the words of the Air Forwarders.
[00:01:51] Speaker B: Association's Brandon Fried, simply aren't clear yet.
And he said that postal networks don't want to risk moving packages that they can't process correctly.
So that is on hold at the moment. There are other services available such as express or e commerce services that will still be viable for shippers and forwarders. It is just postal. And as I mentioned, this was due to the ending of de minimis exemptions in the US on the 29th of August.
[00:02:16] Speaker C: So now I've given all that context, I'm joined by Alex Lenane to give us kind of a broader view of how all of this has impacted the air freight market. So what happened Alex, last week?
[00:02:26] Speaker D: Well, as you know Shelda, I've been on holiday and so I've been a bit out of the loop. August is normally quite a safe time to be away from the news. This year, not so much actually. What was the ending of de minimis exemptions to the US on Friday and a flurry of postal services postponing parcels deliveries to the U.S. i feel I've missed a bit, but I've been catching up. And in general, according to our sources, airfreight remains pretty dull.
Overall rates fell 1.7% in the past week over the previous week, according to Tacindex.
No one seems to be expecting a huge dive following the ending of de minimis because the biggest market, China has already been through it. One interesting point made by Tom Crabtree, who is an analyst for Drury, is that Ayre could see some modal shift. Ocean rates of this year dropped much further than in air and with more reliability from like the Gemini Alliance, Ayre seems to have lost its edge.
There doesn't appear to be much expectation of a real peak season. We'll have to see about that.
Tom Crabtree advised companies to look at markets outside of the US and that does appear to be happening. And a Chinese forwarder added that airlines seem to be managing rates quite well by switching capacity about and adapting fluidly.
One temporary point of interest that I've just learned about is that there is a Chinese military parade on Wednesday which will lead to operational disruption at various major airports including Beijing, Zhengzhou, Shanghai, Chengdu and Chongqing.
But otherwise overall the market is soft, unpredictable, of course, owing to US policy decisions, of course.
[00:04:03] Speaker C: But it isn't just US regulations that are causing supply chain issues at the moment, though sometimes it does feel like that. But the deadline for the third phase of the EU's Import Control System 2, most commonly known as ICS2 for road and rail, has reportedly been postponed by 15 member states.
Alex, what might the impacts be for European importers?
[00:04:28] Speaker D: Well, the European Forwarders Association, Fleet Cats has warned of serious blockages.
It already asked the European Commission to postpone the introduction of this, but what it actually did instead was to allow some member states to delay, which means from Monday there is now a two tier system in place, which is not ideal.
The problem is the number of declarations which will be needed as well as frequent ICS2 outages and inconsistency.
So only a small number of trucks can cause a blockage. So it only takes a few to really gum up the borders, essentially really everyone needs to be on top of which countries have mandated ICS 2 for road and rail from Monday and which have postponed?
[00:05:12] Speaker C: Well, you can find that out on theloadstar.com while we're on the rail and road freight industry, there was also an update that the proposed US Rail company merger between Norfolk Southern and Union Pacific had been facing opposition. So who is against this and what is it going to mean for the company's plans?
[00:05:30] Speaker D: Well, to be honest, it comes as absolutely no surprise that unions and shippers are opposed to this up Norfolk Southern mega merger, but the other rail carriers are also against it. To make this situation even more confusing, there's also been quite some upheaval at the Surface Transportation Board which effectively will be making the decision on mergers and the chair's effectively been fired, which you can read about@the nostar.com as we predicted when this story started. To be honest, there is a very, very long way to go before this merger, if it ever does, goes ahead. So I think it's a long running story right now. But talking of unions, there has been an interesting development in the Port of Virginia. It's being sued by the ila, which claims that the port is introducing automated equipment via the back door and without consultation, despite an agreement in the master contract that the union has to be consulted over any automated equipment. Now this could be a very interesting case which could determine or not how US Ports modernized. So I think that's the most interesting union story of the week.
[00:06:35] Speaker C: Yeah, the ILA versus Automation is definitely one that is ongoing and will have very big repercussions. We will keep you all updated with that. Finally, Alex, what have we had on Premium this week?
[00:06:47] Speaker D: It's been pretty good actually. I think Sanjay's holiday has stood a in good stead. Premium has revealed a fascinating battle between DSV and Kuna and Nagel. Kuna and Nagel is said to be looking to really take up any lost customers from DSV and is preparing for a big old battle with it. It's been gathering Schenker management, including its new head of sales and DSV in the meantime may be finding that it hasn't done its complete due diligence on Schenker in its rush to win the deal.
Premium reports that there will be cost cutting and redundancies at dsp.
It also had an insight into UPS as well as a deep dive into everyone's favorite tech company, wisetech. So there's a lot in there from last week.
[00:07:33] Speaker C: Yeah. Strongly encourage listeners and our regular readers to go and have a look over on Premium. Thank you so much Alex. Really appreciate your help.
[00:07:42] Speaker D: Thanks.
[00:07:42] Speaker B: I'm now joined by Gavin Van Maal to Talk all things ocean freight. And I want to start on ports because we had a few interesting stories on this last week. First, we reported on Alpha Lina's first half of the year port throughput data.
So, Gav, which ports were the winners and losers of the first six months of this year?
[00:08:01] Speaker A: Starting with the top 10, virtually nothing has changed, right? It's still Shanghai at the top, Singapore second and Ningbo third. You know, if you looked at the top 10 ports, seven of them are in China. But without doubt, the big winner of the first six months of 2025 in terms of port throughputs has been Malaysia's Tangzhen Pel.
And looking through the performances of the remainder of Alpha Lina's top 30 ports, it's pretty clear that the new Gemini network has had quite an effect on port performance figures. So Tangerine pelipus was up 15.4% year on year. That is the largest growth seen amongst any of the top 30 ports. It was closely followed by India's Nava shiva, which grew 15.2%. The growth in Navashiva was largely on the back of higher export volumes coming out of India. But for our listeners, I think the most interesting sort of takeaway was really tangent Pelippus. Famously Maersk and Hapag Lloyd opted to use it as their sort of central hub on Asia, Europe, Asia, Middle East, Asia, Oceania. It is the de facto global hub for the Gemini Network and so little surprise to see big volumes there.
The other poor, and I'm just going to pick out one other here just to show you how the new Gemini network has affected things, is Hamburg. The narrative in Hamburg over the last few years has been one of declining market share. We've seen Hamburg lose volumes to the expense of mostly Antwerp and to a lesser extent Rotterdam. The past six months, however, have seen a real change in its fortunes and it posted growth of 9.3% to be precise. Now, I think this is my view is because Hamburg has become one of the three key German terminals that Gemini calls that and it is also included on the shuttle loops. So for example, one of the big trade increases that Hamburg Port Authority reported was a 20% increase in Baltic shipments. That 20% increase is entirely devoid of Russian cargo. So it is only trade going to Denmark, Sweden, Poland and Finland and the other Baltic states, of course. And I believe by my analysis of this anyways, that that's as a result of greater volumes being carried on the Gemini's Intra European shuttle network, which some of which have been consolidated at Hamburg. That's my take on it.
[00:10:37] Speaker C: And obviously the first half of the year saw I think a rise of, was it 4.5% according to container Trade Statistics in overall global volumes. Were there any ports that posted a loss?
[00:10:49] Speaker A: Yeah, a number of ports in the top 30 were showing growth figures below the 4.5%. But you've got to remember these are, these are big numbers. Right. So I mean just, I'm just taking one for example, because we've been looking at Tangerine Pelifet, let's look at its nearby competitor Paul Kelang in Malaysia. So their volumes grew 2.1% but you know, it's nearly 7 point million to use. So the percentage changes can get skewed, especially if it's a very large port. The big losers? Well, there's two ports out of the top 30 that actually showed a decline in volumes, the first of which was Kaohsiung in Taiwan and the second was Hong Kong. Hong Kong minus 3.4%. Absolute continuation of a long term trend which has seen Hong Kong fall from being the world's largest container port in around 25 years ago to number 15 today. I mean, we've written tons of analysis on this over the last couple of years actually. And our general view of this is that the container volumes are basically migrating away from Hong Kong to the nearby Pearl River Delta ports of Shenzhen and Guangzhou and Manchu.
And instead the former British colony is very much becoming the premier Pearl River Delta air freight hub.
[00:12:11] Speaker C: Also in port news, we reported that the Panama Canal Authority is planning to sell the rights to two ports awaiting construction.
And we kind of theorize that this could be a bid to dilute the possible looming power of COSCO and MSC on the waterway. What do you make of this, Gav?
[00:12:29] Speaker A: A few weeks ago we talked about Santos and yeah, the authorities there sort of barring existing terminal operators from bidding for a new terminal in preference to have new entrants because they thought it would create greater competition. I think this is exactly in the same vein as that. There's no question of the canal interfering with whoever takes over the Hutchison concessions. Those are done. But say the original scenario, MSC acquires the Hutchison ports facilities at Balboa and Cristobal. They would then control around 50% of the country's port capacity. I mean, I think it's entirely understandable that the country's competition regulators, apart from anyone else, but also, you know, their maritime interests would not want to see MSC further consolidate that level of control above the circa 50% that they may acquire if the Hutch deal goes through, I think it's very understandable.
[00:13:30] Speaker C: On a more general note of the ocean freight market, I did a report.
[00:13:34] Speaker B: Last week that discussed the race for.
[00:13:36] Speaker C: Cargo between carriers that is set to commence in Q3 because obviously volumes are expected to dip. And it's also important to note that the global fleet order book is nearly at 10 million TEU. And while we've already got this over capacity that's starting to manifest. But analysts at Sea Intelligence warned shippers to expect increased blank sailings ahead of Golden Week as carriers try and manage this overcapacity. So there's kind of lots of factors at play in the supply demand equation and the market is so uncertain right now. But what are rates looking like at the moment? Obviously they're quite a good indicator of market dynamics. I mean there's been 10 consecutive weeks of decline. What happened last week?
[00:14:19] Speaker A: So last week, interesting, a bit of divergence. And I'm going to preface this with recalling what we've said before between a weird correlation between the Drury's World Container Index principally and the Shanghai Containerized Freight Index and these two indices can move in slightly different directions. The WCI along with the freightos, FBX and Zenith as XSI are very much indices that reflect spot rates paid over the last week, whereas the SEFI normally indicate or collects freight quotes for the forthcoming week. Right, so with that proviso sort of established, what we saw was some weird stuff, frankly. I'm just going to focus on the eastbound Trans Pacific trade from Asia to the US West Coast. This is all week on week by the way. WCI saw a 3% decline. FBX saw a 10% decline. The XSI was flat, very marginal half percentage decline. In contrast, the SCFI for the same route posted a 17% increase.
Here's how the situation looked on the US East Coast, Asia to US East Coast. 5% decline on WCI, a 21% decline on the FBX and again flat 0.5% drop on the excess.
In contrast, SCFI posted a 10% increase.
Clearly freight rates declined last week on those two trades. However, you've got two things coming up in this week that might indicate possible upswing in spot rates on the Trans Pacific trades. Firstly, there are a whole raft of general rate increases that are due to be implemented 1st of September.
Now those as normal on those trades range between 1,000 per 40 foot and $3,000 per 40 foot. So it could well be that the SCFI's increase last week reflected carrier optimism that the GRI's would stick. That's explanation number one. Explanation number two is the beginnings of a nascent small mini surge in demand that could take place over September. Because of course what happens at the end of September is China's Golden Week begins 1st of October when the whole country takes a week off. And you do often find, well, historically at least that there have been sort of mini surges in advance of the Golden Week. I have to say, by the way, that none of this was shown on the Asia Europe trades. So not quite sure if that second hypothesis really stands up because Asia to North Europe. Well, the WCI had it down 10% to $2,661 per 40 foot. The SEFI also had it down 11%.
And both the FBX and the XSI also dropped. All the freight levels on the Asia North Europe trades are roughly around the same level.
And you see a similar thing on the asia to Med routes. 5% down on WCI, 3% down on the SEFI and flat showing minor declines on the FBX and xsi. So that's really where we are in terms of rates. Just a couple of things to look forward to. Of course We've got the US Trade Representatives 301 rule coming in about a month. So people are starting to redeploy tonnage.
There are very, very initial discussions around possibly implementation of surcharges to cover the excess fees.
No one that I've spoken to thinks that they will have any chance of sticking whatsoever. The other thing I wanted to mention of course is that as we're approaching the third quarter, of course the annual contract negotiations on the Asia Europe trades should be starting to come about. You know, the shippers will be preparing their annual tenders now. So it will be very, very interesting to see what sort of annual contract rate levels are eventually sort of finalized given that the spot rate environment has been so weak for several consecutive months now.
[00:18:38] Speaker C: Well, I'm sure we'll be talking to a few stakeholders to find out what they're going to be doing this tender season. Stay tuned on the Lodestar and we will let you know. Gav, thank you so much for joining me this week.
[00:18:49] Speaker A: Thank you very much for having me, Charlotte.
[00:18:58] Speaker B: So now we have rounded up all the main points from last week's supply chain news. Here is what you might see on the Lodestar this week. Well, we're going to start to be seeing the impacts of the end of de minimis on volumes and rates and also I'm going to try and speak to some shippers and forwarders who are involved in the India US Trade to see just how badly they have been affected by the additional 25% tariffs and what they now plan to do to mitigate their supply chain costs. There was also a webinar on Thursday the 4th from data company apply and sourcing automation company Keelvar to look at how smart sourcing and data can help shippers and forwarders during tender, which is obviously very relevant right now. And the companies are also going to share key rate trends and what they mean for the upcoming tenders, including shifting lanes, rate volatility and demand outlooks. So you can tune into that if that interests you. Otherwise, we will be reporting the interesting and important points on theloadstar.com I do also want to just note that there will be no news in brief next week, but we will be back the week after as normal. Thank you so much for joining me and I'll see you next time.
