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 an insight on what you might see on the Lodestar this week. And happy September everyone. I have no idea where the last eight months have gone, but I hope everyone had a wonderful summer and managed to at least take some time off before we get into the next few months in the countdown to Christmas. Probably way too soon to start thinking about that, but that's what I'm excited for. Anyway, this week I am joined again by the wonderful Mike Wackett. And Mike, I want to start as usual by asking about ocean freight rates, and we reported on the Lodestar last week that there was a rates war breaking out on the Trans Pacific as newcomer Trans Pacific carriers are offering lower rates to gain market share, which has forced the established mainline operators to drop their rates and hold on to customers. Obviously rates are still very high but have been steadily making their way down the peak we saw recently. So what was the movement like last week?
[00:01:05] Speaker B: I just find any real hard evidence of that, Charlotte. I think the thing is with some of these small players is that yes, they do need to discount rates to grab some market share, but if we talk about rates, that's normally between the big players. So I don't think we can really describe it as a rate was yet to, particularly on the Trans Pacific, which is what this refers to. There are a couple of things that are underpinning that at the moment, which is the looming possibility of a strike on the east coast and the new tariffs that are coming in this week. Drury's WCI on the trans Pacific just hardly moved. It was down a couple of percent for the west coast at 6250 ish, but that's still 180% higher than a year ago. East coast rates, which are somewhat irrelevant because nobody really is looking for the east coast at the moment until we know what's going on. They were just down a couple of cents as well at 8600 and still 150% higher than a year ago. So I haven't really found any evidence of carriers undercutting or the mainline carriers undercutting. Plus they're also starting a blanking program ahead of the Golden Week holiday in China, which is first week in October. So that's what the capacity management will be kicking in on that one as well.
[00:02:33] Speaker A: And you reported last week that container manufacturers had their plates full with orders. So what's going on? Are we still seeing shortages.
[00:02:40] Speaker B: Yes. I mean, this really all relates back to the Red Sea crisis last November, actually wrote a story about there being some. Something like about 5% too many boxes around, equipment stuck in yards and depots around the world, clocking up mashes of storage costs. But of course, with the Red Sea, where carriers have had to add in a lot more ships, for instance, Asia to north Europe, we've gone up from eleven vessels to sometimes 14 vessels, taken a lot longer, which means that carriers are only able to use those boxes something around about four times a year instead of maybe six times a year. So they've all gone to those container yards that were struggling for work a year ago, and they're sold out effectively until around about mid October.
[00:03:39] Speaker A: And finally the upcoming Gemini alliance in February. Next year is fast approaching. I have no idea where this year has gone, but you wrote that this agreement could fuel demand for feeder ships, but that some shippers are a bit sceptical and would prefer direct services. I know this is one you're quite interested in. So what do you think's going to happen there?
[00:03:57] Speaker B: Yes, I think as far as Hapag, Lloyd and Lewis are concerned, they have a lot of work to do to convince shippers of Hubspoke or if you like, transshipment aspects and their new concepts. I mean, these guys are actually, realistically, although it starts February next month, they're out on the road, summing this effectively for bookings later in the year. So they need to be able to convince shippers and their key account buyers that this is the concept. And as such, they need to lock in the shuttle vessels to make sure that this is all going to work from day one. Nobody wants to be the guinea pig on this sort of thing. So that it follows that non operating containership owners, particularly of feeder vessels, are actually seeing quite some demand and inquiries for their tonnage. So they're already having a good year, and this, I think they believe, will be the icing on the cake for them this year.
[00:05:01] Speaker A: Yeah, it's definitely going to be interesting to see how it plays out. It'll be a big change to the market.
[00:05:05] Speaker B: Yes, I think there will be. I mean, it's going to be quite something when all this changes round and everybody will be jockeying for position.
[00:05:14] Speaker A: Thank you very much. Last week we reported that german trade union Verdi has rejected the central association of German Seaport Operators collective agreement offer, and this has sparked fears that there could be warning strikes at the ports of Hamburg, Bremen, Brake Emden, Bremerhaven and Willemshaven over the coming weeks. In the fourth round of negotiations for a new collective agreement for the 11,500 employees of the German north seaports last month, the employers submitted an offer that contained two variants, both with different duration. However, a Verdi member survey last week resulted in both variants being rejected as insufficient and employees voting for renegotiation. There is currently no news about further negotiations or warning strikes planned, but the union did say that the completely inadequate proposals at the beginning of the negotiations had provoked the employees who were not prepared to be fobbed off cheaply and indicated that further warning strikes may indeed follow. So watch this space on Wednesday. Last week, though, the potential port strike in India was called off, which was a huge relief to local shipping and logistics communities. The action across twelve major ports was planned to begin on the 28 August, but was cancelled after negotiators representing India's shipping ministry agreed wage enhancements and additional fringe benefits for some 20,000 workers. And then in further strike news, the canadian rail employees of Canadian National Railway and Canadian Pacific Kansas City resumed service on the 26 August last week after the labour minister's direction for binding arbitration was accepted. And now stakeholders attention is turned to the looming US east and Gulf coast ports come October if a deal cannot be reached this month between the International Longshoremen's association and the United States Maritime alliance. Now looking at the air side in a Zenita and Tiak presentation last week, they said that the global air cargo demand had been showing record strong growth throughout the first eight months of this year, but then capacity had been growing much slower due to its recovery last year, leaving not much room for growth and this imbalance has seen capacity utilization increase and July global air cargo rates showing 2020 four's highest year on year growth at 20%. However, Zenita highlighted a huge capacity utilization imbalance between front and back haul routes from Asia Pacific to Europe, North America and the Middle east, raising cost concerns for these routes. One trade that become a lot more even this year in terms of front and backhaul capacity utilization was the Latin America to North America route with the backhaul utilization having risen 12% from last year. And we also reported that foreign airlines are said to reacted strongly to an emergency security change to us customs regulations on air freight last week and according to sources, an emergency amendment with restricted access has been passed by the TSA requiring carriers to submit additional details of shippers and consignees to the US Customs and Border Protection Agency. The new requirement became effective on the 21 August and one source described its sudden implementation as a shit show. Earlier reports citing sources suggested Korean Airlines had suspended its US bound cargo services as it sought more clarification on the new requirements. However, a spokesperson for the carrier told the Lodestar, contrary to the report, Korean Air has not suspended all us bound cargo services. Korean Air has made the decision to temporarily halt cargo services for shipments originating from Europe, CIs and Middle east regions destined for or transiting through the US until the 18 November in response to the TSA regulations. Another source described the situation as concerning as carriers were being forced to find time to work out what was required under the new rules. So perhaps more to come on this story.
So now you are back up to speed with the main points of last week's supply chain news. Here's what you might see on the Lodestar this week well, like I mentioned previously, Verdi union members rejected our employers offer and so the parties will be back at the negotiating table sometime soon. In the meantime, we might see warning strikes occur across german ports and that would create port congestion and extended lead times. If they do indeed happen, we'll of course be reporting on any updates as they unfold. We might also see some news pertaining to the ongoing DB Schenker sale. There are currently only two bidders left, CVC Capital Partners and Danish forward at DSVD. The rival bids are somewhere in the region of 14 to €16 billion, according to Bloomberg. Deutsche Bahn was evaluating the offers and would discuss with the government and the Lodestar premium reported last week that forwarders are hoping DSV will win the takeover because there will be lots of business to gain if DSV acquires its german rival as customers and employees fall down as ripe as fruit, according to one source. And obviously this acquisition will take weeks, if not longer, to finalise, but we will of course be reporting on any updates as they happen. And the Lodestar premium as well does really insightful analysis of m and A moves, so this is definitely one that they will be keeping a close eye on. And finally, the union representing port workers on the US east and Gulf coasts are preparing for wage scale meetings in New Jersey on the fourth and 5 September. So that is Wednesday and Thursday this week, and that is where the union's wage scale delegates will review its master contract demands. The union said they will also use those meetings to establish strike committees from Maine to Texas to be ready for the 1 October if a strike does indeed happen. So we will also likely see some news there, and hopefully it's headed in the direction of an agreement because the ripple effects of those strikes across the supply chain would be huge. Thank you so much for listening, and I will see you next week.
