Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast news in brief, where, as always, we're going to be recapping last week's supply chain news and giving you an insight on what you might see on the Lodestar this week. So one of the main stories of last week is the kind of reshuffling of the ocean alliances. So what's happened here, Gav? It's a bit confusing.
[00:00:24] Speaker B: We'll give it a go, Charlotte. Well, first of all, good morning. Pleased to be here on a Monday morning. Shortly after we recorded last week's podcast got to my desk. Almost the first press release I get is from the japanese carrier, one saying the alliance has reaffirmed its commitment, re signed, and we now call itself the Premier alliance. So they've lost Hapag Lloyd, who are joining Maersk in the Gemini corporation. The remaining carriers won. Yang Ming and Hmm are forthwith to be known as. As the premier alliance. February 2025 is the pivot date for it all, by the way, on the same day, the Federal Maritime Commission gave the screen light to the Gemini Corporation. So all this stuff all came together basically last Monday. The premier alliance is left looking very weak in terms of its overall capacity. Once you take out hapagloid and put it with Gemini. To counter that, what they have done is they signed a big vessel sharing agreement with MSC. MSC has basically indicated it's going to go it alone, but it has decided to open up services and likewise buy slots on premier alliance ships between Asia and North Europe and Asia and the Mediterranean. And actually by doing that, that solves one of the big glaring gaps Hapag Lloyd's departure from the alliance was, which is namely, how on earth the three remaining caravans be able to continue to provide weekly services from Asia to north Europe. That's pretty much been solved. The one thing that the premier alliance hasn't done yet is draw up any sort of timetable for its transatlantic services and we wait to see what their plans are, because traditionally, none of those carriers have ever been very strong on that trade. MSC has also signed a three year vessel sharing agreement with Zim to cooperate on the Asia US east coast trades.
[00:02:22] Speaker A: We do also need to talk about ocean rates from last week. So did they carry on their decline from the week before? What are we seeing?
[00:02:31] Speaker B: Yeah, they did. It was worse. It was double digit across the board. This is Drury's WCI that I'm using. We're 17% down on Shanghai Rotterdam. We're 10% down on Shanghai Genoa. But the real big four of the week was Shanghai, New York, which declined 21%.
I mean, we're going to have to mention looming threat of the strike on the US east coast here with this. If you were a US importer on the US east coast from Asia, and you wanted to get your goods into your east coast port for a possible shutdown on October 1, the window has shut. As a result, the demand has sort of pretty much dropped. We have reports of ocean carriers offering big discounts on east coast shipments, because if you put a box now on a ship in Shanghai that's destined to dock in New York in three weeks time, you've got no idea what's going to happen to it. So, I mean, it's a risk, right? You are hoping that the Dockers will still be working in the first week of October. So, yeah, with two weeks and there is no sign of an agreement. We had a quote in a story I wrote last week as Peter sand from Zenota become convinced of the view that actually there will be some form of strike action from the 1 October, he thought that it would probably last for about a week and by which time cargo starts getting backlogged thing, and at that point the government gets involved and starts to bang some heads together and gets everyone back to work and gets a contract done.
[00:04:06] Speaker A: Yeah, you did a really good article on the Lodestar premium about that. So I would definitely encourage all listeners to go and read that from last week. Thank you very much. Gabd.
[00:04:15] Speaker B: No worries.
[00:04:16] Speaker A: And now over to air. And on Tuesday and Wednesday last week, I attended the EU CBEC forum in Liege, and it's very clear from discussions at the event that capacity is the new buzzword for air cargo as we go into what is expected to be a very busy Q four. And I'm joined now with Alex Linnane. And you weren't at the event, but you've been in the industry a lot longer than I have. So what do you think this means for the industry?
[00:04:39] Speaker C: Well, over the years, we've seen lots of fun little peaks like this. I mean, not so fun for shippers, obviously. And every now and again, the air cargo industry gets a really nice bump. And this looks set to be one of those times as general and traditional cargo fight e commerce for capacity. And you've got to remember, alongside the shortage of capacity, which will mean that aircraft are moved to high yield trans Pacific routes, there could also be a bit of a double whammy. The threat of the eastern Gulf coast port strike, which could also send the air cargo charter market into a bit of a spin. And that could even mean transatlantic rates could firm up, especially as the summer passenger season is coming to a close and the belly capacity is falling. We've already seen some of the details. Lufthansa Cargo has sent its details of the winter season. It seems to be focusing on the trans Pacific, so that's no doubt a sign of what other airlines are considering, too. But you must have heard all about this at Liege last week. I mean, I think one of the most interesting things you wrote was about the belgian customs potentially cracking down on non compliant e commerce, and they could even block shipments. Can you tell us more about that?
[00:05:45] Speaker A: I know there's a bit of contention around Liage as an e commerce hub because it attracts a lot of foreign e commerce, meaning that shippers all have kind of different ideas of customs procedures. I went to a talk by Administrator general of Belgian Customs Christian van de Warren, and he said that he has lost his patience with non compliant e commerce coming into liege airport. Specifically, those not complying with the ics two regulation and ics two requires shippers to send things like six digit HS codes for each item in their consignment, a description of what's in it, as well as a detailed buyer and seller information. This is required before the shipment arrives in the EU, and obviously this makes it a lot easier for agents to then carry out the inspections in the speedy way that e commerce demands. And Christian said that he was looking to start blocking at shippers, not playing by the rules, whereas at the moment, failure to comply leads to delayed imports and exports or the possibility of fines. So it seems like there is bit of an e commerce boiling point or a big crackdown coming soon. But another big news item last week was the reports that DSV's bid for DB Schenker was accepted. So, Alex, how likely is this to go through? And what's all this going to mean?
[00:06:53] Speaker C: Oh, this story has been interminable, really. I mean, fun though, as well. There's been months and months of speculation and media leaks that finally subject to Deutsche Barr, the supervisory board approval, which we think will be early this week, it looks as if DSV will buy DB Schenko. Interestingly, the union Verdi was backing CVC, which was the rival bidder, and they claimed that a private equity owner would protect more jobs. Ten of the 23 positions on the DB supervisory board are employee representatives. So CVC might still be hoping that the vote goes its way, but I'd be surprised if it didn't go through. DSV is too smart to fail on a supervisory board vote. Interestingly, I've been speaking to DB Schenker staff and some don't believe that PE would be the better option anyway. PE obviously needs to make its margins too, and one way of doing this might be to cut jobs. And I suspect that some of the longer term german employees of Schenke who love the brand will hope that somehow Schenker won't disappear in the same way that Panalpina did. But I suspect it will. Others that I spoke to, though, sound more pragmatic and they told me that forward has come and go from companies anyway, it's all part of the deal here at the Loewstar. My colleague Alessandro on Loewstar Premium, he wanted DSV to win, I wanted CVC to win, because I'll be sad to see the Schenker brand go. So no doubt there are similar splits of opinion in Schenker's offices. But finally, I think this story will come to a close.
[00:08:24] Speaker A: Thank you, Alex.
[00:08:26] Speaker C: Thanks, Charlotte.
[00:08:33] Speaker A: So now you are all caught up with the main events from last week's supply chain news. I'm going to give you some insight on what you might see on the Lodestar this week. Well, we reported last week that Air Canada told its customers to expect more than a week of disruption if a planned 72 hours strike goes ahead on Tuesday. So that's tomorrow. And it noted it was preparing for the worst. Air Canada carries perishable live commercial goods, components for manufacturers and other time sensitive items in its belly holders and freighters. And obviously the ripple effects if a strike happens would be the usual. So delays and embargoes. The airline was looking to government intervention to stop the strike, but the association warned the federal government against this, saying it would tip the scale in favor of the employer and worsen labour relations. So, more strike news to look out for this week. In cheerier news, I'm going to Billand in Denmark on Wednesday to see Maersk name its first triple seven freighter. And I'm going to meet some of the air cargo team for interviews and hopefully touch on the upcoming busy season and what they plan to do with their new capacity. Also, much like the Lodestar's previous series on e commerce, which was a few months ago, and and pharmaceuticals. At the end of July this week, we will be launching our latest series and the theme is artificial intelligence, or AI, as everyone calls it. We've been speaking to Raft, who provide AI software to logistics companies. Some interesting themes, such as the practical uses of AI, the future of AI, some use cases of companies who use AI, and also a look into why some people might be a bit skeptical. So stay tuned for those. And finally this week, the DB supervisory board are meeting, so we will likely see a sign off of DSV's bid for Schenker. Or maybe not, who knows? Keep an eye on the Lodestar and we will keep you updated with everything you need to know. Thank you for listening, and I'll see you next week.
