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 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. So we are now nine days away from the impending strike on US east and Gulf coast ports. So, gav, as we countdown the final nine days, what are the latest updates on this one?
[00:00:30] Speaker B: So, with the caveat that we're talking on Friday afternoon UK time and that this is airing on Monday morning, so there's a good old fat weekend in the middle there that something could happen. But on the caveat that it doesn't, not very much has changed. The sort of notable event this week was that 177 trade associations representing all sorts of industry verticals in the US wrote to the White House and said, please get them to start talking together. Please not let there be a port strike on the US eastern Gulf coast, to which the White House said, we're not going to get involved. We're not going to invoke the Taft Hartley act, which allows, if I remember Alex, you probably know this allows the us government to stop a strike if it is deemed, if it's a security.
[00:01:18] Speaker C: Issue or other, or something else strategically, nationally important. So it is particular circumstances.
[00:01:24] Speaker B: Particular circumstances. I think we mentioned this before, but what seems to me to be the real issue here is that on the one hand, the ILA insists that it's not going to discuss a master contract until discussions between ill locals and local employers are all completed, and then it will do a master agreement, whereas the USMX just wants to crack straight on with the master agreement and do the locals afterwards. Given that there are several ports, Philadelphia, Mobile, Tampa, Jacksonville, which the ILA have all named as being at an impasse, it's difficult to see how a master contract is going to get signed. There's not just one set of negotiations that has to be concluded, it's at least five or six. So, I mean, I think people should probably pretty much get ready for this. If a strike does happen, the likelihood of the White House getting involved exponentially increases because there'll have to be some sort of reaction.
[00:02:22] Speaker A: And Alex, this strike will obviously cause huge disruptions to ocean shipping. If it does happen, are we seeing this increase the demand for air freight?
[00:02:32] Speaker C: Well, interestingly, in the past, any disruption like that, especially strikes, have had a huge impact on air freight. But I spoke to Dan Morgan Evans last week from air charter service, and he said that they haven't started to see any additional demand because of the potential port strike. Yet he also said that he doesn't think that there will be so much demand because it's east coast and there's plenty of air capacity on the transatlantic. But I had some reservations about this, and I know you do as well, gav, because obviously trans Pacific traffic could fly to the east coast from Asia as much as the west coast, because.
[00:03:09] Speaker B: It'S very different in shipping. Right. In shipping, it's 55% of the east coast volumes come from Asia, either via the Cape of Good Hope or via Panama, but they're very much ex Asia. And so for european shippers to North America, it's a different scenario, because if you put a container on a ship today, Friday, yeah, you will get it unloaded at an east coast port next week before the strikes due to begin.
[00:03:35] Speaker C: Well, obviously air can go anywhere, but he was basing that on the Baltimore bridge collapse and he said that the air freight didn't get any particular lift from that, or the charter market didn't get much of a lift from that, so that was his feeling about it. Having said that, it is, the run up to Christmas rates are strong and shippers who haven't sorted their capacity out will probably have to pay high rates on the charter market. But Charlotte, actually, you've just been seeing Maersk. They must have told you a thing or two about the market.
[00:04:01] Speaker A: Yeah, I went to Billund in Denmark for literally one day, but it was really interesting. Maersk was naming their new 777 freighter, which is their first one, and a source told me that this had already been booked up with e commerce and that Maersk's long term customers weren't really getting a look in. But I think that's kind of the vibe ever at the moment, capacity is going a bit crazy. Everyone's trying to get space. What's this doing to rates?
[00:04:25] Speaker C: Well, in the charter market, they say that rates have actually been high all through the summer slump, and that they expect them to continue to get higher and higher. And they're saying if there is emergency air freight needed, it will be expected, but there is capacity available. It just depends how much you're prepared to pay for it. That's the question.
[00:04:44] Speaker A: And what's ocean freight rates looking like at the moment, gav?
[00:04:48] Speaker B: In general, they're looking pretty weak. And this is all taking the US east coast situation out of the equation for a second. We've just had another week of declines. The decline isn't as steep as the declines we've seen over the previous months. So this week it was a sort of single digit drops. The biggest dropper was the Asia North Europe trade, which declined by 9%. Similar Asia med was down 6%, trans Pacific down just 1%. So, you know, it's fairly balanced. And Asia to us east coast is down 4%. But it's kind of irrelevant at the moment. On the other hand, on the transatlantic, the rates strengthened again this week. They were up another 2%. They're well over the $2,000 per 40 foot mark. And of course, there is still that thing that there is still a few days left for european shippers to load cargo in Europe and beat the 1 October deadline. So transatlantics held up. Oh, by the way, south of the north Europe North America thing, on the, on Europe to South America, this is the time to ship. Apparently, rates have reached an all time low there, as Zenita was reporting that the short term spot rate from Europe down to the South America east coast is currently $610 per 40 foot. And get this, the spread between spot rates and contract rates has almost vanished at the moment. They're almost the same on that trade. So I don't know what's happening on Europe to South America. It doesn't look like a lot.
[00:06:19] Speaker C: Get shipping to South America.
[00:06:20] Speaker B: Get shipping to South America if you want cheap freight rates.
[00:06:23] Speaker A: Well, while we're talking about numbers, FedEx released their first quarter results last week. So these were a bit disappointing, weren't they, gav? Could you tell us why they were.
[00:06:31] Speaker B: Disappointing if you're a FedEx shareholder? So FedEx has this very weird financial calendar, which is completely different to the rest of the world. The revenues were in line with estimates. It was just that the earnings per share was about 25% off what they call the sort of consensus forecast for the earnings per share amongst investors, known as. And that led to double digit declines in its share price immediately following the earnings call, which was Thursday night. Is this a canary in a coal mine sort of situation? We ask ourselves if we look at the wider trade through the lens of FedEx's results. If you take a persistent weakness in the us industrial production, we're talking like Boeing, big companies which are also affected by strikes and this sort of thing. But if you. If you combine a general industrial weakness in the world's largest economy with also the magnitude of the Federal Reserve's interest rate drops on Wednesday, the current environment looks pretty weak. FedEx said this right. We're cautiously optimistic that industrial production will moderately improve in the second half, but we are dialing in pretty low growth exports expectations at this point because of the environment that we're seeing. So don't know. Is this early signs that this sort of persistently strong us economy economic run has come to an end?
[00:07:55] Speaker C: Well, it looks like consumers are just buying e commerce and absolutely nothing else.
[00:07:59] Speaker A: Alex, last week you continued the coverage of the DB Shankar takeover and I understand there's been some updates here. So what's the latest?
[00:08:06] Speaker C: Oh, yeah, the never ending saga of DB Shankar. What is it, about a year now it's been going for? Anyway, the latest is that CVC partners which lost out on the deal to DSV, a source close to them believes that they don't think it's been handled very well, the sales process. They think that their bid was better than DSV's and so why would DSV possibly have been chosen over them? So they think that there's some disquiet on the DB supervisory board about this. And I imagine that they're working hard to kind of make that concern even bigger. And it comes at the same time as there's an awful lot of stuff going on in Germany at the moment. Commers bank. There was a failed sale of a dutch company to Germany. There's other companies, Volkswagen. There's a lot going on in the corporate world in Germany and there have been a lot of questions asked in the german media about whether the sales processes in Germany are being handled properly. So I think CBC is kind of hoping that that spotlight might help it get noticed a bit more. Also, the other sort of slight bit of news, and it may not even be true, is that the Deutsche Bahn supervisory board meeting, which is where hopefully this will all end, has been delayed again from September 27 to October 2. So this is just going on and on. But CVC, I believe, is trying as hard as it can to see if it can get any input at all.
[00:09:25] Speaker A: And finally, last week, Seco Logistics admitted that it was having to refinance what's happened there.
[00:09:32] Speaker B: Oh, yeah.
[00:09:32] Speaker C: Well, this has been a fun old story, really. So Lodestar desk one had heard from some corporate finance sources that things were afoot at Ceco and that there was going to be some changes to his ownership. Now, we asked Seco, who immediately put us in touch with a crisis communications fancy pants pr place in America, and we gave them 24 hours to tell us what was going on. They then put out a really anodyne press release revealing practically nothing apart from the fact that Seco is having some refinancing. But they gave us absolutely no details about that whatsoever. What they did say to us was that Seco had not defaulted on its debt repayments. So that's one thing. Management will be staying the same. And Ceco actually is very keen to say that there's nothing to see here. It's business as usual. They've just got more investment, which they needed because of the ongoing freight recession which has affected all the market. So we'll have to just keep an eye on that one, I think.
[00:10:33] Speaker A: Perhaps some more stories to come.
Thank you both very much for joining me.
[00:10:37] Speaker C: Thanks, Charlotte.
[00:10:38] Speaker A: At the start of last week, we reported that some extreme weather events disrupted supply chains in both Europe and Asia. The departures from Shanghai's container terminals were disrupted following Typhoon Babinka and that was the strongest typhoon to hit Shanghai since 1949. Hapag Lloyd advised that ships were waiting for between 36 to 60 hours to berth in Shanghai while the port worked through the disruption. And waiting time in Ningbao was estimated between 24 to 48 hours. That was on September 16. Then, in Europe, severe flooding across central and eastern Europe led to transport delays, as warned by Kuna and Nagal. On Friday, Hapag Lloyd warned of operational disruptions due to flooding in Austria, Czech Republic, Slovakia and Hungary. It warned that the flooding significantly affected local infrastructure, including transport networks and its container depots, which likely would result in delays. And the reports are that the worst is still yet to come, with the Danube set to reach its highest point on Saturday in Budapest. So expect some delays there.
So now you are hopefully all caught up with last week's supply chain news. Here's what you might see on the lodestone this week we're going to be continuing to delve into the AI series that we started last week. The next article will be focused on the practical uses of artificial intelligence in logistics. I spoke with the world's largest AI logistics platform raft and with some of their customers. These are companies who have adopted AI into their processes. So I asked them where they've integrated AI and why they chose to integrate AI into the areas that they did. At the end of this week, we might have some news on the ongoing dispute with trade union Verdi and the Central association of German Seaport Operators. And this is a dispute between german port workers and their employers. Already we have had warning strikes at Hamburg, Bremen, Willemshaven, Bremerhaven, Emden and Brake. And if agreement is not reached, we will likely get more strikes at these ports. After their previous offer was rejected in the fourth round of negotiations, the employers tabled a new offer. This provides tax and duty free inflation compensation bonus of €1700 to be paid out in October and an hourly wage increase of €1.15 and this offer has now been submitted to Verdi members for review. The Verdi Federal Tariff Commission recommended that the members accept the offer, but of course this doesn't necessarily mean that they will at its meeting on Friday, the collective bargaining committee will decide on the offer based on the results of the member survey. So we'll give you an update on what they decide and what it could possibly mean for port strikes in Germany. Alex Linane has been working on a juicy story about shenanigans at a north american airport, so keep an eye out for that too. But of course, the major stories this week will likely be focused on the upcoming ILA strike. It is the final week countdown to the 1 October, and attention now turns to not if a strike will happen, but what will happen to supply chains. When it likely does. We will probably start to see congestion and hiked rates in the coming weeks as it unfolds, but of course, keep an eye out on the loadstuff and keep you updated with anything you need to know. There won't be a news in brief next week because I am off on holiday, but we will be back the week after as normal. Thank you very much for joining me and I'll see you next time.
