Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: Good morning and welcome to the Lodestar podcast. News in brief, we're going to be rounding up last week's supply chain news and giving you insight on what you might see coming up on the Lodestar. Well, as everyone knows by now, tariffs have been the main disruptor of supply chains across these recent months. But last week also saw some different challenges for stakeholders to navigate. First one was Super Typhoon Ragasa. That was on Tuesday 23rd September. Guangdong province in China, which is home to about 4% of the world's manufacturing capacity, saw a typhoon level 1, which is the highest level. And more than 10 cities including Shenzhen, announced the closure of factories and transport systems. This also led to flight cancellations. And this is a significant issue in the run up to Golden Week when factories are rushing to get their manufacturing done before they close for the holidays. And they would normally expect to close on around the 30th of September. But those that shut due to the typhoon now have a very small window to get goods out before these holidays. And we also reported that due to Poland's refusal to open its border with Belarus, air freight rates to Europe had spiked according to TAC Index data, and more than 130 freight trains had been stranded. The border has actually been closed since 12 September because Polish authorities identified security risks from recent Belarus slash Russian military exercises. So obviously this has caused significant rail freight delays. And authorities in Beijing are actually pushing for the reopening of the trade route because it's concerned about rumors of worsening Chinese export numbers. Also stemming from the geopolitical side of things, last week saw dock worker strikes in Italy for 24 hours at ports such as Genoa, Livorno and Ravenna following earlier action last Friday, protesters and strikers were blocking the loading of military cargo bound for Israel, which has continued despite the government in Rome last year actioning a full arms embargo on Israel. And this is quite similar to earlier action that we saw this year with dockers in France, Greece, Spain and Sweden who all engaged in similar acts of protest. And these could all be potentially contributing to any issues with European port congestion. But of course, despite all of these other supply chain issues, tariffs were still a big part of last week's headaches. I'm now joined by Alex Linnane. Alex, I believe you had the pleasure of reporting the details of this one. So what's happened now?
[00:02:34] Speaker C: At the time of recording this podcast, no executive order had been issued yet on the latest tariff announcements, but apparently according to Truth Social, we can expect to see from Wednesday this week, 100% tariffs on imported pharmaceuticals, a 25% tariff on all heavy trucks, a 50% tariff on kitchen cabinets, bathroom vanities and associated products, and a 30% tariff on upholstered furniture due to national security, of course.
So the question really is, will these actually come to pass or will trump Taco Out?
I no longer know whether these will have any impacts on freight movements or rates, to be honest. But what we saw on Friday is that air freight spot rates have soared from China to Europe, according to one forwarder, which, as you mentioned, is likely driven by the typhoon and the closure of Poland's border. We also put paid to some speculation over a flexible freighter that appears to be on the ground.
But to be honest, you've been much closer to the air freight action. You were away last week in Baku at the Caspian Air Cargo Summit. So was there much talk on tariffs there? How was the event?
[00:03:44] Speaker A: Yeah, it was. It was a really good event. It was my first time at the Caspian Air Cargo Summit and my first time in Baku, which is a very interesting city. It's got Istanbul vibes. But I just, I've come home, I felt like I've just been chain smoking all week because of the. The fumes I've been breathing in.
But, yeah, I mean, it's no surprise that tariffs were talked about a lot. And there were some really interesting comments about the impacts of all of this. So Consultancy Avian examined the shifting dynamics in trade due to the U.S. tariff policies, including obviously, the drop in China U.S. volumes and also the subsequent rise in China to Europe volumes. Tiaka's Glyn Hughes kind of summarized it quite nicely. He was saying that not only are stakeholders now adopting a China plus one approach and manufacturing, but also a US plus one tactic in the distribution of their goods. So trade is just kind of going everywhere. And some airlines there, including cma, CGM Air Cargo, Amazon, United, Atlas, they were all talking about the constant changing of their networks in light of the shifting demand. And Amazon and United were both saying that partnerships and interline agreements would be beneficial to expanding their networks, which I thought was interesting.
[00:04:53] Speaker B: And there was also a lot of.
[00:04:54] Speaker A: Talk about the growing importance of E commerce and where this is all moving to. Plus, DSV gave some tips on how to succeed in this volatile environment. And it said, unsurprisingly, that it was looking to undertake more inorganic growth opportunities.
I understand, though, that one area that DSP hasn't been growing is in its employee number. Quite the opposite. You reported. What's the story here?
[00:05:18] Speaker C: Well, yeah, recently there has been a lot of focus on jobs with forwarders pretty much the world over going into cost cutting drive. I mean there's a long list of forwarders that have announced job cuts. DSP has already announced that up to 13,000 jobs will be going after the Schenker takeover. But actually this looks set to be higher. It might be more than 16,000 jobs. But we also last week took a look at agentic AI and how this is going to impact the jobs market in freight.
According to a study by MIT, about $65 billion worth of tasks in the US alone can be done by AI. So that could impact more than a million full time jobs in transport in the us. And forwarders are particularly exposed to this.
I spoke to Plexport about the use of agentic AI and they said it would take significant costs out of the forwarding business.
It itself is using AI in every single one of its new products.
But like many forwarders, it has said that the aim is to keep the number of roles that it has and just use them in different ways. The MIT study also recommended that companies keep their existing staff and it pointed out that hiring externally tends to be much more expensive than retraining existing employees.
Another jobs related thing we're looking at is the impact of the extra costs for the H1B visa in the US which is commonly used by large forwarding companies. So I'm sure there's a lot more to come on logistics jobs.
[00:06:50] Speaker A: Yeah, I mean 16,000, that's a huge number. So yeah, I'm sure that's got a lot of people quite worried. But like you said, we will have the latest on that I'm sure. Before I let you go, Alex, as I was traveling I didn't have much time to read through Premium. Was there anything there that I should go back and have a read of?
[00:07:07] Speaker C: Oh loads as ever to be honest. That'll keep me busy over the next day or so.
There's more on the DSV post Schenker acquisition and what it means for dsv.
There's a really interesting analysis of US import volumes.
There's an article on how legal action might be the next logistics disruptor and a debut by the great Walter Kemsis on the US economy and the likelihood of recession.
There is also, from another new contributor, a fascinating look at why companies going for integrated logistics are doomed to fail. He writes that mixing the world of box lines and 3pls has proven toxic more often than not.
So yeah, there's a lot in Premium again this week.
[00:07:48] Speaker A: Oh I will go and have a.
[00:07:49] Speaker B: Look at it now.
[00:07:49] Speaker A: I love that they've got like a big selection of different authors over there with lots of different perspectives. So thank you very much, Alex. I really appreciate that.
[00:07:56] Speaker C: Thanks, Charlotte.
[00:07:57] Speaker A: So I'm now joined by Gavin Van Mul to give some insight into the ocean freight market. Gav, Alex and I have already kind of recapped the latest with tariffs, but you had an article on premium last week about the declining US import volumes. Presumably this is all related. I mean, what's going on?
[00:08:14] Speaker D: Yeah, completely related. This is derived from analysis by the industry consultant John McCarran, who did some research at the beginning of the week. So the top 10 US ports saw volumes decline year on year in August. So it's slightly ahead of the CTS numbers by a very marginal 0.1%. But what he noted was that obviously the 7 August tariff deadline actually applied to goods loaded in August. So a lot of the traffic in August that was coming into US ports was still under the tariff exemption.
Right. So really the effect of the tariffs on container volumes probably won't be seen at US port throughput data until September. However, building on the US National Retail Federation, which obviously tracks orders placed by US retailers, that there is going to be a big slowdown in US port traffic for the remainder of this year. And you know these are serious declines, right? September should be down 6.8%. October, 13.2%. November, 19.7%. December over 20%. If you consolidate those last four months, the overall decline that they'll see is 15.7%. I just wanted to put that into context because that's a really significant drop.
Probably worth remembering that the biggest recorded drop in container volumes in the history of box Shipping was the 12.4% that was seen in the six months following the global financial crisis.
So basically what we're looking at is that this decline of 15.7% over the last four months of 2025 could possibly be the sharpest decline in volumes the industry has ever seen. We haven't properly seen the full tariff effect, but boy, it could be on its way.
[00:10:17] Speaker A: Yeah, that's some really interesting figures there. This low demand is having a huge impact on rates. I mean, you actually had a headline at the end of the week that carriers are trying desperately to fight back against the general weak rate environment that we've been seeing. So I want to ask you first, what is the general movement of rates this week? I'm assuming I'm going to know what your answer is, but also how Are carriers mitigating these declines?
[00:10:41] Speaker D: Okay, so look, rates on all the east west routes were down compared to the week before. But that won't come as a surprise to anyone who watches this market regularly. As you said, demand's low. The capacity cuts through the blank sailings program don't really take effect until this week when China closes due to its Golden Week holiday. I think that starts on Wednesday.
So there is a couple of days of batteries still being open, a couple of days of port loading, but you know, everyone's getting ready for the shutdown. Rates certainly on the Asia Europe trades are now heading into loss making territory, which is the point that spot freight rate wars tend to take place, something that we've discussed in previous weeks.
And freight rate wars have really become a question of who can stomach the losses enough to gain market share. I mean last week the World Container Index from Jury, the Shanghai Rotterdam leg ended at 1735 per 40 foot. Shanghai Genoa was down to1990, so marginally below what I consider to be quite an important $2,000 per 40 foot threshold.
So how are carriers mitigating this? Well, the historic response to this trend of declining rates, especially when they start hitting loss making levels, is the introduction of what our colleague Mike Wackett calls the shock and awe tactic of a carrier introducing a massive GRI and then hoping its competitors will follow suit and hold some kind of pricing line. And so it was last week with Hapag Lloyd announcing a $1,000 per TEU general rate increase on Asia North Europe beginning 15 October and similar quantum although slightly higher for various Mediterranean destinations. The date here is important of course, because it's when we should see the post golden wheat trade sort of fully resume. In terms of activity. The litmus test will be whether the GRI sticks and other carriers follow suit and where demand is and where capacity is for the final quarter of the year. Historically what we've seen in these situations is that the initial gri, the big one might not hold, which indicates the continuing of the rate war. But you will expect to see another attempt from either the same carrier or another carrier pretty soon after that. So they will try to counteract this through big announced price hikes and it will be a question of industry and for re for which read carrier discipline as to whether those prices hold.
[00:13:21] Speaker A: Well, I'm sure we'll pick this discussion back up in two weeks time on the News in Brief podcast we can find out what happened. But one carrier that was in our coverage a lot last week Was the Chinese line Cosco first, as we know there is the upcoming USTR fees on Chinese vessels or carriers calling at US ports. And as a Chinese carrier we've been reporting that COSCO was in the firing line big time. But now it seems that they don't, they aren't too scared.
[00:13:46] Speaker C: What's happened?
[00:13:47] Speaker D: Well, I mean nothing's changed really. They put out a statement saying that they would maintain their capacity and they remained committed to the US trade, blah blah blah.
Subsidiary OCL released a, when I say a similar statement, in fact it was exactly the same statement. It was a complete copy and paste except they just replaced the word COSCO with the letters double OCL. So the USTR is util implemented on 14th of October, I think interestingly the following day, the 15th of October. And this is separate to what we've just been talking about, HAPAG in relation to Europe Asia, but on the Trans Pacific there are a slew of general rate increases set to be implemented on the 15th of October. So it'd be interesting to see whether, you know, they might partially stick as some sort of alternative to implementing actual USTR related surcharges. The other thing to note is that the USTR port fees could fall, force some carriers and I'm thinking Costco and Double O here to slim down their port calls or to reduce the number of port hauls in the us but we won't know that for a few weeks. I mean really, if you read between the lines of the Chinese carriers comments, what they're basically saying is they're going to suck up the extra costs for the time being at least.
[00:15:07] Speaker A: I mean also Costco's been eyeing other trades too. It expanded its Indian network. I mean, even though it said that it's going to be holding firm with its US coverage. Is this a possible mitigation move to hedge its bets on the US trade, do you think?
[00:15:20] Speaker D: Yeah, certainly, it certainly is one, you know, and I think just beyond the Asia India trade at the moment. But I mean carriers are looking for all sorts of trades to mitigate the problems. I mean we. Right. At the end of last week we ran a story from our Asia correspondent Alison Koo who'd been talking to Evergreen and they were saying a similar thing, that they were pumping more resources into Inter Asia and Latin America to return to the Asia to India Middle east trade. We've been getting really mixed messages about this.
So you're right, the Asian carriers are piling into it and not, not just the big guns like Costco, but also the group that we've kind of collectively termed opportunistic startup carriers, people like CU Lines who've been attracted by the growth potential of India, which is hardly surprising. Right, because anyone can see the potential in India. But the reports from our sources suggest that this interest has also sort of crashed freight rates. Being told, you know, Shanghai, Dubai shipments are now at around $600 for a 40 foot and effectively is the important thing, absolutely zero on the backhaul. And there is some concern among some forwarders that they're worried about whether Indian demand will continue to hold up. I mean, if you talk long term and if you assume a normalization of the trading relationship between China and India, the potential is obvious. And I think it's a relatively safe bet that at some point in the future this is going to be a massive trade just because of the population numbers. Right. Demographics support it, but it's nowhere near that yet. And so, you know, it's, it's kind of teething problems.
[00:17:04] Speaker A: You love making a prediction right at the end of the episode.
[00:17:07] Speaker C: There you go.
[00:17:08] Speaker A: Interested to see if that comes true or not. Thank you very much, Gav.
[00:17:11] Speaker D: You're very welcome, Charlotte.
[00:17:19] Speaker B: So now we've rounded up last week's supply chain news. Here is what you might see coming up on the Lodestar. As always, you can expect to hear more on tariffs. Plus, Alex Linane will be looking at air freight in Southeast Asia and I will probably have some more insight to come from the Caspian air cargo Summit. Flexport are hosting some webinars this week. Also there is one on Tuesday about eliminating air freight from your supply chain, which sounds interesting. And one on Thursday for their regular European freight market outlook. The Lodestar will be in attendance at both of these and we'll be bringing you the main takeaways on theloadstar.com I also want to mention that in two weeks time will be the Aviation Connect conference in Copenhagen. The Lodestar will be at the event. So if you're planning to go then please reach out to me to arrange an interview or just to say hi. And we are also coming closer to the implementation date of the USTR port call fees on Chinese vessels and carriers. So we might have some more news to come there. Thank you so much for joining me and I'll see you next episode.
