Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Lodestar podcast News in Brief, where once again we are going to be recapping the week's supply chain news as briefly as we possibly can. Coming up on this episode, we will be looking at what is behind the rising rates on the Trans Pacific and what this means for service levels and booking risk. We are also going to be looking at the latest shuffles in the air freight networks due to a short supply of capacity.
My first guest for this episode. Joining me once again to unpack the latest in the ocean freight market, I am joined by the Lodestar Managing editor, Gavin Van Maal. Hello, Gav.
[00:00:40] Speaker B: Hello Charlotte. Very nice to be here again. How are you?
[00:00:42] Speaker A: Yes, it's very good to have you back. It's like Groundhog Day, isn't it? But I'm doing very well, thank you, Gavin.
So, getting straight into the news for the last few weeks and last episode, we were talking quite a lot about the high Trans Pacific rates this week. During an online investor conference, Yang Ming Chiefs said that freight rates on the Trans Pacific trade could stay high despite global container shipping entering its traditional fourth quarter off season. So the executives pointed to a combination of Panama Canal constraints, limited effective capacity, persistent port congestion and cargo ships between US Gateways as the key factor supporting rates. Also, the Port of Long beach announced record traffic volume for August and its CEO said he is expecting strong volume in September, which will likely continue into October and possibly November.
And he cited predictions from carriers and cargo owners and of course the congestion at the Asian ports caused by the storms that we've seen. So how is all of this translated into Trans Pacific rates this week? What happened on the Transpac and how is that comparing with other major lanes
[00:01:45] Speaker B: appears to have been reaching the sort of peak in terms of pricing. Drury's World Container Index for last week saw the US east coast, which has obviously been the real hot spot over the last month or so. The Asia US East coast was essentially flat pricing stuck at $10,300 or so per 40 foot, while into the West coast they were up 2% to just a bit under 8,000, $7,800 per 40 foot. I mean, there are signs of sort of, I hesitate to use the word weakening, but that's sort of what it is in terms of pricing. There are now reports of sort of discounts from carriers. So into the west coast you can be getting rates for as low as $6,000 per 40 foot. I mean, it's still pretty high right for this time of year and, and into the east coast reports of discounts, you might be able to get something for $9,000 per 40 foot. But these, these, these sort of offers are said to be sort of few and far between. It's really the congestion that's still the issue here. And I think the sort of important thing is it's very eas say, you know, it's congestion, there's vessel bunching and stuff, but it's probably just worth, you know, just remembering what that impact has on the forwarders and stuff.
Because the congestion, the vessel delays, the vessel bunching, what they, what they lead to is, is issues with canceled bookings and cargo rollovers. And that's the, that's the sort of problem and that, and when, when you get that kind of environment that certainly in this case appears to be holding the rates up at quite unseasonably high levels for what I see. I mean, if you look at Asia, Europe and you ask for a comparison with Asia, I mean, they have been in gradual steady decline, like a sort of gentle ski slope, baby ski slope for several weeks now. And this week was no different. You know, they were down another few percent on both, both to North Europe and to, and to the Med. One other trade just, just while we're on the rates and we haven't, we don't look at it as much because it's normally so stable, but the transatlantic, especially westbound to, to North America has remained very strong. It's just over $3,000 per 40 foot at the moment. That's 72% up year on year. And it's, and it's, it's what, 50? I mean, the general rule of thumb for transatlantic freight rates from as far back as I can remember. So they've generally been between sort of, they generally stick around $2,000 per 40 foot and in times of sort or low capacity, they might push up to two and a half thousand dollars. But to be at 3,000. They've been at 3,000 for well over a month now or been above 3,000. So there's, there's, there's evidently relatively strong demand there. And of course, other issues that we talked about, the congestion and vessel function because, because the congestion is also taking place in Europe. It's also taking place in some parts. You know, when you get congestion starting in Asia, it necessarily spreads to other areas by, by virtue of the fact that the vessels that were congested in one part end up arriving at the other.
[00:04:52] Speaker A: A lot of ripple effects.
[00:04:53] Speaker B: Yeah, exactly.
[00:04:55] Speaker A: I think you said before congestion. I think it was a podcast. I think we did it? It was like last Christmas or something, you said congestion was the root of all evil because it just, it just, it just knocks on and knocks on and. Yeah, it really does. And we're seeing at the moment with, with the race. But you mentioned the, the transatlantic there.
[00:05:11] Speaker B: Yes.
[00:05:12] Speaker A: You reported last week that the trade war between U.S. and Canada, coupled with recent transatlantic talks between Canada and the EU as well as the UK is beginning to fundamentally change the country's freight flows. So what are the details? How significant is this and is this something that's contributing to the higher rates on the transatlantic.
[00:05:30] Speaker B: Last bit of that question first. I'm not entirely certain whether it is or not.
It's baby steps. So I did. So I'm going to a shout out to Stefan Montz, who is the first founder of the Canadian Forder Speed Global Logistics, for a brilliant interview that he gave me and some really in depth information and, and viewpoints. What, what it is so far is that it seems that Canadian shippers are, it is particularly important, are doing trial shipments, particularly on sort of industrial components, automotive components, you know, quite advanced, particularly in the automotive industry where they are looking to replace supplies that would have come from the US and were coming from the US and then I think it's well known, not just in our circles, sort of in global economics, as people have been looking at the U.S. canada trade war, you know, and they particularly pick out the automotive industry and talk about a car will go back across the U.S. and Canadian border for many times before it's finished, you know, and, and so with the issues that have been going on between the two countries, absolutely crazy. If you look at it from our perspective as a sort of neutral observer, there is no doubt that many Canadian shippers are looking to re engineer their supply chains and this is sort of supported by trade policy movements. Mark Harney's visits to Europe recently was, it was very well broadcast in our press here. I have no idea how, how well it was sort of, you know, how well it was reported elsewhere, but certainly over here there was a lot of talk.
So, and there's two bits to this. So you've got, you've got the ceta, which is the ceta, which is the Canadian Europe Trade Agreement that's being negotiated between Canada and, and the eu.
Don't, as far as I understand it hasn't quite been ratified yet. There's, there's still a couple of things to our. Now at the same time, I think on the 1st of September, UK acceded to the CPTP. No it's the CPTPP.
That's right.
Doesn't roll off the tongue very easily.
It's the Comprehensive Trade Partnership for the Trans Pacific or something like that. Anyway, it doesn't really matter because what it does mean is that basically there's, there's a common trading agreement that the UK and Canada can operate under. And, and certainly that means According to Mr. Monce, that, that it basically it's made sort of British goods financially competitive with what Canadians were sourcing from the U.S. i mean he said, you know, he said that basically at the US Canada border it's become a bit of a nightmare frankly, with customs brokers buried under paperwork and so on. I'd just like to take one quote from, from the, from, from, from the article.
This is what he told me. He said the motivation to look to Europe is pure survival. And when he says Europe he's including the UK in that. The motivation to look to Europe is pure survival. With cross border trade becoming punitive and unpredictable, EU sourcing under CETA offers duty free stability and we absolutely expect this to accelerate through Q4 and into next year. Supply chain managers hate volatility more than they hate high costs. And even if the US and Canada magically sat down tomorrow and patched things up, the psychological damage is done. Supply chains have deep muscle memory. So I think that gives a really good sort of summation of, of particularly the sentiment that's going on in those circles.
[00:09:08] Speaker A: Yeah, I mean I think quite a few people are trying to. Well that's like a trend that we've been seeing over the last, I mean few years now. It's like there was China plus one and then now people are looking for us plus one when they're looking for their, their importing. So yeah, it's quite interesting and it'll be interesting to see if that continues the strength on the transatlantic. We will be monitoring it of course. Finally, for news, this week we saw news of a potentially significant leadership transition at Pacific International Lines with the implications perhaps going beyond just a change of CEO. So what are the details of the personnel changes and what could it mean for the future of PiL?
[00:09:44] Speaker B: So we had a. Yeah, you're right. We had a very interesting analysis written of this by a previous guest on our podcast, actually Niels Roche, who of course is a PIL veteran. What he was talking about is just the way that the chase. So you've got. So departure is Lars Kastrup, who's a really well known name in line of shipping, has had long tenures with mass CMA CGM Pl as it was known. He arrived at PIL at a time when the Singapore carrier was staring into the abyss. I mean it was on the verge of bankruptcy and over the course of the next few years he managed to really restructure the company in profits. Now you might argue that he was aided by, by the, the sort of general economic conditions but nonetheless he's done a fantastic job. It's now a very profitable company. It's got more ships on order and it's, and he brought it back to stability. He righted the ship as it were. His. They've announced a. So the, the majority owner of, of PIL is Temasek which is the Singapore's, which is Singapore's sovereign wealth fund. And a Temasek insider, Wan Chi Fung has been nominated as Mr. Kastrup's successor. That's going to be a six month process. I think he's initially been appointed deputy CEO and then he, he'll fully take the reins in April next year. And so Niels was asking these very interesting questions about what does this actually mean for pil because it's gone from a company that was, was, was fighting for its survival to one that now has a whole load of strategic options on its plate. Now Temasek also used to own NOL, which was the holding company of the container line APL which was acquired by CMA CGM around 10 years ago. So the questions were does the appointment of Mr. Wan therefore indicate that Temasek might be preparing PIL for a sale itself which would obviously be of great interest to all the M and A enthusiasts in the industry? Well the answer is we don't know because actually PIL doesn't need to sell and there are a whole range of strategic options that it, it has at its fingertips now. And it might well be that the Singapore government decides that it's in its best interests to remain to, to, to hold on and keep a national carrier. So it could be more, there could be more M and A. I mean it could now become a buyer, it may look at doing an IPO. One of the interesting things on Mr. Wall One CV is that he was appointed CEO of BDP, the Philadelphia headquartered freight forwarder, the PSA, another Singapore operator.
[00:12:21] Speaker A: So many letters.
[00:12:22] Speaker B: Yeah, I know, I'm sorry. So PSA is the big global port operator. It's also owned by Temasek which led me to wonder whether actually we might look at the Singaporeans might be looking at some kind of combined terminal operator carrier proto merger in the sense that we see, you know, all of the big lines now have big terminal operating arms. So perhaps it might be in their interests for a big term operator to have its own carrier arm. You know, I don't know. It's, it's, there's a lot of speculation at this stage, but it's, it was just highlighted as one of the more interesting executive moves that we've, we've covered.
[00:12:58] Speaker A: Yeah, it was an interesting article from, from nel's interesting analysis and of course, we will be watching every step of the way and reporting on any updates of this. Gav, before I let you go, what was on Lodestar Premium this week? Could you give me some highlights, please?
[00:13:11] Speaker B: So we had a really interesting comment on the latest on the acquisition of Hutcheson by msc. Or not, as is the case. I mean, the short answer is it's still stuck in. It's stuck in abeyance in Beijing. Spoilers. Yeah, yeah, I probably shouldn't do. I'm giving away all the trade secrets here. I mean, the other thing, of course, is that Hapag Lloyd's, Rolf Aben Janssen is, we understand, is in Israel at the moment trying to close the Zim deal. And then we've got some, we've got a couple of really good pieces on container shipping and their earnings season and whether they're going to be able to continue earning what they have been doing. It's been some very good stuff as ever, as ever.
[00:13:55] Speaker A: Gav, thank you so much for joining me. It's been great to chat to you.
[00:13:57] Speaker B: Thank you very much, Charlotte.
[00:13:59] Speaker A: My next guest for this episode. To help me round up the air freight news and beyond, I'm joined by Avery Aviation Software's Chief Commercial Officer, Tristan Cox. It is great to have you on the podcast, Tristan.
[00:14:09] Speaker C: Thank you. Pleasure to see you again.
[00:14:10] Speaker A: Charlotte, before we start, are you able to quickly introduce yourself and what you do at Avery?
[00:14:14] Speaker C: Yeah, sure. So my title is Chief Commercial Officer, but that actually is probably only a small part of what I do. We're quite a light team at senior management level, so we're pretty fluid across the roles that we each perform. So I guess my primary goal is to bring revenue into the company, finding new clients, working with existing clients to make sure they're getting the most from the partnership. But because of the way that we work at Avery, I mean, we're an IT company, but we're actually a lot of us come from the air cargo industry, so people like Phaedra, Den Hertog, myself and more recently you've seen we've appointed Cornelia Korsch and Gianluca Marchangelo, both industry veterans. So we very much build products that we know the industry is going to want rather than building something and hoping that they come and buy it. So we spend a lot of time on product development as a team and a lot of time helping clients on board, which is a key part of what makes us successful and a lot
[00:15:06] Speaker A: of time winning hackathons as well.
[00:15:08] Speaker C: Yeah, we just talked about it before we kick this off, but yeah, one of our, sort of one of the proud things we take great pride in is we're not just industry experts. I've just named a few of the people that work with us, but we're backed by probably the most technically capable people in the industry. I mean, Ukraine has an amazing aviation history and story to tell.
The majority of our developers and project managers are still based in Ukraine, a lot of them mostly Ukrainian people. So you blend those two things together and it's the perfect recipe for delivering the right products into the marketplace. So, yeah, the hackathon is really the icing on the cake. We've been to five and we've won five. And I'm not going to name and shame the others, but we're up against very big organizations with very deep pockets and a lot of people. And look, they do an amazing job of those hackathons as well. But to come away with with five victories and I think before we started, I showed you the back of my T shirt which has the five trophies on it. So you might see it next time we meet.
[00:16:03] Speaker A: Very impressive.
So let's get into the news now. So we had some fresh data from Trade and Transport Group and Avian showcasing the latest e commerce movements, which is for the month of August. So Avian's latest outbound China e commerce data recorded a 16% year on year decline in August, which is the steepest fall so far. This was driven by a 40% drop in exports to Europe. So Trade and Transport Group data also showed that Chinese low value and E commerce exports to the European Union fell by 65% year on year in August, following already a 54% decline in July. I mean, this is of course the impact of the market continuing to weaken following the introduction of the euro 3 per item fee in the EU. So Avery oversees end to end operations within the air cargo supply chain. What have you been seeing in terms of rates and capacity in the last few weeks on Asia to Europe? And how is this comparing with the other major Lanes.
[00:16:58] Speaker C: Yeah, I mean it's a very different, that market is totally different to the one I remember from 10, 15 years ago at the airlines like British Airways and American Airlines, China and Asia into Europe and across to the US was underpinned by large shippers like Apple, et cetera. And you would take season long capacity at a fixed price and then there'd be, you know, some, some more transactional stuff around the edges. It's now, E commerce is now really driving that capacity situation and the volatility is like nobody's seen before. You can't predict week to week, day to day, mostly because of the regulatory changes that you've just alluded to. So you really need to be very nimble in that market. It's harder for the freighter operators who need to adjust schedules and operations more than the passenger people who are probably going to be flying those aircraft anyway. But we've certainly seen exactly those patterns that you're, you're, you're talking about from that research. And what I think is interesting is the way that it, it's a bit like water. If it doesn't come this way, it finds another way out. And you'll see an uptick in places like India, Africa. You know, I think some of that is referenced in the data you're talking about. Yeah, it's, it's, we have to be on our toes too. And I think technology is part of that solution, enabling that, that, that.
[00:18:10] Speaker A: I mean like you said, yeah, it is like water, it flow path you block. But it does seem like these changes are happening more and more regularly. So these constant changes and external pressures and then subsequent huge swings in where volume is moved and how much is moved, have you seen it push shippers to be favoring shorter agreements? I mean, are there any trends that you've been seeing in terms of contracting?
[00:18:33] Speaker C: Absolutely. As I just started this sort of our previous answer with those season long, you know, back to back agreements with shippers have just disappeared in the main. I mean you've got one or two big, big sort of customers still out there willing to do that. But it's become a really transactional marketplace and people aren't prepared to take the risk perhaps that they were previously on that capacity because you could resell it and you're not sure now that the demand's going to be there. Particularly with these. It's not just country to country, it's region to region. So you could end up with a lot of capacity and space very expensively that you can't do anything with. And there's not really much opportunity to recycle that through other routings. You know, you're committed to that trade lane and given the volatility of it, I think very few people would be prepared to do that.
[00:19:16] Speaker A: So while we're on the topic of rates, something that I wanted to ask you that I've been looking at recently is how forwarders have been reporting getting different rates and space levels shown across different booking platforms for the exact same flight. Obviously, part of Avery's solutions that you offer is a cargo quoting tool which can make calculations based on advanced rates database and flight schedules. So have you noticed a disparity across platforms in rates and capacity, whether that's like a third party platform or from the airline itself? And do you think there is a solution to this?
[00:19:46] Speaker C: Yeah, I mean, I only have anecdotal evidence because we don't have. I'm not privy to all of that information that goes on, but certainly, one, it doesn't surprise me. And two, anecdotally, as I said, I've seen evidence of that. But actually I think that's a good thing. I mean, we are creating marketplaces. What is a market about? Competition. What does competition create? Differences in quality of service, price standards, et cetera. So I'm not at all surprised. And I mean, let's use an analogy. If you go to Fortnum and Mason later and buy some Marmite, it'll be a different price to go into the co op later and buying the same jar of Marmite, it's no different here. And if you look at the distribution channels that airlines, passenger airlines have used, you can get a ticket on booking.com, kayak, Skyscanner or the Airline Direct. You'll get five different prices probably. And I think that's what we're seeing now. Airlines are becoming clever about the distribution strategy. I think the early days they just chucked everything on the platform.
This is my capacity, there's a price. Do you want to buy it or not? I think now they're getting more intelligent and they're using more advanced revenue management tools to actually say, do you know what on this platform, for that rate or for this capacity, we're only going to show this much inventory and we'll perhaps push a bit more directly into our own channel. So I think you'll see people are starting to play clever games with it, which I think is a good thing because I think this is how we advance as an industry. Just putting everything on there at the standard price. It doesn't really Excite the forwarder.
[00:21:03] Speaker A: Yeah, it's an interesting take, actually. I've not thought of it like that, that you can actually kind of make it work to your advantage. So. No, that's. That's a good point. So, as we were previously talking about, this three euro fee in Europe is just kind of the latest thing to shake up the air cargo industry. Obviously, we've previously had the de minimis removal in the us. Then there's this continued geopolitical uncertainty and tariffs, all of that. There's also supposed to be a further handling fee for small parcels introduced in the EU in November, which again will likely shake up this market.
All of this volatility, of course, now means it's more important than ever for companies to be able to monitor data points and to act on any changes that might be needed. So I saw this week that Avery has launched a new product to help make find these data points easier. What is this solution and why do you think it's needed in the market?
[00:21:49] Speaker C: It's called Ask Avery, which is the branding term.
Now, this is where I'm going to go off, off piste a bit, because I'm the sales guy, not the technical guy, but it's really using artificial intelligence to shorten the workload for people wanting to extract data quickly and efficiently from large data sources. And Avery, the main ERP system, is an example of a large. It's a large database, a lot of information.
But as a user, I just want to know, tell me quickly, how many kilos did I move from London to New York last week? What was the average load factor and yield previously? Some analyst has to sit down with some Excel spreadsheets, pull data from one source to another, and then create a report for somebody to look at and analyze. You can now write that query into Ask Avery. It then uses multiple AI sources, you know, the usual ones, ChatGPT, Claude, et cetera, under this MCP model, they call it. Basically, it's just a standard way of interpreting data from multiple sources. So within seconds, you're now getting very complicated bespoke reports from a deep data lake, you know, within Avery or any other systems that you choose to look at. Where it's a little bit clever is we only allow it to look at information that we trust. So if you ask that question generically into ChatGPT, it's probably running off, looking all over the Internet and the world looking for information to glean, whereas we're throttling it back. Say, only look at the data we're giving you from within our own systems, which we trust and know is right. So the purity of that information should be much higher than a. Than, if you like, a general search of, you know, of the wider world. When the technical people probably listen to this and go, he doesn't know what he's on about.
[00:23:21] Speaker A: It sounded good to me.
[00:23:22] Speaker C: Well, as a layperson, that sort of makes sense to me. Ask me how it works. You'll need to get the clever people from Avery, like Vitaly, onto the call.
[00:23:29] Speaker A: Well, no, it sounded good to me. I mean, I'm not a techie person either, but. No, that makes a lot of sense. And I like the name Ask Avery. I think that flows very well. Tristan, thank you so much for joining me. It's been wonderful to speak to you.
[00:23:39] Speaker C: Yeah, lovely see you again, Charlotte. I look forward to some more Cheltenham tips in March, So thank you.
[00:23:43] Speaker A: So that was all we have time for for this episode. A huge thank you to Gav and Tristan for joining me and helping me round up the ocean and air freight news. And a huge thank you to you all for, listen, watching. If you're not watching, I say this every episode, but please do head over to YouTube so that you can watch the episode. And please, like, subscribe, comment, share, all of that. It really helps us out. We will see you next time on the News in Brief podcast.
