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. Now, unless you are under a rock the whole of last week, then you will know that the main stories have been focused around the International Longshoremen's association going on strike on the US east and Gulf coast ports. And this started on Tuesday last week when the master agreement expired between the dock workers and the United States Maritime alliance. But this was only short lived. And on Thursday last week, they announced that they had come to an agreement of sorts. So what happened, Alex? How was this resolved?
[00:00:45] Speaker B: Oh, well, it's been an exciting week, really. As you say, it started on October 1, and there was much bluster. And Harold Daggett, who's really quite well known now, was his usual boisterous self. Interestingly, the White House stepped in reasonably soon to say, we will not invoke the Taft Hartley act, and you're going to have to sort it out by yourselves. And then late on Thursday night, the rumours started that an agreement had been reached. And it turned out the dockers have agreed to, I think, 62% pay rise over six years. But really, what they've done is kick the whole thing into the long grass. They've said that the contract is now extended until January 15. And so all the difficult negotiations, which is going to be automation, have still got to be done. Now, economically and politically, it's a much better time of year for them to do this, because if there is a strike in January, there's going to be a bit less cargo than there is right now.
[00:01:45] Speaker C: Well, not necessarily, no, because you've got the run up to Chinese New Year. So actually it turns out that that's going to be a mini peak.
[00:01:53] Speaker B: Oh, that's interesting. Yeah, that's a good point. But politically it's better because it pushes it onto the in tray for the next president, whoever that may be, who starts on January 20. So it's got the Democrats out of an electoral problem most of all. And of course, there's massive relief all around because it was starting to look like it could get quite messy. There will still be quite a bit of sorting out to do. The estimation is about three weeks until everything's cleared up and back to normal, as it were.
[00:02:21] Speaker C: I mean, there are 44 vessels at anchor outside at the moment, waiting to berth along the east coast and Gulf coast. There's another 120 on their way.
[00:02:31] Speaker B: That's as of Friday.
[00:02:32] Speaker C: That's as off Friday. Yeah.
[00:02:34] Speaker A: One of the things that we reported on last week was that force majeure was called by some of the major carriers, including Evergreen one and Cmadda.
[00:02:43] Speaker C: I think all of them would have done. I mean, they wouldn't have been carrier who wouldn't call force majeure, given the situation, would they?
[00:02:50] Speaker A: Well, this excuses the carriers that called force majeure from fulfilling their contract obligations and this is in the case of events that are out of their control. So natural disasters, wars or strikes. And this also means that they have the liberty to reroute cargo if necessary. And not only will the shippers not be refunded for this, but they might also have to pay surcharges in the coming weeks for the cost of rerouting and delays.
[00:03:16] Speaker C: They will, won't they? I mean, there will be port congestion surcharges coming in now as they clear up the backlog.
[00:03:24] Speaker A: And what impact has it had on rates? Have we seen rates go up?
[00:03:27] Speaker C: So, yeah, on the transatlantic, it's a bit of a weird picture this week because the Drury WCI had their Rotterdam, New York leg sort of static. There was no change. Weekend, weekend. I. For Zenita, they did see quite a jump. This is the transatlantic. They saw rates increase by 20% week on week. And in fact, those rates on the transatlantic are up nearly 60% since August, which is actually quite an opposite performance compared to the other deep sea trades, Asia, Europe and Trans Pacific. So there's definitely been some front loading, there's been some price reaction to the US east coast, the transatlantic. But, you know, thoughts that there might be a sudden cargo rush onto the trans Pacific as us importers were thought to try and use west coast gateways instead of east coast ports that didn't transpire. In fact, trans Pacific rates were down 4% on the WCI. And for what it's worth, they were also down on the Asia Europe and Asia Mediterranean routes by eight and 9% respectively. But those routes obviously largely unaffected by the ILA related actions.
[00:04:38] Speaker A: Right. And obviously it was only three days. But Alex, did this have any impact on air freight?
[00:04:43] Speaker B: Well, actually, yes. I spoke to a couple of charter brokers this week who said that demand had gone up hugely. They had loads and loads of requests for extra charters and rates were starting to hit the sort of almost record amounts. They were saying if the strike probably continued, I think charter rates were going to head the same way as they were in Covid. So super expensive but it's also been impacted not just by the port strikes, but by Hurricane Helene, which devastated much of the south of the US. And so there's a lot of equipment going in there and humanitarian aid, so there's a lot of charters for that. And also a lot of passenger capacity has been sent to the Middle east to evacuate citizens in Lebanon and so on. So the charter market has been busy. Although the strike will now not so much affect demand directly, I can see a situation where rates don't particularly fall because I think there's still enough demand and e commerce has still booked up a lot of the capacity and there's enough horror going on elsewhere in the world to ensure that there's still need for air freight.
[00:05:50] Speaker C: So basically what you're saying then, Alex, is it's difficult to delineate the effect of strikes compared to all the other factors that have been in determining the demand for air freight.
[00:05:59] Speaker B: Right? Yeah, definitely.
[00:06:01] Speaker C: But we've got strikes elsewhere as well.
[00:06:03] Speaker A: Well, maybe not, actually.
[00:06:04] Speaker C: I don't know.
[00:06:05] Speaker A: In Germany, the trade union Verdi actually agreed on the offer from the Central association of German seaport Operators. 77.6% of Verdi members voted in favour of their employer's offer from the fifth round of bargaining. I think this was somewhat overshadowed by the ILA strikes, but if anyone was curious, the german port strikes that have been kind of in the background, they're not going to happen. And the agreement is good until the 31 July 2025. So we've got a while for that one.
[00:06:38] Speaker C: It's quite interesting. One of the things that have been sort of said around the us thing was that one of the problems with the way that the us labor employee relationship as well is if you only get these negotiations once every six years, there's a lot of time for frustrations and whatnot to sort of fester over that period, whereas, you know, if you're meeting every year on an annual basis, there's presumably more room for the problems to get ironed out.
[00:07:05] Speaker B: And also on ports, Montreal went back to work last week after a 72 hours strike, but I'm not sure they're completely out of the woods yet. They're currently in mediation, so we'll have to keep watching that.
[00:07:18] Speaker A: And finally, in some non strike related news, are we seeing an end to the whole DB Schenker takeover saga?
[00:07:25] Speaker B: Well, yes, this might be our last mention of it, at least for a while, because the Deutsche Bahn supervisory board voted to agree the DSV takeover, despite the fact that the employment unions, which make up ten out of the 22 board positions were said to have voted against it. They still lost. So yes, DSV will be taking over Dibushenka. And as you'll see in the Lone Star today, I'm quite sad about it.
[00:07:52] Speaker C: Haven't we got a, we've got an op ed coming up this week as well, haven't we? From an insider?
[00:07:58] Speaker B: There is, there is. Oh, I don't know if we can say who wrote it.
[00:08:01] Speaker C: No, we can't say who wrote it, but we can sort of tease our listeners with the contents of it, right?
[00:08:06] Speaker B: Yes, there is an op ed coming up about the takeover of Shenka. It'll be worth, well worth the read. It was on low Star Premium last weekend, will be free to read for Lodestar readers this week.
[00:08:26] Speaker A: Now you are all caught up with last week's supply chain events. Here's what you might see on the Lodestar this week. We're likely going to have more news about the fallout of the ILA strike. One estimate from JP Morgan said that the strike would have cost the US economy between 3.8%, $8 billion and $4.5 billion per day. And one day of the strike was predicted to lead to one week of disruption. So shippers, forwarders and carriers are likely to face challenges throughout most of this month. One of those could be seen in detention and demurrage fees now that ports are back open, but the delays are still being felt. So we might have some stories on that for you on Thursday, Fretos head of research Judah Levine will present the latest trends in the international ocean and air freight markets, and he's also going to share the projections of the strike's impact and the outlook for the rest of the year. So we will be covering the highlights of that on the loadstar now on Wednesday. Last week we reported that israeli, jordan and iraqi airspaces were temporarily closed after Iran's biggest ever missile attack on Israel. Many carriers, such as Lufthansa have said that they would be avoiding the israeli and iranian airspace until the end of the month. And so this week and beyond we could see Middle Eastern cargo being affected. Zenita air freight analyst Wen Wenzhang told the lodestar that further escalation in the conflict, which is expected, could see additional wall risk surcharges introduced for air cargo being shipped into or out of affected regions in the Middle east. And there could also be further disruption to air cargo supply chains through delays at airports in the region. She pointed out that air freight rates spiked last October following the initial escalation in conflict between Israel and Hamas, so a further deterioration in the political situation could have similar repercussions for the market. But of course, when it comes to supply chain and logistics, there is little you can do in the way of predicting. And it seems like black swan events are increasing in frequency. The best thing you can do is stay informed by following our daily breaking news on theloadstar.com or on our LinkedIn page. The load Star thank you very much for listening and I'll see you next week.
