Episode Transcript
[00:00:00] Speaker A: Hello and welcome to the Lodestar podcast. I'm your host, Charlotte Goldstone. I'm really sorry for the gap in our schedule last week. I unfortunately caught the illness that everyone seems to be getting and I definitely was not well enough to record a podcast. I'm sure none of you would have wanted to listen to me sniffle my way through that for 20 minutes.
But we are back this week and ready to unpack the supply chain news. Coming up in this episode we are going to be taking a look at recent reliability data and what different carrier alliance tactics mean for on time performance.
We're going to also be looking at the delay in the USTR fees for China linked vessels in the US and we're going to be taking a look at recent rate data in both air and sea.
Joining me to help unpack this week's supply chain news is Zenita Chief analyst Peter Sand. Hello Peter. Welcome back to the podcast. Always a pleasure to have you here.
[00:00:58] Speaker B: Hi Charlotte, thanks for having me back on this important podcast that she has insights with all the logistics professionals that we like to talk to.
[00:01:08] Speaker A: Well, very kind of you to help out once again. So first up this week I want to talk about schedule reliability because we on the Lodestar looked at Sea Intelligence's monthly report for on time performance. And I think the most interesting thing to me from this report is that across the east west container trades in August and September, MSC achieved a reliability of 68.9%. And this was interesting because it was ahead of the Gemini Corporation at 68.4%, obviously well short of Gemini's ambition of around 90% reliability. Although performance did vary significantly across the trades. I know this is something that Senator monitors too. So what are you noticing in on time performance? And do you think that we're starting to see weak points in certain strategies across the alliances? Because obviously you've got Gemini with their hub and spoke system and MSC with a kind of a more direct network. So what are you noticing there?
[00:01:57] Speaker B: I think for sure, everyone, whether they're working inside an alliance like Gemini or Premier or working on their own as msc, it seems as if the intense typhoon season that we saw in Asia back in July and August still has some repercussion and still ripples its nasty effects across global networks. And as you may also know for sure, Charlotte and the listeners on this podcast at Senate, we clearly also look into on time performance, we look into the bank sailings, we look into the delays, all the things that matters around reliability.
But arguably the methodology is also different. From ec. So when I reference numbers on a global scale of 25% of reliability here in October, still counting a few ships still to arrive, but it's like a half year of decline from our most recent peak back in May at 90, sorry, 39%. Right. So we're down at 25% now. And if you look across the board, it's a decline for all of them, but for those that work independently. Right. So it seems as if, as you allude to a little bit, is there a better strategy? Well, currently those working outside the alliances now seems to be able to at least stop the decline in reliability across the board.
But all other corporations or outright alliances seem to decline significantly. And particularly, of course, we pay attention to Asia Europe also, where Gemini, where they famously claim to be able to deliver 90% all things going well, they are down at 2% now. Right. They are actually the worst performing alliance on Asia Europe in this very week.
So definitely bad news and hopefully things will get better shortly.
But it seems as if there's still a lot of, say, troubles to work through with that massive backlog and massive congestion that we saw in, in Asia in the immediate aftermath and also still do in wider Asia
[00:04:16] Speaker A: regions. I'm not sure if you'd be able to pinpoint this, but is the reason for Gemini's poorer performance because they stop at more ports, or is the reason that MSC is just more agile because it's on its own and it can change networks and avoid ports that are more congested?
[00:04:29] Speaker B: I think there's clearly an element of agility in this case. But also the way that we measure this, of course, is very important in terms of what did the carriers individually actually announce and promise the shippers beforehand? And if you leave the last port in Asia way too late, you're probably also getting in troubles with meeting your scheduled arrival anywhere in Europe, regardless of you running a hop and spoke system or running a different show, as we can probably say that MSC is still doing, regardless of them running like one fifth of the total fleet.
So clearly, I think the one conclusion here is that no strategy, as smart as it may be in the design, finds itself scheduled from the mercy of such large scale disruptions, as we've seen around exports of goods from China, which is basically the beating heart of the container shipping network. So once those arteries clog up, everybody feels the pain.
[00:05:41] Speaker A: Yeah, I mean, the typhoons, no one could really avoid that. So it's not completely the carrier's fault. We spoke about this a lot on the last episode of News in brief, about port congestion and bad weather, but I mean as a result of this, we reported this week that deployed capacity on the Trans Pacific and Asia Europe trades during this year's Golden Week holiday, which was at the beginning of October, was the highest on record because port congestion in Asia, as you mentioned, led to vessel bunching at ports, which then meant a series of double sailings which kind of canceled out carriers, blank, straight, blank sailing strategies during the holiday period when they typically look to skip these voyages because of the lack of cargo. So do you think that port congestion is currently one of the biggest factors in carriers minds when deploying capacity? And are we now seeing any sort of improvement in port congestion as we kind of leave typhoon season?
[00:06:28] Speaker B: Yeah, we fortunately do see some, some improvement in port congestion and mainly driven by the North Asian port congestion.
So of course once in particular China gets through the backlog here, we should also see some improvements not only on port congestion, but clearly also on performance schedules, on reliability, on actually meeting the announced transit times in the end and the announced departures of course.
So clearly still some work to do. This has taken a bigger hit than I guess anyone expected because we have the typhoon season coming about every single year and often we see the very efficient terminals being able to batten down hatches and then reopen and actually move on with very little effect, if anything, on global container shipping. But this time around, very, very different to say the least. So obviously these are the most busy ports in the entirety of the world. So if everything goes wrong there, it has ripple effects across the board.
But it seems as if regardless of those many elements that you just mentioned here, double sailings, blank sailings, different strategies, Right.
In the end, ships are waiting to take the cargo. We've seen an explosion of Chinese exports this year and that has of course also been an element in the entirety of the picture. Once you look at painting. Right, it's not been a slow year for Chinese exports. In fact they are up by more than 10% in the most recent numbers that we got from CTS. Right. Including August. So they have been immensely busy and once then they see disruptions. Yeah, all the domino bricks just start
[00:08:20] Speaker A: forming. Yeah. And obviously this year as well we have had the El Nino effect which meant that we had droughts and then low water levels in some parts and then now we had these really bad typhoons. So hopefully next year it's not as extreme. But you never know with container shipping. It isn't all doom and gloom. Of course we've got some good news for shippers and that the US is keen to again delay the implementation of planned port fees on China linked vessels to 9 January to give Washington and Beijing more time to negotiate. So the US Trade Representative said this week that the US is continuing to engage with China with the goal of obtaining the elimination of the axe policies and practices at issue in the investigation. So what do you make of this? Is this actually a positive thing for shippers or is the postponed deadline just kind of another marker of uncertainty?
[00:09:08] Speaker B: Postponement clearly welcomed.
The most recent deadline I believe was 9 or 10 November. So seeing this postponement of any decision around the port fees as a part of the bigger agreement that Presidents Xi and Trump agreed to when they met earlier in the year is definitely positive. But the way that we see this at Senator is that the US administration will probably seek to find some sort of revenue generation mechanism to not only penalize ships built in China, but ships built anywhere. Right. So they are clearly struggling to finance what they are up to on a general scale. And if they can see some benefit from just adding some port fees on a general basis for, for, for every importer to, to pay, then, then that's probably what we're expecting to see. But, but the draconian measures that was announced more than one year ago now targeting Chinese ships mainly, but also Chinese operators as in, as in Cosco and the ocl. Right.
We're probably not going to see an implementation of that.
But clearly more expenses to be paid from calling the US ports also later in 2027 is probably the most likely outcome of this port fee fast.
[00:10:41] Speaker A: Well, it's a good thing that they're negotiating at least. I mean it doesn't seem to have deterred people because I feel like the Chinese shipyards are still very much filled with orders. We've seen the order books like 45% of the total global fleet or something. Obviously that's not all being built in China, but a significant chunk of it is. So
[00:10:58] Speaker B: I think it's definitely a fair point you mentioned, Charlotte. Of course we also look into where carriers are placing their orders for new builds quite closely and you clearly see that China has taken more than its fair chunk in terms of new build orders placed just this year.
So clearly also an anticipation of no specific penalizing of Chinese built ships going forward from, from the, the owners and operators of container
[00:11:27] Speaker A: ships. So I mean in light of everything that we've spoken about with port congestion, holiday seasons, uncertainty, this kind of huge order book, can you give us an indication of what's happening with the freight rates currently on the Zenitha platform?
[00:11:39] Speaker B: Yeah, clearly some, some something is always going on right? We, we. We have, we have seen dramatic consequences of the Iran US war and then of course also the, the nasty effects of the typhoon season that we just dived into before. But positive news are also around. It seems as if those rates into US east coast and west coast that all but touched at least into the east coast all but touched the COVID crazy levels of was that 11,800 per container something like that.
It seems as if we are at peak now. It's moving sideways.
Shippers really appreciate seeing that for for once it's not just going up and up but on the contrary we've also seen a turn of tide into north Europe and met from Asia following a decline in the short term markets since mid year. We have seen in the most recent week here that it's actually turned the other way around and it's coming on the back of solid demand.
We can tell that.
So carriers also getting some ships back to Suez Canal transits we're also measuring that quite closely and that number is going up by the day but there's still some way to go before we can call it a full scale return. So a lot of things is going on in the market right now with short terms up and down but fortunately also that heat seems to be coming down positively impacting also where the long term rates which shippers are negotiating now with carriers and forward is coming into force on January 1st at least for those into Europe the tendering season. It's much welcome to see a turn of tide in the short term market because of course if you have continuously higher and higher short term markets that put a meant pressure also on the long term rates. So a turn of fortunes for the carriers but positive developments for the shippers that are now entering round one, maybe round two even of their tendering for for cargoes to to move next
[00:13:56] Speaker A: year. Yeah it's going to be interesting to see what transpires after contracting has ended. Now Peter, before I let you go, I know that you're very much on the ocean freight side of things but I wonder if you have any Zenith data or insight from any of your air freight colleagues of how the market is currently looking over in air. I mean is there anything, is there anything you could say? I think most people are at the Tiaka Air Cargo forum this week so that's why I'm asking you.
[00:14:20] Speaker B: Yeah, next week they are in Munich for the Senator summit where we will actually release the air freight outlook for 2027. So those being present at the Senator Summit will get all the insights from that. You're absolutely right, Charlotte. I cover mainly ocean and I touch on air on a regular basis. And I know that some of the things that impacting ocean of course also in 2026 have impacted air freight in particular in terms of the mega hubs in the Middle east which are still struggling really to find its foot in the I can't say the new normal, but at least the current situation down there. But air freight is always a bumpy ride and 2027. Yeah, let's see what that's all about. But I'm eager to hear that also once they spill the beans for us next week in uni.
[00:15:17] Speaker A: Yeah, I look forward to that outlook. Peter, thank you so much for joining me. It's been wonderful to speak to you.
[00:15:22] Speaker B: My pleasure. Thanks for having me.
[00:15:24] Speaker A: And that brings us to the end of this week's News in Brief. A huge thank you to Peter for helping me with this week's news and for giving me some insight in air, even though that is not his usual subject. So I really appreciate that and thank you all very much for listening or watching. If you are on YouTube and if you are on YouTube, please don't forget to like, comment, subscribe, share. It really does help us out and we look forward to seeing you on next week's News in Brief.
