Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:06] Speaker B: And welcome to the Lodestar podcast News in brief, we're going to be rounding up the main events of last week's supply chain news and letting you know what you might see on the Lodestar this week. And this episode is sponsored by Etihad Cargo. Etihad Cargo know it is never just an address, which is why they go beyond borders with their partners to ship your valuable goods. So last week we had a report that MSC had reached a new milestone and a record of 7 million TEU in its fleet and also that Maersk was rumoured to be lining up an order for eight 18,000 TEU ships. But interestingly, this is kind of also going on at the time that we reported that there is somewhat of a grim outlook for carriers because there's this tonnage overhang that's set to last until 2030, which an export Import bank of Korea researcher said was being compounded by little to no vessel scrapping. And also rates are expected to enter a down cycle largely because of this overcapacity. So I'm now joined by Gavin Van Mael to give us the latest ocean freight rates which is somewhat of an indicator of what is going on with this supply demand imbalance. Gav, where do we stand currently? What was the latest movement of the spot rates last week?
[00:01:13] Speaker A: According to Drury, this world's container index all ticked up by sort of fairly high single digit rates. North Europe's up to sort of nearly $2,000 per 40 foot. The West coast was up 9% to sort of 2,650 per 40.
That was on the WCI and that came on the back of the November, the first GRIs on the Trans Pacific and new FAK rates on the Europe Asia trades. So it was sort of decent pricing discipline as per the wci. However, on the Shanghai Containerized Freight Index, which gives quotes for the week forthcoming, we're starting to see some declines again. So it looks as if we've had a couple of weeks of slightly elevated rates due to price increases and that these price increases are now beginning to fall off and prices are set to decline once more. I mean the SCFI for the route into the US West coast for next week has it declining by 16% down to sort of 2,200 per 40 foot. So I think we can start to see the structural supply demand imbalance you mentioned there Charlotte. It comes to the fore again. You know, you get these little pricing burps and then it declines again.
[00:02:39] Speaker B: Yeah, it's really not looking good for carriers. I was speaking to Matthew Gore, who's a maritime lawyer at HFW about the upcoming contracting season and he raised to me a couple of issues that carriers and shippers saw last time, such as like invoice lead times, rates, surcharges and nominated volumes. The details of all of these and what to look out for in contracting can be read in the article I did last week. But he was basically saying that because the carriers are likely to be competing for volumes that the negotiating power is probably going to be with the shipper this time around. But can carriers afford this? I mean we had some Q3 results last week from the carriers. I think Maersk was one of the most read of these, so we'll stick with those. How are their balance sheets looking gav? Are they already showing signs of struggle or are they in quite a comfortable position?
[00:03:25] Speaker A: Well, I mean all the carriers have decent war chests that have been built up over the last few years and that's not news for anyone. So in short they can.
I was at a very interesting sort of half day conference in London last week organized by the New York Shipping Exchange NIE Shex. One of the, one of the things that we were discussing there was there is clearly some kind of freight rate war underway on some of the major trades, particularly the Asia, but also on the Trans Pacific. I mean we reported last week that even with the GRIS that I've just been talking about, there were also some carriers that are immediately beginning to discount almost as soon as the GRIS were published. So that tells you that it's a very highly competitive environment. If we look at the Maersk results as a kind of reflection and bearing in mind that there is always inbuilt lag to this because they're reporting on their third quarter and we're now well halfway into the, into the fourth quarter. Nonetheless, you know, the fundamentals are the same. So their container volumes are up 30%. That's a really, really strong performance and clearly indicates that they have been focusing on winning container volume market share.
At the same time, revenue's down 10% to just over $14 billion and it's EBITDA fell 61%.
So yeah, that indicates they're going for market share. They've increased the volume but the revenues are down. So basically, you know, it's lower freight rates. Is this to the benefit of shippers? Well of course they want cheaper prices. The sense that I got from a lot of shippers at this conference and some of their forwarders was that it's not so much rock bottom rates that they're after. They're more interested in service reliability and paying a rate that is in line with the market. So I think you looked at index linked contracting as well, didn't you? And certainly the amount of contracts that we're seeing now that have some form of index linked aspect to them is on the increase. I think Maersk and Hapac Lloyd who both spoke at this conference both said that about 10% of their annual contracts now have some form of index relationship built into them. So that is very much happening.
[00:05:45] Speaker B: Yeah, it does seem to be more on the rise definitely. We've got Hapag Lloyd reporting this week so we might hear some more on that. On the port side you had a few stories last week that indicated a renewed appetite for ports to concession off terminals to private operators.
Do you know what might be spurring this?
[00:06:02] Speaker A: So two came to my notice last week. Charlotte Kittagong, sometimes called Chantagram, which is the big export hub for Bangladesh and Gladstone over in Australia. So the story of Chittagong was that basically the Port Authority is on the hunt for a consultant to help it develop what it calls a sort of systematic metric to manage the concessions that it's got going. So previously all the terminals in Chittagong were run by the Port Authority. It's now switching to a landlord model. So we've already got the Saudi operator, Red Sea Gateway Terminals operating Batanga. DP World and PSA are building facilities. I think APM Terminals is also building a facility there which is great news basically for the whole of Bangladesh that it's finally going to get a working poor. It's just completely arse about it.
You know, it's like they've, they've got these concession processes going with the private operators but they haven't yet worked out how they're going to actually manage these concession things.
In complete contrast to that Port of Gladstone which is primarily a bulk gateway, Queensland coast. Think of Brisbane.
Go another 500km north of Brisbane, you get to Gladstone, does a lot of coal agriculture stuff from Queensland. Anyway, this is how you actually do a concession, right? You call for a request for interested bidders, you put it out there to the market. You say this is the opportunity.
Please deliver your submissions of interest by X time. You then judge those, you then draw up a, a short list and then you start, you know, you get the people on that shortlist to put the bids together. The question of course is whether a port, not really anywhere near any urban industrials or urban center, does it really need a new container terminal. So I thought that was. The interesting thing is that you've got one process that's done absolutely how it should be. But I think it's questionable as to whether there's an economic base case for that opportunity. And on the other hand, you've got a port that is so utterly fundamental to the running of an entire country's economy and yet somehow seems very difficult to manage it properly.
[00:08:19] Speaker B: Now moving on to air freight. But before I do, I just want to say that this episode is sponsored by Etihad Cargo. At Etihad Cargo, every shipment represents more than just a destination. It is a connection, a promise and a responsibility.
And that is why Etsy had Cargo works closely with its global partners to ensure that your valuable cargo is delivered with care, consistency and confidence. With an extensive network and expert handling at every stage, Etihad Cargo really does go beyond borders to meet your needs and exceed your expectations.
I'm now joined by Alex Danain. Alex, last week you were at Tiaka's Air Cargo Forum in Abu Dhabi. How was the event and what did you hear were the main topics of conversation, more importantly?
[00:09:00] Speaker C: Well, I will be writing on it this week, but the main topics of conversation probably were how many events there are at the moment. I mean, I think there's five air cargo events in a six week period and so you get quite a lot of dilution. So not everybody was there. Lots of people registered, but I wouldn't say that they all turned up. So there was that. But it was also lovely to be in sunshine. Obviously Abu Dhabi was looking at its finest. Etihad was obviously a great host, but aside from that, the main topics of conversation in the conference itself are really how good 2025 has been for the airlines, perhaps slightly unexpectedly. And there's quite a lot of data showing what has really happened this year. There's a few surprises in there, but it will all be on the lodestar in the coming week once I've worked out how to get through it all.
[00:09:48] Speaker B: Yeah, there are a huge number of events great for air miles, but not so great for the jet lag. You also had several interviews while you were there. Did you get any exclusive info?
[00:09:57] Speaker C: I had. I had quite a few, yes. One of the interesting ones, I talked to Carlo Logistics about its port and airport community programs and also about how they might be at risk in a cyber attack. So that was really interesting. I had my first ever interview with Peter Pencil, who's head of Delta Cargo Ex Siva. I really enjoyed that he's a really interesting man and I'm looking forward to getting that out onto the Lodestar. Although I think there'll be some permissions that will be needed from Delta before I get the whole thing out. And I sat down with Stanislas Braun from Etihad Cargo and we had a long chat about how Etihad's been doing and what it's planning for next year. I started by asking him what drove their profitability this year.
[00:10:41] Speaker B: Yes, very usefully you have sent me the clip live from the event, which is very good to hear straight from Stanislas mouth. But I do have to just say as a disclaimer that obviously there is background noise because it was recorded at the event. But here is what Stanislas had to say about what drove Etihad's profitability this year.
[00:10:58] Speaker D: So I mean, we need to go back in 2024 where basically I started to reorganize and to make sure that we have the right focus on the customer. This is one of the main points I did in 2024. So I mean we did cut, for instance, Asia was one region. I put two North Asia, South Asia, because I mean, when you see, I mean the amount of cargo coming in the world out of Asia is more than 50%. So we need to make sure that basically we have the right focus on the source.
So for instance, I mean we are very early in Vietnam, where we started 11 years ago with fighter and now we have inserted, I mean, our passenger since this weekend. I was in myself, I mean in, in Hanoi this weekend to celebrate with our customer, I mean, the start of six passenger daily with the 787, which will allow us, I mean, to add 130 tons per week of capacity.
But it's also about how we can serve Vietnam and South Vietnam like Saigon, where we are not flying. And now we are operating, I mean with Teleport, one of our partners out of Saigon. We are basically Phuket. We are operating three to four times a day with a wide body. But as you know, I mean, there is not a lot of factory around. So I mean, we need to fulfill this passenger flight and it's what we are doing, I mean, thanks to this. So a part of the strategy to come back to your question was indeed, I mean, to put more focus where the source of cargo was coming and to split it into what we did with Bernard in Singapore, Southeast Asia, up to Australia and India and North Asia. Jacqueline based in Shanghai for China and Korea and Japan.
[00:12:43] Speaker B: Thank you, Alex. Something that has been a major topic of conversation for air cargo players in the last two years, has been E commerce. Usually this is celebrated as a major source of steady volumes, but last week there was a bit of trouble. I mean, we had a story that the French government had been sanctioning cheap Chinese imports. What are the details?
[00:13:01] Speaker C: So first last week it was all about sex dolls and France didn't like them and now it's about compliance. So as of last week, authorities at Charles de Gaulle said they're going to inspect every chain parcel. So I think estimates are something like 200,000 a day. So that's quite a backlog to go through all of that. Shane also said it would look at suspending imports. Now, we're not sure yet how this backlog is going and we will, we'll find out as much as we can. But I think it's quite an interesting turn of events in France.
Yeah.
[00:13:33] Speaker B: We also heard that Alibaba's logistics arm Chai now had delayed expansion plans at Liege airport. Are these two stories connected? I mean, do you think it's worried about the EU's plans to stem E commerce imports? Perhaps.
[00:13:45] Speaker C: It's not looking great, is it? I think there is going to be a bumpy road for a lot of cheap imports, especially following America's example and with the theory that there's an awful lot more E commerce coming into Europe now. So Chanier hasn't quit Liege, but it has dropped plans to significantly expand that which had been its proposal. And you do start to wonder if this is the beginning of some sort of crackdown in Europe.
Just as an aside, Liege has also been impacted by these drone movements which are causing problems at airports throughout Europe. Now I think I read today that UK has sent some experts to Belgium to help, but yeah, not quite sure how that play out, but I think there is going to be a bit more compliance required by E commerce companies in Europe.
[00:14:28] Speaker B: And finally, Alex, what is the latest with the US Government shutdown? I mean, you reported that flights could be cut this week. If it is still in place, would.
[00:14:36] Speaker C: This hit cargo volumes?
[00:14:38] Speaker B: I mean, presumably it would.
[00:14:40] Speaker C: Well, it started last week with a 4% cut to flights at 40 major airports in the U.S. now the airlines have mostly been saying that it's not going to impact international.
It's going to be short haul passengers who are mostly cut and it's easier for them to get a rerouting or a different option and it's probably less money for the airlines to lose.
So, so far so good. But the FAA has said it's going to increase the number of flights to be cut, so we'll have to see whether that will start to impact any cargo flights. And then of course there is a massive domestic Freighter Network, Amazon, UPS, FedEx. So it may well be that they have to start cutting flights. But perhaps the bigger impact immediately is the grounding of MD11s after last week's UPS crash in Louisville. So that might have a big impact on freight and it's something we are looking at on the Lowstar today.
[00:15:32] Speaker B: Thank you very much, Alex.
[00:15:34] Speaker C: Thanks, Charlotte.
[00:15:42] Speaker B: So now we have rounded up all the main points of last week's supply chain news. Here is what you might see coming up on the Lodestar this week we will have more exclusive insights come from Alex's interviews at Air Cargo Forum as she has just detailed. Plus, we have a few more Q3 results coming out this week. Particularly interesting will be the carrier reports. We have Maersk's Gemini partner Hapag Lloyd reporting on Thursday this week and French carrier CMA CGM are expected to report on Friday. So it's going to be interesting to see how these compare with the results that we have already seen. Stay tuned and we will give you the full analysis on theloadstart.com thank you so much for joining me and I will see you next time.
[00:16:21] Speaker A: Sam.
