Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast, News in Brief, where we're going to be recapping the main events from last week's supply chain news and giving you some predictions on what you might see on the Lodestar this week. It's been quite a quiet one for logistics news. Always nice to have a week like that. You don't get it very often in logistics, but one quite interesting story that we reported last week, well, was MSC's contingency plan to mitigate the impact of strikes at the Port of Montreal, but this didn't exactly go to plan. What happened, Alex?
[00:00:35] Speaker B: Yeah, hi, Charlotte. It's quite an odd story. I expect there's more to it and we'll try and find out, obviously, but we were contacted by forwarders who had had a note from MSC saying that during the Montreal port strike, it was going to reroute its shipments to Halifax instead. So far, so good. MSC then told customers that they would have to collect their shipments from Halifax, which is more than a thousand miles from the original destination, and that they would face additional costs. Now, the forwarders at this point were a bit up in arms about it. According to our sources, there were mass complaints, a lot of reading of the relevant clauses in various contracts and threats of cancellations of business with msc. Now, we don't actually know if any or all of these helped MSC change its mind, but change its mind it did. So in what actually could be called sort of best practice customer service, MSC appears to have u turned and offered the use of one of its feeder vessels, which is currently anchored off Halifax, to move the cargo to Montreal. Of course, there will be an extra charge, as there always is. But what's odd is that some forwarders know about this service and some don't, but it's quite a big thing for MSC to do because of cabotage rules in Canada, means that MSC is going to have to get government permission to use this feeder vessel. And the other slightly odd thing is that it's great news story for msc. It's helping out its customers, it's found a solution, but it won't confirm any of this to us. So who knows, if any more comes up, we'll let you know.
[00:02:04] Speaker A: So, speaking of hopping across ports, Gav, you did a story for the Lodestar Premium last week about MSC and the Gemini alliance playing a game of musical chairs across UK ports. Can you explain what's happened?
[00:02:17] Speaker C: Yeah, so I wrote the analysis for Premium last week, but the news actually broke the Friday preceding that, when There was a customer advisory from Maersk and Hapag Lloyd, who will make up the gemini cooperation come February 1st. And that customer advisory said that they were effectively going to consolidate all of the Gemini's UK calls on their Asian North Europe services. They would all be fed through London Gateway, which effectively meant that. That Maersk was departing Felixstowe, where it's been for a very long time and currently operates in conjunction with MSC under the two EMA lines. I mean, obviously Asia is a really big source of cargo for the uk, so it's obviously very important for the forwarders and importers which ports are being served by what carriers and so on. So what happens is, effectively I'm going to do it before and after. Before as it is now we have the 2M basically consolidated at Felixstowe, three 2M services plus a standalone MSC service. The 2M also has one call at London Gateway. That's as it is at the moment. The Ocean alliance has two calls at Felixstowe and one call at Southampton. That will remain absolutely unchanged. So any Ocean alliance customers, nothing changes. You can switch off, you can just. Oh, yeah, exactly. Just fast forward through this bit unless you want a good old chuckle at your peers who happen to be customers of the other carriers.
The Premier alliance, which today is the alliance, right, currently has one call at London Gateway and two calls at Southampton. That says it as a moment, where we're going to be at the beginning of February is that the MSC will have two calls at Felixstowe, two calls at London Gateway and two calls at Southampton. At one of the London Gateway calls, the Lions service will be slot shared with the Premier alliance carriers and the two calls at Southampton will also be slot shared with the Premier alliance carriers. And the Gemini cooperation will have its 3, 3 Asian North Europe services. The AE1, A3 and the AE5 will all go through London Gateway. So to conclude, the situation could be like this is the MSC is going to have two Asia Europe services calling at each of the three main ports, Felix Stowe, London Gateway and Southampton. Ocean alliance is, as it stands, basically the Premier alliance is as it stands, except their containers will be coming on board MSC ships. So the real change is Gemini, which is suddenly going to have a whole load of Maersk and Hapag Lloyd cargo coming through it. I think that's basically it.
[00:04:57] Speaker A: So winners and losers in all of this.
[00:04:59] Speaker C: Winners and losers. Well, clearly Felixstowe's, it's going from the current thing of 6 Asia Europe services, it's going to 4. It's clearly the loser, London Gateway, is a clear winner. Really? Southampton's also a winner because Southampton, although probably the cargo itself, will remain relatively unchanged. It will be welcoming MSC to Southampton, which is the first for its Asia North Europe.
[00:05:22] Speaker A: Don't like to hear that. As someone from Portsmouth.
[00:05:23] Speaker C: No, you wouldn't.
There is a stevedore down in Portsmouth. You should get in touch with them to support your local business. I'm sure they'd like that. Anyway, so, just as a caveat to all of this, what we've been talking about is pro forma. This is all published schedules, right? The reality of shipping is different because, as you know, Charlotte, and you've reported on a lot in your first year with us, port congestion is a big thing and when port congestion happens, ships have to go to other ports and the UK is no different to that. And Felixstowe's no stranger to congestion itself. And the fact is, at the moment, Felixstowe is periodically hit by congestion. You know, its position on the east coast of the UK means it gets subject to quite high winds at times, for example, and in those cases, ships are diverted from Felixstowe to London Gateway is the natural diversion point, you know. But, yeah, pro forma, Felixstowe's loss. London Gateways win.
[00:06:19] Speaker A: We are now coming to the end of Q3 financial season, but we did have a few more results last week. We've got ocean carrier Zim and US retailers Target and Walmart. So, Gav, could you give us an overview of these in whichever order?
[00:06:33] Speaker C: Yeah.
Okay, well, let's start with Zimmerman. So Zim was the last of the carriers that disclosed their figures to publish. They smashed it. They did really, really well. Revenues shot. I mean, you know, Zim's quite heavily exposed to spot rates on the Trans Pacific, so they really benefited from that strong early peak season that we were writing about. Nearly 3 billion in revenue, an EBIT of 1.24, adjusted EBIT of 1.24 billion. Their margin for the quarter was 45%, which is really strong. In addition, they carried just under a million TEU. It was 12% volume growth year on year, which is double the market growth of 6%. So they did really well. I think they're entering 2025 in really good shape. They've got these new ships coming on, which are almost all delivered. And if there's market downturn in 25, which is a persistent possibility with the structural overcapacity, ZIEM have something like 35 ships coming off charter over the course of next year. So they can at A flash without incurring any penalties or anything. They will be able to reduce their fleet capacity in light if the market declines. So they're looking really good. Walmart and Target was extraordinary because it really was the tale of two shippers. Obviously that's a misquote from Tale of Two Cities by Charles Dickens. Right. And A Tale of Two Cities was first published in two Midlands regional newspapers. It was the Bicester Times and the Worcester Times.
I'm gonna edit that out.
[00:08:13] Speaker A: That's not, that is not making the final cut.
[00:08:17] Speaker C: Oh that's so cool. I love that joke. Anyway, Target, so it's a tale of two shippers, the best of times and the worst of times.
So Walmart first really good. Really really good. Results from Walmart beat analysts expectations 1 market share but really importantly their inventory levels were spot on and Targets weren't. Target missed the target. Yeah, they didn't live up to their name and they, they actually blamed it on higher freight rates and the three day strike on the east coast. Walmart faced exactly the same circumstances. Excuses. Excuse. Yeah, exactly. So there's a very interesting article by Laurie and LaRocco at CNBC who had done a bit of delving into the, into the actual shipment numbers and it suggested that Target had basically shipped their stuff when the freight rates were highest.
[00:09:10] Speaker A: Right.
[00:09:10] Speaker C: So they, yeah, they missed the target. They hadn't played the game very well. Not a bull. Sigh.
[00:09:15] Speaker A: While we're on that kind of numerical flow.
[00:09:17] Speaker C: Yes.
[00:09:18] Speaker A: What were the ocean freight rates?
[00:09:19] Speaker C: I mean another week unchanged. So that's now three weeks that they've basically been unchanged. They pushed up a bit during October as a result of these general rate increases but then the ones due in from November really haven't stopped much. In particular there's one on November 15th which hasn't had any impression on the market at all. This one was introduced on the 15th and the Asia, Europe and the Asia Med trades have remained basically unchanged and Transpacific is actually edging downwards slightly. We've talked in the past about the relationship between contract and spot rates. It's very important for the carriers for the remainder of this year to try and get the spot rates as high as possible because most of the annual contracts on Asia Europe are set to be concluded in the first quarter next year and they will take their cue from the spot rate levels. So we have another rate hike scheduled for the 1st of December very similar figure. I mean MSC, CMACGM and Hapag Lloyd have all published new FAK rate levels for that date and they're all for the Asia Med or Asia West Med. They're aiming for $6,500 a 40 foot for the Asian North Europe. Hapag's looking for $6,100 per 40 foot. These are due to come in, in like at the end of this week and I don't think there's much chance of them actually sticking. If you look at it according to the Druid well, Container Index, the current Asia North Europe rate is $4,000. And to the Med, it's four and a half thousand dollars. So what carriers are looking for basically is a 50% growth in rates in the space of one week. And recent history would suggest that that is a fantasy.
[00:11:05] Speaker A: And while we're on the topic of rates, Alex, would you like to go over the air freight rates from last week? I think Neil van der Wild spoke, spoke about this on Mike King's podcast, which was out last week and it was a really good episode. So definitely go and listen to the main Lodestar podcast if you haven't already.
[00:11:21] Speaker B: Yeah, I mean, this, this chimes with what we were hearing in Miami and now Neil has sort of confirmed it as well that Q4 was a lot less peaky in air freight than was expected. I mean, in Q3, it looked like rates were going to go crazy, that it was going to be chaos, there's going to be a fight for capacity, but that hasn't really happened. Rates haven't soared in the way that everyone expected, although they are, don't get me wrong, they are high. They're still 20 to 25% higher than they were last year. But some indexes have seen even a decline. World ACD said on Friday that the trade lane seeing the most spikes currently is westbound transatlantic. My first thought was front loading, but it's not front loading. It's brought about by lower capacity and winter schedules and reasonably high demand for the Atlantic. And the peak which was expected would have seen rates really soar out of Asia Pacific, but they haven't really. There's been a bit of a rise to Europe from Asia Pacific, but they've fallen to the us. Neil Van der Waal thinks this is likely because airlines shifted capacity to Asia. That's something we started seeing the end of the summer, beginning of autumn, and shippers have been much more careful with their Q4 capacity booking. However, January could be quite strong for the airlines because shippers are likely to need to use air freight whether there's a strike or not, because they're not going to know if there's going to be a strike or not until January 15th, so they may well have to do a bit of pre booking on that one first. But January is for January. That's. That's all for now.
[00:12:55] Speaker A: Thank you, Alex.
[00:12:56] Speaker B: Thanks, Charlotte.
[00:13:04] Speaker A: So now you are all caught up with the main events from last week's supply chain news. Here's what you might see on the Lodestar this week. I have an interview with DHL E Commerce UK tomorrow and I'm really keen to talk to them about how E Commerce is changing the retail landscape of the UK and how carriers and forwarders are responding to this. I've also been looking at cargo crimes, specifically the theft of entire trucks from warehouses by criminals using falsified documents to pose as a driver. And apparently this is on the ris. I've been speaking to the Transported Asset Protection association, or tapa, as it's more commonly known, Logistics Insurance Group, TT Club and the American Trucking association. Been talking to them about what exactly is happening and how stakeholders can protect themselves and their cargo against this. So look out for the write up of that. Freightos will be releasing its Q3 results this week, so we might have a report on that for you. Alex and Nain recently did an interview with Finnair Cargo so you can expect to see the highlights of that. And we can't forget that we are still waiting for an agreement between the Canadian port workers that were striking this month and their employers. It's currently in the hands of the Canadian Industrial Relations Board who stepped in at the request of the Labour Minister to end the strike at the various ports including Montreal and Vancouver. So perhaps more to come on these negotiations. Definitely one to keep an eye on. Thank you so much for joining me and I'll see you next time.
