Episode Transcript
[00:00:06] Speaker A: Good morning and welcome to the Lodestar podcast News in Brief, where as always, we are going to be recapping the main events from last week's supply chain news and giving you a little preview of what might come up on the Lodestar this week. Now I'm going to start by giving you a few bullet point news items that we're not going to delve into, but just some interesting things to note that happened last week. So there was the news that Israeli billionaire Aydan Ofa was going to be selling his 16.5% stake in Ocean carrier Zim after Zim had seen its share prices skyrocket this year. I think we touched on that in the last News in Brief episode. Hapag Lloyd announced a deal where they would be buying 250,000 tonnes of green methanol annually with delivery starting from 2026. And a spokesperson told us that it had agreed to a more than 10 year deal of this supply from Chinese company Goldwing. We also reported that India could see major supply chain disrupt as strikes have been called at key government controlled ports. Labour groups told port authorities that workers would stage indefinite work stoppages across ports from 17 December in protest at the lack of action to address concerns including pay. And while we're in that region, some more positive news for Indian shippers as they have been excluded from Donald Trump's initial tariff action plan. This is at the moment until he inevitably adds more tariffs, but this is very good news for Indian shippers and industry stakeholders who are eyeing further gains from the trade diversification going on in Asia. So yeah, obviously last week I'm sure you all heard that soon to be President of the United States, Donald Trump publicly announced that he would impose 25% tariffs on all goods from Mexico and Canada and an additional 10% on everything coming in from China. Now it's important to note that during his election campaign Trump vowed 60% tariffs on all imports from China and up to 20% on the rest of the world. So he's narrowed the tariffs to only three exporting nations and really reduced the 60% promise on tariffs from China. Zenita pointed out last week that this was an example of the unpredictable nature of his trade policy. But Gav, what do you think this means for supply chains in the near future? Are we going to see yet again more front loading?
[00:02:22] Speaker B: It's more uncertainty, but the sort of uncertainty is more focused than it was before. It's a narrower band of uncertainty because what, of course, what remains unclear to the trade is exactly when these, the date of the implementation of these tariffs has been no indication of that. If these tariffs are due to be implemented on the 20th of January, like day one of his presidency, then basically if you're an American importer and you want to get shipments in before the 20th of January, basically got about 30 days from the point of, you know, booking the shipment, the two week plus transit time plus unloading loading ports and all that sort of stuff. So you have until the end of this year effectively to place those bookings. And that of course only pertains to cargo that is effectively ready to ship, that is, that's been built. Right. So if you don't have that cargo ready and the deadline is the 20th of Jan, then you've missed it. Basically there isn't a great deal of scope for a huge surge of front loading to take place if the deadline is the 20th of Jan, and to be honest that's probably a good thing. But I mean as Peter sand at Zenita reminded me, you've had these persistent trade overhangs through the course of the year. Red Sea crisis, the longshoremen on the eastern Gulf Coast. So basically a lot of US importers have been front loading all year and he made the point that inventories are probably already brimming. So thankfully for the wider trades, there isn't as much capacity for frontloading as there might have been because front loading does tend to cause cargo bottlenecks.
[00:04:02] Speaker A: What about trucking in from Canada and Mexico? Because obviously they're the ones being hit the most by the time. Is there going to be a sudden increase of trucks?
[00:04:09] Speaker B: I'm not a road freight expert, but something to consider, it's worth definitely something to consider. I mean especially if you look at the products in Mexico that are effectively Chinese investments. We've talked about the big automotive, the electric vehicle factories that built there, but it doesn't just stop there. There's a whole range of vertical industries that there. So yeah, you probably really want to talk to a US Mexico cross border specialist and I can put you in touch with several Charlotte, if there's any.
[00:04:35] Speaker A: Listening right now, please do get in touch. Charlottetheloadstar.com so Gav, following from last week's theme of the port musical chairs. Yes, MSC has now updated its 2025 proforma network.
[00:04:48] Speaker B: Yes.
[00:04:48] Speaker A: So what's happened here?
[00:04:49] Speaker B: So myself and Alex were invited to go and give a presentation, a new network of sort of forwarders and freight interests here around the feel Felixstowe area called the Hive Connect Group. But shout out to Paula Bellamy and James Miller. Thank you very much for inviting us. It was a great little do. And we were asked to sort of give an outlook of what was happening, particularly in terms of Maersk leaving Felixstowe under the Gemini agreement, moving to London Gateway, and how Felixstowe was going to become a very, very important port for msc, which it already is. Subsequent to that, over the course of this week, MSC republished its 2025 East west standalone network, as it calls it. This goes back to this strategic difference between MSC and Gemini, where Gemini talks about focus on transshipment hubs, shuttle services to sort of secondary ports, and MSC is the direct opposite, trying to offer as many port pairs as possible. And so this week it really doubled down on that, introducing a raft of ports, port pairs. And basically I've had to scrap my presentation that I gave to the hive group. Right. Things have changed since then. So, for example, we're talking about UK calls. MSC has now added an extra London Gateway call on its Albatross service, which is quite interesting because prior to this, if you looked at MSC's UK call network, it was two calls per week at each of the three main ports, two at Felix, so two at London Gateway, two at Southampton. The London Gateway and Southampton services obviously being operated in conjunction with the Premier alliance carriers. Now it's injected a further call at London Gateway on its Albatross service. So the situation now is that Felixster has two weekly services, Southampton has two weekly services, London Gateway has three weekly MSC calls, and that rather looks like whatever Gemini does, MSC will go and match it. The one thing we can say from this is that Gemini looks really strong in London Gate with three calls per week, but then the following week, suddenly MSE ups it to three calls a week. So there's. And then. And that's not at all. It's very interesting to note that the Visinyam, which is this new container transshipment hub on the southern tip of India, built by Adani, and as an alternative transhipment hub to Colombo, Vis and Yam's now had two weekly calls injected on two of its Asia Mediterranean services. So MSC has got two transshipment hubs at that Indian subcontinental thing. It's just another couple of things here. And this goes back to our talk about tariffs, actually. The Trans Pacific services, the Pearl and the chinook, these are MSCs. They each had a single Vietnamese call. One was Haiphong in the north of Vietnam and the other was Vung Tau in the South. Henceforth from February 2020, 5. Both of these services will have two calls in Vietnam, both at Vung Tau and at Haiphong. I think that's an interesting thing because Vietnam was the primary beneficiary of that China plus one strategy. And so I think it's quite interesting to see the MSC kind of in response to the. To the tariffs. I don't know if it's in response to tariffs, actually. I'm wildly speculating there. But I think it's interesting that it's upping its coverage of Vietnamese calls for exports to the U.S. well, the Gemini.
[00:08:15] Speaker A: Alliance is opening its bookings this week, so it'll be interesting to see what shippers choose. Yeah, yeah, yeah. Finally, I have to ask you about rates. Has anything interesting happened there?
[00:08:23] Speaker B: I mean, not really. It's been a really boring month. On the rates, Drew's WCI. The Trans Pacific rates were down 5% week on week. Asia North Europe rates were down 2% week on week. Rates have been gently sloping downwards since the beginning of November when those last price increases actually stuck. Everything's been on gentle downward slope since then. Yesterday, December 1st, there were whole new GRI's that came in on the Trans Pacific. These range from $1,000 per 40 foot to $3,000 per 40 foot, depending on your carrier. We await to see whether these will also stick. Similarly, on Asia North Europe and asianmed, there's a raft of new FAK rates that carriers are trying to implement. We sort of reported that the sentiment on the trade is that they probably wouldn't stick. We'll wait to see. Stuff is very dynamic at the moment. You only really need to get a hiccup in the supply chain somewhere for other parts to be impacted. So the jury's out whether these will stick, whether rates will increase in December. Normally they don't because it's very much the slack season. Christmas shipping's over. But, you know, with the tariff stuff, you never know what new announcements are going to come out of Trump's mouth. So I don't know. Frankly, Charlotte, I think it's all very much up in the air.
[00:09:47] Speaker A: Well, funny you should say that, because while we're on the topic of air freight rates, we're going to move over to air Air.
[00:09:52] Speaker B: There you go. How about that for a segue?
[00:09:55] Speaker A: So the global average for air freight rates grew 2% to $2.79, and this was the highest level recorded this year. So when I read that, I assumed it would be largely from E Commerce coming from Asia as people stock up on all the Christmas bits. But according to data from world acd, this was actually driven by increasing spot rates, mainly from North America and Europe origins. So this seemed quite surprising to me. But they explained that this was due to a capacity shift from the Transatlantic to the Asia Pacific region because airlines were anticipating a surge of shipments, mainly from China and Hong Kong to Europe and North America. But instead, global tonnage this week remained flat from the week before. And while average rates from Asia Pacific to North America flattened week on week due to this excess capacity, world ACD data showed that rates from Europe to North America increased significantly, up 8% week on week. According to Rotate's database, capacity from Asia Pacific to Europe was up 7% month on month and up 4% Asia to North America, while Europe to North America capacity was down 4% across the same period. So hopefully that offers some explanation to those rates. World ACD also noted that more forwarders than last year secured their capacity before the peak season, which then has a dampening effect on the rate development pattern that we saw last year. And now I'm joined by Alex Linnane. Hi, Alex.
[00:11:19] Speaker C: Hi, Charlotte.
[00:11:20] Speaker A: At the start of last week, there was some rather tragic news about a DHL plane crash and there was some speculation in the media about what the cause of this crash was. Alexander, do you have any more details?
[00:11:30] Speaker C: Well, yeah, I mean, most people will know by now. A DHL aircraft crashed in Lithuania tragically with the loss of one of the crew members. We've just reported the story straight on the day it happened, but German media have actually put together a whole list of the events that took place in the few minutes before the plane's crash. Now, apparently the pilot reported to the tower as was normal, but no one responded at first. It was only on the second attempt that the controller responded. The controller then gave instructions for the landing approach, but the crew didn't understand it clearly and the pilots asked twice before they'd understood that they had clearance to go on the landing approach. It's possible that by then the pilots were already too close to the landing and they were going too fast, so they started to make corrections. Meanwhile, the air traffic controller asked them to change the radio frequency to the landing frequency, but again the crew misunderstood the sequence of numbers and didn't receive one number correctly, which basically means they were talking into the ether and the air traffic control was also talking into the ether and no one could hear each other. By now the pilots realised that they really were going too fast and too low to land and they tried to raise the nose of the plane. And reduce speed, but it didn't work. So it sounds from that that there was a communication error, but people have started to ask why the pilots didn't see that they were too low before they got to that point. The German media also reported that there's no reliable evidence that Russian sabotage was involved, which was everyone's first thought, to be honest. But there continues to be quite a lot of suspicion. The Inspector General of the German armed forces said that it's possible that the crash of the DHL plane was a kind of test by Russia to explore weak points. And he thinks that Vladimir Putin has created this kind of hybrid state, he says, a state that is no longer quite peace, but not quite war either, and moves back and forth in this gray area. This includes testing how far they can go, he said. So, yeah, we're no closer to knowing, frankly, after all that what was the cause of it. But after the incendiary packages were found in various parcel networks in Europe, there is quite a lot of suspicion. We'll just have to wait for the outcome of the investigation.
[00:13:53] Speaker A: Well, moving into more positive news, Maersk announced on Wednesday that it's going to pay Lufthansa Cargo to use saf, which is sustainable aviation fuel, on its behalf, and the carrier will then be able to pass the environmental benefits onto its air freight customers that booked with Eco Delivery Air. A Maersk spokesperson told the Lodestar that SAF was often unavailable at airports where Maersk operates. And so as Lufthansa has very good access to saf, it was a perfect partner. We found this a bit confusing because whenever there's a conversation about saf, it's usually about how scarce it is and how no one has enough. So we were questioning why Lufthansa would sell its supply of SAF to another carrier rather than use it for itself and give to its own customers. Now, Alex, I think you'd probably do a better job of explaining this than me. So what is the setup?
[00:14:42] Speaker C: This is made a bit more complex because Maersk is such a large group with many different parts to it. Book and claim is a normal way that people use and sell saf. So you can use SAF on an aircraft, but someone else can claim the emissions elsewhere for the use of that saf. But this is slightly different. It took us a while to get to the bottom of this. But this is actually just a case of Maersk in its guise as a forwarder is just a typical Lufthansa customer. It's not Maersk's cargo department. It's not any other department, it's Maersk's forwarding department, just being a plain old customer of Lufthansa. And that's when it all starts to make a bit more sense. So I hope that helps. And there was one other I suppose it's positive it's about a new commodity in air freight. Well, it means it's not new. It's been around for a while, but there's been heavy growth because air freight is always at the forefront of new stuff. People fly it first and then sooner or later it will go by sea. In this case it's servers, which have high demand for AI, obviously. And AI servers are bigger and heavier and more complex than old school servers. And this is just a little note, so I didn't really understand servers, particularly what they looked like, how heavy they were, where they were needed. So we've just done a little explainer for anyone else who doesn't really know much about them either, which you'll find on thelowstar.com but good to see another commodity coming into the air freight world.
[00:16:16] Speaker A: So now you are hopefully all caught up on the main events from last week's supply chain news. Here is what might come up this week. Well, I should just note that tonight, Monday 2nd December, is the Seahorse Freight Journalism Awards and tickets are still available. If you're in London tonight and fancy hanging out with a bunch of journalists and other industry professionals, me included, I will be there. Then get yourself a ticket and come and say hi. Now there isn't much on my news radar for this week other than lots and lots of webinars giving 2025 supply chain forecasts and advice on how to manage your supply chains. But don't worry, I've signed up for them all so you don't have to. Instead, you can read the highlights on the Lodestar. Tomorrow I will be watching Hapag Lloyd's panel discussion about key trends shaping the ocean shipping industry. That's with Alpha Liner and Scang Global Logistics. The key topics are said to be the current state of the container shipping industry, what to expect in 2025 and beyond, and what can be done to overcome future challenges of shipping. Then also tomorrow there will be a Flexport webinar on what will shape the air cargo market in 2025 and that is also featuring Zenita and Air France KLM. Then later in the week is S P Global's Global Shipping Report, analyzing the 2025 outlook with Vespucci Maritime's Lars Jensen. And this is described as a preview of the types of discussion that will occur at TPM 2025 in March and then the next webinar is with Flexport and McKinsey & Company. They will be exploring key trends shaping 2025 global logistics and freight markets such as evolving consumer expectations and generative AI. So do go and sign up for any of those if they sound interesting or useful to you. Otherwise, like I said, you can catch the highlights on theloadstar.com and finally, I'm going to be attending an air cargo media briefing with IATA. This is a 2024 Industry Performance Overview and forecast discussions are going to cover market challenges, digitalization and security. Plus there will be a Q and A session, so you can expect a whole range of topics to come from that. Thank you so much for joining me this week and I'll see you next time.
