Episode Transcript
[00:00:00] Speaker A: Foreign.
[00:00:07] Speaker B: Welcome to the Lodestar Podcast News in brief, we are going to be rounding up last week's supply chain news.
Now if you haven't already noticed, we have moved to video format which is a very exciting change for us and we really hope you like it. And if you are still listening on the audio version, then head over to our YouTube channel to see all the good stuff that we've got going on over there. Please, like share, subscribe all of that good stuff. It really helps. So without further ado, I'm going to introduce my guests for this episode. As always, I'm joined by the Lodestar publisher, Alex Linnane.
[00:00:41] Speaker A: Hello Alex.
[00:00:42] Speaker C: Hi Salad.
[00:00:43] Speaker B: And the Lodestar Managing editor, Gavin Van Maal.
[00:00:46] Speaker A: Hi so much.
[00:00:47] Speaker B: Thank you both so much for joining me. So this episode we are going to be going over container trade statistics, recent volumes and pricing data. We are going to be looking at new E commerce fees in Europe, pressure building on ocean carrier Zim, and of course, updates to WiseTech's new new pricing model.
Let's start the episode by looking at the most recent pricing and volume data from cts. That's container trade statistics. So this is for October because there's a slight lag between when the carriers report and when they can publish the volumes. The October global container liftings rose 2.8% month on month in October to reach 16.3 million TEU. And that is the sixth time this year that these volumes have gone over 16 million. Whereas I think in 2024, this, this only happened twice. So it's, it just shows how busy this year has been for container volumes. Sub Saharan Africa again led the way with import growth. They were up 16% year to date. And the Far east still remains the clear leader in their words, for exports in October, that was up nearly 5.2 million TEU from October 2024. But they noted that despite this continued growth, their PRI, their global price index dropped another 3 points to its lowest level this year and 21 points below January. So Gav, what is causing this disconnect between liftings and pricing?
[00:02:13] Speaker A: The received wisdom is that it would be overcapacity. Right.
But as far as I can see, every single ship is, I mean, every single ship is in employment right now, right?
[00:02:26] Speaker B: Yeah. Recent Alpha Liner data that we reported on last week showed that the commercially idle liner capacity has only marginally changed since September. I think it's 0.9% of the global fleet.
This virtually hasn't changed from a fortnight ago as well. So what is going On, Yeah, I know.
[00:02:43] Speaker A: I mean, I think in the same Alpha liner report it said that there were, on the liquid charter market, there were, there were two, there are two vessels currently open for employment of what? Of the worldwide fleet of about 4,000. I mean, I've got a theory for you on this and it's something we've been working on for a bit.
And that's all of the volume growth we've seen this year has come from China. And this is a big narrative in most of the business press at the moment, how it's diversified. Its exports that would have gone to the US are now going elsewhere.
And I think that that's also been accompanied by a change in Chinese freight buying behavior. And it's something that we saw, we've seen over the first nine months this year. Alex and I did an interview with Oscar De Bock, the, the quite recently installed CEO, DHL Global Forwarding, and we were asking him why, if there's been, I think for the first nine months of the year, global container growth is like 4.7%. But if you look at the major three PLs, Coon and Nagel, DHL, DSV, you look at all of their nine month results and those guys are all reporting like 2% container volume growth, if that.
So there's a massive, there's a clear and growing disparity between what the big three PLs are booking, which would normally come with added margins because obviously they buy and sell freight at a certain premium to their customers compared to Chinese exporters who are the engine of this, of this China export sort of momentum, basically buying direct from carriers or using domestic forwarders to book with carriers. And as a result it's not only sucking profits away from multinational 3pls, but it's pushing though, but it's also driving down overall pricing. And then last week, for example, we saw Costco place like a $7 billion shipbuilding order with Chinese shipyards for like 87 vessels. So it was Chinese state shipbuilding. I mean, you know, this is sort of is this big expansion. I mean you need to do ships to do trades. Costco is the de facto Chinese state shipping line. I mean, and, and in terms of that perspective, and by the way, these 87 ships aren't just container ships, they're also tankers, bulkers. It's basically a state, looks to me like a state fleet replacement program rather than a big addition to global capacity.
[00:05:23] Speaker B: Right, okay, that's a really interesting point actually. And kind of on that, that global liner growth that we're seeing, I went to a Flexport webinar last week and they showed that I think the order book is now 30% of the global fleet, which is a crazy addition. So they said that this kind of overcapacity that we've been talking about for weeks and weeks is just going to keep growing. And we had some new data as well from the United Nations Conference on Trade and Development or UNCTAD as more commonly known. They forecast only a 12% growth between now and 2030. So obviously like I said, that disconnect is going to keep growing. Do you have any kind of indication on how demand or rates are holding up at the moment as we head towards Chinese New Year, Christmas, all of these big events?
[00:06:06] Speaker A: Yeah, there are, there are a few sort of emerging indicators.
I mean probably an opportune moment to talk about the latest spot rate movements. The latest Jury's World Container Index was broadly flat on the week before but it showed a 7% increase to Northern Europe and a 15% increase to the Meds. And that was mitigated if you like, by a 7% decline into the US West coast and a 5% decline to the east coast. And there's a couple of sort of quite interesting sort of emerging trends going on here.
One is that they're there appears to be.
We just talked about changing freight buying behavior and it also appears that the, the trade flows and the normal peaks and troughs are changing a little bit. I've just finished reviewing an article from one of our correspondents in Asia that's talking about in the last couple of weeks there's been a 10% demand surge in bookings, in particular in Hong Kong to, to. To European destinations. And in its commentary accompanying the latest WCI numbers Drury noted that over the last three years it's seen in each of the last three years rather it's seen a year on year demand surge in December. So it's actually pumping up demands right after the peak season because none of these goods are ever going to reach here for Christmas or anything like that has become a normal feature. And obviously a lot of that is to do with the next holidays which follow, which is Chinese New Year, which arguably is probably more important to global container shipping than Christmases.
And we're seeing that on, if you just have bear with me for a second, we're also seeing that on the interasia trade, which is, I think you mentioned in your introduction, is still the largest trade and certainly rates on the interasia trade appear to be increasing.
I mean, you know, intra Asia has been strong this year volume wise and there's no surprise there.
But rates are strengthening in the run up to its peak season, which just said is prior to Chinese New Year. And I did think there was a very interesting thing on this is it again it's derived from Drury also does an intra Asia rate index and there was a China suspended seafood imports from Japan at the end of last month amid a diplomatic round that may well have had an impact because Yokohama Shanghai rates fell quite severely by sort of 20 plus percent.
And I think it all serves as a reminder that there are sort of geopolitical tensions that can suddenly interrupt trade and they're all over the place. We tend to focus on the Red Sea a lot but actually these sort of problems are global.
[00:08:57] Speaker B: Yeah, I mean it is definitely. Geopolitics and tariffs I think are the two main factors that have shaped the industry this year. And speaking of Tarif, we had some more tariff news last week yet again. I almost thought we had escaped this for the rest of the year, but no, we've got some more tariff news and that is that obviously at the moment, the ieepa, which is the International Emergency Economic Powers act, is with the Supreme Court at the moment and it's looking likely that the Supreme Court are going to uphold the lower court's verdict that these tariffs are unlawful.
And if that happens, then obviously this is going to open the door for refunds. But last week the US Trade Representative, Jameson Greer, said that if this does happen, then they've got other tools to seek these revenues and put these tariffs in place. I don't really know what the other tools are, but I guess we will find out. And I was speaking to some forwarders who were saying that this gap between people seeking refunds and the US administration trying to implement these other tools, it would leave a bit of a tariff vacuum. And that obviously opens the floodgates of front loading, which we have seen a lot this year. So perhaps something to look out for there in the next few months.
Now, Alex, as well as tariffs, something else that has shaped trade a lot this year has been de minimis and customs charges and different people trying to curb the flow of E commerce. You had a story last week that some logistics group had some logistics groups had criticised the latest move by the Netherlands, France, Luxembourg and Belgium to implement handling fees on inbound E commerce. So what are the details and why are stakeholders so annoyed about this?
[00:10:41] Speaker C: OK, yeah, those four countries decided unilaterally to bring in a two euro levy on parcels worth under $150 so the de minimis, basically only Luxembourg is already in law, so levies will start on January 1st.
The others are in the process of putting it into law. France has also got a five euro environmental levy on E commerce.
Now the EU has of course pledged to end a minimus exemption, but not until 2028, although it did say there'd be some sort of temporary solution next year. The problem is that if you bring in a charge in some countries, not others, then obviously the e commerce flows are going to go into the cheaper countries. Now I would expect to see Germany and Hungary in particular benefit from e commerce flows if the others put on a charge.
Now a lot of e commerce currently comes into Liege, comes into Schiphol.
So those airports are going to lose out. Air cargo Netherlands is one of those logistics organizations that has complained about this. Obviously they worried about the loss of revenue to Schiphol businesses. And an EU wide policy is obviously the answer to this. It will stop the lumps and bumps of changing air cargo flows and it will achieve what it's trying to achieve.
[00:12:01] Speaker B: Yeah, no, exactly. I mean as long as it's an EU policy and the UK is exempt because I don't want to have to pay more for the things that I order online. I'm joking guys. I don't order from Sheen and Temu. Anyway, as we know, E commerce is a big portion of air freight volumes. So how are the fundamentals in air cargo in general looking? Like pricing and capacity, all of that. I mean we spoke about a mini peak last episode. Has this turned into a mega peak yet or has this died completely?
[00:12:26] Speaker C: No, neither actually. I would say it's still a mini peak, which is quite nice. I spoke to so many people recently that I'm just going to give you a few stats on this.
So rates are still climbing according to TAC Index. Freightos Fax showed a bump before Thanksgiving, then a lull and it's on the rise again, which is quite nice this late into the year for airlines.
In terms of E commerce, we found out last week that China's growth is now overwhelmingly going to non US destinations, which has made the European cargo market extremely competitive. According to Cathay Cargo.
According to Rotate, just for a quick look at next year, widebody belly capacity is going to go up 6%, freighter capacity up 7%.
Zones said that this year air cargo market growth was 4 to 5%, but they expect next year to be just 2 to 3%.
So people are going to be looking for the growth markets and one of those things is going to be AI servers.
So many companies have mentioned this to us now. It's definitely a thing. It needs special handling, so it's quite high yield.
But one of the concerns is whether the AI bubble is going to burst.
I think probably not quite yet. So Foxconn, which obviously makes a lot of AI servers, its production revenues are going to double quarter to quarter next year. And it said that a doubling in shipments over 2026 on 2025 was a conservative estimate. So I think there's still a lot of shipments to be carried.
They have. I mean, Foxconn's AI server production is in Taiwan, Mexico and increasingly the us.
Their aim is to do sort of local capacity for local consumption, which means that they're going to start producing more where it's needed. But again, that's not going to happen for a bit.
And I don't think the bubble is going to burst yet. There's still going to be major shipment moves next year and the softening may start to take place in 2027, but we'll have to wait and see on that one.
[00:14:33] Speaker B: While we're talking about AI, I wanted to ask you if you had any updates to that story we spoke about last week, and that is the backlash that WiseTech received for the new pricing model for its software, Cargowise. I think people are quite interest in this one. So what's the latest?
[00:14:49] Speaker C: It's been fascinating, actually. It's. It's a great story and I think it's going to run and run, to be honest, because it involves so many people. From what I've seen, a lot of forwarders are saying pricing for them on the new pricing schedule has gone up between 30 and 50% now because it came in on December 1st. That means that everyone's budgets for next year are going to be wrong. It's going to be very difficult to find an extra 35 to 50% in your budget.
So that probably means that they're going to reduce IT spend elsewhere.
The difficulty is they can't vote with their feet. Wisetech basically abort a lot of the local competitors, so no one else is really in a position to have the same scale that wisetech has got with its Cargowise system. One solution suggested to me was that Flexport, which as we all know isn't making large amounts of money from freight forwarding, might be better off selling its software to the rest of the market. I'd be surprised if it did that, but it's one possibility. Another suggestion is DSV's Tango software, which it got from Schenke that also could perhaps be made into some market solution. But generally speaking, people are a bit screwed, to be honest, and there's not very much they can do about it at the moment. We are having more on this. I've been contacted by lots of people. So we will be running a story this week on the problems of Cargowise and how it could maybe do better for its customers.
[00:16:16] Speaker B: Yeah, this story got quite a lot of interest last week when we published it, and quite rightly because it is a very, very shocking story. So I'm looking forward to hearing what updates come to that one. We also had a bit of news last week that Kuna and Nagel had been introducing some job cuts. I think this is something that we've spoken about before. It seems like they keep cutting jobs. So what's the latest here it is.
[00:16:37] Speaker C: We have to be careful here because it's only one round of job cuts. It's just taking a while. They announced in their third quarter results that they were going to cost up to 1500 jobs, which actually in the general scheme of things isn't very many. But it's managerial jobs in general and those people can be quite noisy. So it's been rather a bumpy process.
People aren't very happy. But one of the things actually that people are most unhappy about is not so much the redundancies, but about the idea that Kununaga's culture, which has been really proud of in the past, seems to be changing and it's becoming a different sort of character in the market, which is many people think is a real shame. And then we have a few other bits of forwarder news this week. Actually, this caught my eye. So private equity company Stone Peak, which bought ATSG earlier this year and is already an investor in Lineage Logistics, it's looking to do the same in Asia. So it's set up Peregrine Cold Logistics. It's acquired a Philippines company called Pinnacle, and I think this will be the first acquisition of many as it looks to set up a cold chain network across Asia. Not dissimilar to Lineage, perhaps. I think that's really one to watch. And in other news, we had a little exclusive on the fact that Siva is looking to reopen in Russia.
[00:17:58] Speaker B: So now we've covered geopolitics, AI tariffs and forwarder gossip. Let's move on to something else that has been in the spotlight recently and that is ocean carrier Zim. So last episode we mentioned about Hapag Lloyd's interest in acquiring the Israeli Liner, which would give competition to the Zim CEO, Eli Glickman, who also wanted to take over the carrier. And now Eli Glickman might have another issue on his hands because it seems that a group of shareholders that is more Gemmell and Pension Reading Capital and Sparta24 want to shake up the management board.
[00:18:33] Speaker A: So what's prompted this gap so important distinction? Actually, it's not the management board, it's the Board of directors. And Mr. Glickman is a member of the former but not of the latter. And it's the latter, I. E. The Board of the Directors, which recommends or not a takeover offer to Zim shareholders and it also nominates the people who fill the Board of Directors. So in the wake of Mr. Glitman's failed takeover bid for Zim, or rather a management buyout which emerged at, which was made in the summer, that has brought out a lot of other potential buyers such as Hapag Lloyd, we understand also that Maersk might have inquired about buying it. Wouldn't be surprised if there are others as well. And that sort of shaken things up amongst the Zim shareholders. So in the wake of all of that, this group of what the Zim board terms dissident shareholders, I think on Wall street or in the City of London, we'd normally call them activist investors.
And basically they have put forward three alternative names to the Board of Directors nominees for the.
For the Zim board, which is due to be voted on the 26th of July, December, when Zim has its AGM. What's behind it, Charlotte? I think it's what's normally behind activist investors. Doing this sort of activity is normally in preparation for some other form of takeover offer or M and a opportunity to come up. That's. That's what normally happens, right? You get people onto the board who are.
You feel benignly towards your desire to sell the company or whatever it may be, and then you hope that those things get pushed through. So that's what seems to be the case.
And the most recent development was a letter to shareholders from the Zim board. Sorry. In the wake of all this, the Zim board hired a company called Institutional Shareholder Services, which is like an independent audit of corporations.
And this group recommended, as recommended to the Board of Directors that the Board of Directors own. Eight nominations should be put forward to shareholders and not the three put forward by the distant shareholders, if you like. So basically the board has put out a letter to the shareholders saying ignore the anomalies that the dissident shareholders have put forward. Vote for us Lot, us eight, Lot and everything will be fine and we're all going in the right direction.
More to come. Let's see where the vote, what happens on the vote? I wouldn't be surprised if there's further developments on this before the vote takes place on the 26th.
[00:21:25] Speaker B: It's all a bit dramatic really.
It wasn't just.
[00:21:29] Speaker A: Well, you say that. Sorry, you say it is dramatic. But I should just remind everyone that this generally happens about once every 10 years with sin. I mean it was in 2014, it was incredibly close to going bankrupt.
It redelivered a whole load of chartered ships. A load of Zim shareholders completely lost their shirts, ended up with the ship owners who own those chartered ships, such as Danaus. One of them ended up taking like a 60% stake in Zim before it could then refinance and do all these things. And that led to the IPO in 2021. So it is dramatic, but drama is like a sort of recurrent feature of Zim's corporate history.
[00:22:11] Speaker B: So business as usual for them.
We were looking at Maersk last week because their ambition to be allowed to bid for the Techon 10 terminal project in the Brazilian port of Santos was denied last week by the country's Federal Audit Court who voted to uphold legislation that bars operators of existing terminals in a port from bidding on new projects. So who is up for this project now?
[00:22:37] Speaker A: I think it's the final nail in the coffin for what are known as the sort of the incumbent Santos operators.
So that's Maersk and MSC who jointly run one terminal, CMACGEM that runs another, and DP World another one. So in my view this basically paves the way for one of three outcomes.
One, I mean basically the bidding process goes forth and what it says is that if you already operate a terminal in the port, you can't bid for a new one.
So there's one of three outcomes to this. Firstly, you get one of the smaller global terminal operators such as AD Port Group, yieldport, Hapag, Lloyd's, Hanseatic Global Terminals, there's icsi, there's, you know, there's eight or nine smaller ones which could reasonably put bids in. Secondly, you get one of the Asian carriers doing it. Now, obviously Costco we've already talked about, they have a big operation in Peru. They'd be looking to grow their footprint. They would probably pay quite high dollar for it and I know that they'd love to have a foothold in what is South America's biggest port.
Third option is you get one of the local champions, we already know of two. There's jbs, the food producer, which actually launched a port arm earlier this year and is now operating in the port of ITAGAY in Santa Catarina province. Or there's another Brazilian commodities conglomerate called CSN, which according to local reports is also looking to put a bid together for tech on 10. So you basically are one of those three options or a mashup of one of those. So you could see like one of the Brazilian shippers tying in with one of the carriers or one of the global terminal operators doing a joint bid. Because in a country like Brazil, which is very, very heavily export dependent.
[00:24:34] Speaker C: You.
[00:24:34] Speaker A: Know, they like to promote their national champions and this is a case where it'd be very easy for them to do so.
[00:24:40] Speaker B: I mean, it's quite niche. But this wasn't our only carrier wants to invest in a terminal and sees a hurdle story. Last week MSC was also facing some issues in Spain. So what are the details of this one?
[00:24:52] Speaker A: Okay, so this is. So this is MSC, BlackRock, the hedge fund which it sort of formed a joint venture and Hutchinson. So it's the Barcelona Europe Southern terminal that's Best, we're going to call it best, which is owned by Hutchison, which MSC along with BlackRock are trying to purchase a stake in it. I don't know what the stake is, but we, but the European Commission announced last week, its competition commission announced last week that it was opening an in depth investigation into the deal because of it thinks there's going to be competition infringements. Should MSC acquire a stake there? It doesn't have a stake in a Barcelona terminal. It does account for something like 60% of the volumes in Valencia, runs a terminal there. So that might be one of the reasons why they feel there's going to be a competition worry. There's just one other aspect to this story, which is that, I mean, the reason why everyone sort of raised their eyebrows immediately is because of course MSC is sort of in the middle of negotiating the purchase of Hutchinson's entire international portfolio. You know, this 22 billion deal that was reported in March this year.
And what has transpired from this is that the offer to buy a stake in Best very likely predated the offer to buy the entire international portfolio. So I mean, it's just, just one, one aspect of it there. It's, I wouldn't be too surprised to find the fact that, you know, they started looking at Best and then someone said, you know what, you know, if you've really got the money we might sell the whole thing to you.
But anyway, the best deal is under the EC's competition microscope and it won't be resolved until 30 April next year, which sort of gives an idea of the sort of extended timeline that we could be looking at.
The wider Hutch deal. Sorry, Tom, I realize I'm going at the wider Hutch deal because if it's prompting competition's concerns in this jurisdiction, there are plenty of other deals in the wider deal which are likely to trigger competition concerns. I hope that explains that it does.
[00:27:23] Speaker B: And I am going to be on the edge of my seat until the 30th of April waiting to see what the outcome is to round up the episode. Alex, can you please give us a list of what was on Premium last week?
[00:27:33] Speaker C: We can yes, there was a deep dive on finances at cma, CGM and Siva Logistics, so Siva Logistics is currently very much under the spotlight over at Lodestar Premium.
Let's look at how new ESG rules can hit ocean carriers and a look at ocean freight contracts. Aussie, right? Seasonal and we're looking at how they are going to fare next year. Sadly, nothing back from Flexport on the Flexport Premium Rail that I mentioned last week. They've been very quiet this week, which is a shame. But yes, always worth a read on Premium.
[00:28:09] Speaker B: Yeah, definitely sounds like there was lots of good stuff over there. So I do advise listeners and watchers now to head over to Lodestar Premium and see what they've got. Alex Gav, thank you both so much for joining me this week. It has been wonderful to speak to you.
[00:28:24] Speaker C: Thanks Charlotte. It's been different this time and thank.
[00:28:29] Speaker B: You all so much for listening and watching. Please, please do subscribe to our YouTube channel and leave a like a comment. Give us feedback if you have any. It all really helps. Thank you very much and we'll see you next episode.
[00:28:48] Speaker A: Sam.
