Episode Transcript
[00:00:00] Speaker A: Foreign and welcome to the Lodestar Podcast News in Brief, where as always, I'm going to be recapping the main events from last week's Supply chain news with help from Alex Linnane and Gavin Van Mull. And if you stick around to the end, you will get an insight on what you might see on the Lodestar this week. And I should just start off with a quick disclaimer that if I sound huskier than usual this week, that is because the cold British weather has finally caught up with me and I'm not feeling the best, but I'm going to power through anyway. And I believe Alex Danane is also feeling a bit under the weather, but actually that gives me a nice little segue into our first segment because speaking of weather, last week Hapag Lloyd advised rail operators CN and CPKC had implemented tiered operating restrictions in response to severe winter weather across Canada. And this included shorter trains and reduced speeds, which it said have resulted in minor delays expected to last for the next two weeks or so. And the ports of Toronto and Vancouver actually both experienced extended delay times last week at around nine days. We also saw this bad weather in Canada take effect at the start of last week as container vessel MSC Baltic 3 ran aground after experiencing a power failure some 12 nautical miles from the Bay of Islands in Newfoundland, Canada. So after they lost power, the crew were unable to secure anchor because of the bad weather conditions, but they are all safe. Damage to the cargo is unclear, but this is likely going to be called as a general average situation. Also, while we're on the topic of MSC, they acquired the remaining 50% control of East Container Terminal at Nardal West, CMA, CGM control the other half, and Alpha Liner reported that the new developments at this port would attempt to replicate the success of Tangemid. And we know that this port has been super busy with transshipments since it's taken on the diverted Red Sea capacities. So hopefully the investment here will start to speed up operations. And while MSC have taken on this new venture, we reported last week that they seem to have dropped one of their services. Gav, you had some details on this. Could you explain a bit more please?
[00:02:17] Speaker B: Right, so just to go back slightly on the NADA or west thing, I just sort of clarify, it's not that CMA and MSC will be operating the same terminal. They're operating sort of a neighboring facility that's being split into two separate terminals. There's quite a long development timeline on that port, so the impact of it will be felt in sort of a couple of years on the Trans Pacific. And this is back to shipping. Yeah, we ran a story on MSC's Mustang service, which was a China Long Beach Express Trans Pacific string. We're running about five ships. It hasn't run since about the middle of last year. And really it's a kind of victim of not enough demand on the trade.
And in that respect it's probably an indication of the fundamental sort of overcapacity situation that we're all aware of going.
[00:03:07] Speaker A: On in the background now while we're on available services. You also had a story about how Asia to Europe capacity will be reduced as the new alliances settle in. Is this set to have an impact on shippers at all?
[00:03:20] Speaker B: I mean, anything carriers does has an impact on shippers. So yes, it will. I mean the picture according to the published pro forma schedules and the vessels that we know that have been assigned to those particular services, when you sort of add it all up, if we look at the Asia North Europe trades, there's a marginal increase in the number of sailings, but an 11% reduction in capacity. And it seems to me that the alliance shift has allowed the carriers the sort of breathing space to adjust capacity to what they see going forward. And we all knew capacity would have to be reduced at some point this year. But it would seem that having it reduced in a planned way via the schedules is a lot better for shippers than to be hit with a series of ad hoc blank sailings, which plays absolute havoc with their planning.
[00:04:21] Speaker A: And slightly aside from container shipping, you also looked at the GXO Wincanton deal and the latest development there didn't look too promising for the takeover. Can you explain a bit more?
[00:04:32] Speaker B: So the Competition Markets Authority in Britain, which is our merger and acquisition watchdog, issued its provisional findings. It's undertaking a phase two investigation of GXO's takeover. Canton and basically it's all about the supermarkets. Charlotte, the regulator said that what they call grocers, which we know as Tesco supermarkets et al, have four basic choices for their contract logistics. I'm paraphrasing here, they can choose gxo, they can choose Ring Canton, they could choose DHL supply chain or they can in source those operations.
And very simply, the CMA says that a combination of two of those four they think will lead to higher prices. Well, as a background note, GXO said they don't think that the finding threatens the deal. They still think it goes ahead and they wouldn't talk about it further. But if one reads between the lines, you would suspect that they are probably preparing some sort of what they call remedies in M and a talk. They would hive off some part of it that might satisfy the CMA's concerns. It's very difficult to tell right at the moment and the next month is going to be crucial. The statutory deadline decision for the deal is the 20th of April, so there's to play out on it.
[00:05:52] Speaker A: Yeah, well, we will definitely be keeping an eye on the developments of that one. And now moving over to air freight. Alex, I know you've been looking at Schiphol a lot recently as it changes strategy in line with the government's push to reduce noise and pollution, which freight stakeholders weren't best pleased about. But at the start of last week, you reported it had annoyed freight stakeholders again, as they will be disproportionately, disproportionately impacted by its proposed new tariffs. What are the details?
[00:06:18] Speaker C: On the day that Royal Schiphol group announced its 2024 results, it also had to face the Dutch Authority for Consumers and Market, who have been asked to decide whether Schiphol's new tariffs are fair. El Schipol, which says it wants to invest, says it needs an average rise of 37% over three years. So that's up 41% this year, 7.3% next year and 12.5% from April 2027, which is quite substantial. But it also said that it was going to use tariffs to try to dissuade operators from using old aircraft. Night flights are going to become three to six times more expensive than day flights, but it will depend on the aircraft. Air Cargo Netherlands has argued that by doing this, the airport is kind of turning itself into a regulator, which is contrary to the Aviation act, and that the fees will disproportionately affect cargo, which is often, as we know, at night and in older aircraft. ICN said there's no alternatives for cargo and that because freighter appropriates are pretty flexible, they're likely to go to other airports, which will affect Schiphol's network quality. And a study showed that the rise in tariffs would lead to a 25% cut in freighter flights and a 12% drop in volumes from Schiphol, which will benefit airports like Liege and Brussels and just generally upset the Dutch because they like being the logistics hub for Europe. The Markets Authority has yet to make a decision, though, so we still don't know what's going to happen there.
[00:07:48] Speaker A: You also had an interesting story on the illegal exporting of Aircraft parts to Russia amid sanctions and how logistics partners need to be vigilant against this.
[00:07:57] Speaker C: That's right. I mean, we were alerted last summer by a source who told us that aerospace parts out of Miami to the CIS region were on the rise and parts going from countries like Kazakhstan directly into Russia, which of course is forbidden under the sanctions. Now it seems that the DOJ also heard this and they've begun to prosecute companies and employees.
In this case, it was a company called Flighttime Enterprises that was accused of exporting $2 million worth of aircraft parts to Russia. I think there'll be more of this to come. But Interestingly, with the US's sort of new view on Russia, who knows whether actually these cases will ever come to fruition. But everything's quite difficult to interpret geopolitically right now.
[00:08:41] Speaker A: Yeah, to say the least. Anyway, now moving swiftly on to a rates report. Gav, I know you did a report based on zenitha Insight that looked at how steady contract rates were versus quickly falling spot rates. So what are the most recent rate figures and what impact is this having on contracts?
[00:08:58] Speaker B: So spot rates still fall. Last week the declines on the Trans Pacific were steeper than the declines on the Asia Europe trades. For the first time. And I mean, not as long as I can remember, but certainly for the first time in quite some months, prices ex China to North Europe and the Mediterranean fell by 9 and 8% respectively. These are spot rates, of course, as quoted on Drury's World Container Index, the ex China to West coast was down 11% and was down 13% to the east Coast. And sources in China said that carriers, specifically referring to the Trans Pacific trade, said that carriers were dropping prices to attract cargo. So perhaps, you know, we've talked about an emerging rate war on the Asia Europe trades in recent weeks. Perhaps this is now beginning to spread to the Trans Pacific. Of course, on the Trans Pacific, larger majority of volumes are carried under contract contract rates. And it's difficult because we're in the middle of the season. They seem to be holding fairly strong altogether. I mean, forwarders report that and Zenith's freight rate sort of benchmarking would support that as well. And they did make the interesting point that they have been seeing carriers offering quite steep discounts if shippers sign up to long term rates. If a shipper signs a contract with a carrier on Asia Europe that lasts over six months, they are on average looking at a 28% discount on prices to commit for the longer term. So it's very clear that the carriers are targeting as much contract business as they can. But I should say that, you know, this is. It's late, right? Normally contracts in Asia, Europe would run from January to December, but a lot of shippers on that trade have delayed even issuing their tenders until Chinese New Year finished. So the calendar has slipped. An observation that we've made before.
[00:10:53] Speaker A: And how is this comparing with air freight rate?
[00:10:56] Speaker C: Well, according to world acd, tonnages are sort of recovering slowly now from what they're calling a shallower lunar New Year than normal. So tonnage fell 13% during the Chinese New Year and has now seen 2.3percent week on week rises. Last year it fell 20% and rebounded 15%. So it is slightly different. The World ACD has said that interpreting the data on this is complex and difficult. It doesn't know if there was real front loading or confusion caused by de minimis. But it said that those two factors may have actually cancelled each other out. In week seven, tonnages from China and Hong Kong to the US did regain 40% and 27% respectively, but they are 20% or 30% lower than January. In terms of spot rates. China to it was up 10% to $4.34 per kilo. Asia Pacific to the US went up 4% to $4.81 per kilo. But China to the US has fallen 6%. So there may be something in this de minimis confusion.
[00:12:00] Speaker A: Yes, and obviously There is that 1st of April deadline coming up for the review of the de minimis exemption. So it'll be interesting to see what happens with rates and volumes out of China until and after that point. Thank you both so much for joining me.
[00:12:13] Speaker B: Thank you very much.
[00:12:20] Speaker A: Now you are all caught up with the main events from last week's supply chain news. Here is what you can be excited to look out for on the Lodestar this week freightos will be announcing their full year earnings. We will give you the summary of the highlights of this On Tuesday there is a flexport freight market update looking at the latest ocean and air freight updates into and from Europe. Also going to be looking at capacity and rate developments and an update to how US Tariffs are impacting global trade. So if you're interested you can tune into that or we might have a report of the highlights if there's something super interesting in there. Now on November 25, 2024, that is the Canadian Maritime Employees association said that it and the Port of Montreal Longshoremen's Union had agreed to enter a mediation process for a period of 90 days the parties agreed not to make any public statements in connection with the ongoing mediation process until it was done, but by my calculations the 90 days will be up this week. The mediation decision was made after the Labour Minister asked the Canadian Industrial Relations Board to order binding arbitration, so it's one to keep an eye out for and see if the parties release anything from that.
Also this weekend I am flying to LA for TPM which is really exciting. You will be seeing lots of coverage for that next week. Nick Marsh and Gavin Van Marl will also be attending, so do come and say hi if you see any of us and send me an email charlotteheloadstart.com if you would like to arrange an interview. It's my first TPM so I'm really intrigued to see what it's like.
And finally, please keep an eye out for the second ever episode of the Lodestars brand new Air Cargo podcast which is a Tiaka special and will be dropping at some point this week. How exciting. Thank you so much for joining me and I will see you next time.
