[00:00:03] Speaker A: Coming up, trade wars, rates, updates, reliability disappointments and 2027 forecast. It's a container trade special from the Freight Buyers Club and I promise you
[00:00:14] Speaker B: you're gonna like it Mike. It's been a tough year for shippers.
[00:00:17] Speaker C: When we get to the distortion level we have a market level shift and that's I think what we're seeing into the US at the moment.
[00:00:23] Speaker B: Not even official White House. It's what's in social media that you know, has people scratching their heads.
[00:00:32] Speaker A: Just clarify that you said container lines have been a bit over generous on the surcharges. Do you mean by that that they're overcharging? Is it yes or no?
[00:00:40] Speaker D: But with the war happening then suddenly everyone got very pessimistic.
[00:00:43] Speaker B: Right now I'd say it's probably advantage carrier.
[00:00:53] Speaker A: Welcome to the Freight Buyers Club, I'm Mike King and today we're going deep on ocean shipping supply chains, resilience, risk rates and forecasts. And to help me do that I'm joined by three absolute world class experts in their respective fields. Jimmy Sirota is a PSA veteran who spent years at the Singapore port operator leading the teams behind its long term contracts with the world's container lines before taking on commercial oversight of PSA's terminals in Europe and the Americas. Along the way he pioneered its predictive analytics on trade lanes. And in June this year he left to launch his own startup, Nava analytics and Research. He's now one of the leading forecasters in container shipping. Which is exactly why he's here. Jimmy, welcome to the Freight Buyers Club.
[00:01:47] Speaker D: Thanks for having me Mike.
[00:01:49] Speaker A: Well, you're very welcome.
And next up we have the one and only Nick bailey who's got 15 years in logistics and supply chain behind him. He was a lead analyst for logistics and services at AP Moller Maers before setting up the Signal House's co founder. These days his focus is on turning supply chain developments into practical business intelligence. Hello Nick, how are you doing?
[00:02:13] Speaker C: Very well, thanks Mike. I don't want to be anywhere else apart from here for this conversation.
[00:02:18] Speaker A: Well, you've been speaking all over the place but you said this was the highlight of your of your summer speaking tour, is that right?
[00:02:25] Speaker C: Highlight of my year?
[00:02:26] Speaker A: Your highlight of your year.
[00:02:28] Speaker C: Come on, where else would I possibly be today?
Possibly doing.
[00:02:33] Speaker A: I fall for flattery every single time. Thank you so much Nick.
And next up it's the one and only John McCown returning to the Freight Buyers Club. You might know from the McCown Report, the famous analysis of container volumes and quarterly analysis of the industry's financial results. But he was mentored by. Get your head around this. Malcolm McLean. No ma no less than the great Malcolm who invented container shipping.
John also spent 20 years as sea level executive at listed transport companies.
He went on to invest in transportation stocks at a large hedge fund. And he's also a non resident senior fellow at the center for Maritime Security and the author of Giant of the Sea. My God, the. The CV carries on and on and on.
You're part of the whole foundation of container shipping, John. Welcome back to the Freight Buyers Club. I'm sure it's an honor for you as well as Nick.
[00:03:28] Speaker B: It is, Mike. It's always a pleasure to be with you and thank you for asking me. Good morning.
[00:03:34] Speaker A: My tongue was firmly in cheek there. Well, we're honored to have you with us.
That goes for all three of you.
We're going to get into all of this properly in a moment, but first, a short message. Well, it's sort of from me, but also our partner on this episode.
Hello, if you don't know me, I'm Mike King and I'm the founder and host of the Freight Buyers Club. And I'm delighted and I'm very proud to say that we're ranked now in the top 0.5% of podcasts all around the world according to Pod SEO. You can check it out yourself in 2026. That means we're averaging over 20,000 downloads a month across podcast platforms on YouTube. We're now over 6,000 subscribers and we're chasing 10,000 by early next year. And you can help with that. So if you're watching, please do hit subscribe and drop us a comment telling us what you'd like us to cover next. And if you are interested in partnering with the Freight Buyers Club and you fancy sponsoring a show full of people who get unreasonably excited about container rates, supply chains and air cargo.
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Welcome back. I'm my king. I'm with Jimmy Siroto of NAVA analytics and Research, Nick Bailey of the Signal house, and John McCown of the McCown Report. John, to you first, we're going to keep these opening, opening questions quite succinct if we can. Now, no one knows the Trans Pacific trade quite like you.
So please give us a very quick breakdown of the key supply and demand drivers on the trade this year and a little clues as to what we should be thinking about moving forward that we can maybe get into a bit later on.
[00:05:42] Speaker B: Well Mike, it's been a tough year for shippers. You know, it's basically volume demand has been flat. Five of the eight months have had decreases.
You know, that's really an inversion. The US used to be kind of on top of global trade and really it's all driven by the tariffs. The tariffs have really in my view more kind of redirected.
So we're seeing some real robustness in major crate lanes in the rest of the world.
But the demand in the US has been flat. I mean it's all driven by tariffs. We're now kind of in our second straight year of flat demand.
So that picture has been different.
On the capacity side, kind of a big driver has been the unusually strong typhoon season in asia. Worst in 10 years.
You know, voyages that were delayed. That has the effect of drawing down on capacity.
But the big catalyst in my view, and even with this weak demand and across lanes including the Trans Pacific, pricing's really ripped. You know, the CFI SCFI is up 192% since February.
The CTS global pricing index is up 54%. That's a key measure.
The spot indices, breweries, Shanghai LA is up like 254%. And the driver there I think is the war.
The war kind of had the effect of shooting up fuel prices. In my analysis the carriers have been a little more generous in their surcharges relative to the fuel cost. And then we've also had some capacity problems. The war cut off 3% of the world's container volume in the Persian Gulf, led to some disruptions. And then we had of course the front loading in the US and that had the way of kind of having things out of sync. So all of those came together to be a pretty tumultuous year for shippers.
[00:07:48] Speaker A: Just a quick one, John, just clarify that you said container lines have been a bit over generous on the surcharges. Do you mean by that that they're overcharging? Is it yes or no?
[00:07:58] Speaker B: Yes, yes. That's kind of the.
You go back to the oldest game of kind of rate increases in the form of gotcha surcharges.
[00:08:10] Speaker A: Okay, I just thought I'd clarify that. Maybe Nick and Jimmy want to comment on that if they wish Nick over to you again.
Keep this One short, if we can give us a short synopsis of how you define global trade risk, how that's playing out for container shipping right now, and importantly, the key things we should be thinking about for the future, that maybe we get into a little bit more later on.
[00:08:30] Speaker C: So I think one of the questions I get asked the most is how do I define risk?
Especially as someone who tries to operate as a person who lives in the world of supply chain risk. Right. So I don't have any deep insights on what risk is or what risk isn't. It's just stuff that happens, disruptions that happen in the environment that we operate in. I think what's changing and what's interesting to think about risk is actually how risk or how disruptions, how are things that happened connect to each other, how they cascade through our supply chains and how they compound after they happen.
And I think that's really where risk is today. That's really what matters.
Right? So we live in a world which is very, very fast. We live in a world which is very, very connected. We live in a world which you can't really divorce yourself from an event that happens across the world because our supply chains are global. When we talk about connected, what do we really mean? Well, I would say that it's something that happens upstream or downstream. Wherever we are in the supply chain, either our suppliers or our consumers are affected by what happens in, in our supply chain. What do we mean by cascading? Well, it means that something happens like a longer voyage as congestion in a port and then all of a sudden we have downstream effects. That's just classic bullwhip effect type of stuff in supply chain parlance. But that's the way that we expand it as well. And then compounding, well, you know, when costs go up, they've got to go somewhere. They've got to be paid for by someone. So how do we deal with those kind of compounding effects if we want to think about what happens in the future, if we want to think about what happens when we looking into next year into, into 2027, as you say?
I would say that actually what really matters is, you know, what's our supply chain exposed to? What are we doing? How are we arranging our supply chain? What's the architecture, what's the exposure that we have? What can we do about that?
It's all very well and good to say that we are all exposed to congestion, but actually it's a little bit different when it comes down to my supply chain versus your supply chain. And that's the way in which we need to start thinking about the future, I would say.
[00:10:48] Speaker A: Thanks Nick. Jimmy. We just heard there from John and Nick a whole bunch of ingredients to think about when we're looking at supply and demand for container shipping. When you forecast things, what are you looking at and what are others missing? Maybe, yeah.
[00:11:06] Speaker D: Well what I observe is most forecasters seem to depend on like 2 extreme of the spectrum. So one group will depend a lot more on computing power, the machine learning tools, et cetera.
And the other group will depend more on macroeconomics, disruptions, geopolitical events and things like that. So my approach is kind of trying to combine the two in a more optimum way. And in a sense the so called secret sauce is to know which straight lane needs which ingredients and at what point in time you turn on or turn off those ingredients. Right, so, so I think that from my perspective, I think the combination of the man and machine is really crucial to get good accurate forecasts.
[00:11:56] Speaker A: Okay, thanks Jimmy. We're going to go back into that a little bit more detail later.
Now if anyone is watching on YouTube or Spotify, you're going to see a few screens on chart but I'm going to try and talk through these as well. So you can understand them if you're only on audio.
And Nick, first up we've got Sea Intelligence latest carrier rankings for August global schedule reliability fell to 49.9%, the lowest since September 2022. And the ships that were late were almost seven days late on average. Maersk was the most reliable of the top 13 carriers at 67.3%. Wanhai was bottom on 23.2%.
None of those carriers improved month on month. What's going on?
[00:12:43] Speaker C: Yeah, I think, I think a couple of things are happening, right? So we're according to the latest data, seeing more vessels being laid and then more vessels being further behind as well. So those are two really big measures that shippers want to be looking at. Like when is your stuff going to arrive? And then when a delay happens, how much further behind is it going to be?
If we look at the way globally the our chips are arriving, our reliability factors are able to be measured. We actually see that in Asia, only about 32% according to sea Intelligence. In the way that they're measuring reliability, only about 32% of ships are arriving on time. Whereas globally the average is actually about as bits big.
If we think about the way that supply chains generally operate as well, we have Asia as the origin, a lot of manufactured goods. So if we are intra Asia supply chains are having low reliability and low deliverability, then we're talking about a lot of downstream impacts and a lot of downstream effects. You had Elaine Lowe on the podcast a couple of weeks ago talking about congestion across the Asia ports, especially the smaller and the especially the small reports.
An issue with finding out how that's the kind of structural impact that is existing in the global supply chain at the moment.
That obviously has a lot of downstream impacts for shippers. If we think about supply chains distributed globally, we see that actually there's quite a lot of manufacturing that takes place in consumer markets in the West. So there's a lot of downstream impacts the consumers and manufacturers in the west have to then for have to therefore deal with. If we look at the charts and we look at the reliability in another way, we can look at carrier differences as well. And that's another way of seeing actually we know where the carriers operating, where are they exposed to and I'm sure if we saw that chart from another perspective, we would have a very different view on who are the most reliable, who are the least reliable, at least in terms of delivering on sign carriers as well. I think the important thing is that when we measure the geographic distribution of our supply chain or when we measure the carrier partners that we have, a global average is actually not the most important thing. Who are we partnering with? Where are we geographically exposed? That's the most important element for us, understanding where is on time delivery. And that's when we can get into making decisions about the supply chains that we operate and the partners that we have.
[00:15:22] Speaker A: Thanks for that Nick.
Interesting point John.
Just maybe you can give the carrier side a little bit here because they have had quite a few things to deal with on screen now for those watching is a a map of The World's Top 30 Port Congestion Hotspots as of 4th October from Liana Lithica hotspots in Europe, West Africa, India. Standing out biggest so far really is it's Shanghai, it's some of those big Chinese ports.
On top of all of that we've had a lot of obviously you mentioned earlier John, geopolitical disruptions, a lot of weather disruptions.
Give us a carrier's perspective on how you have to manage these supply chains and oceans, these ocean shipping networks right now given all of this disruption.
[00:16:07] Speaker B: Sure.
As I mentioned earlier, in some ways the net effect of the tariffs have been to shift volume shifted into other regions. And in some ways you can link the hotspots directly to that. For instance there's no region that is, has been ripping with growth as much as Africa.
You know, a lot of months the year over year increase in boxes in or out of Africa has been more than 20%.
I think the last 12 months.
Africa inbound loads are up 18% outbound or up 6%. So that's some pretty massive growth that by itself is going to kind of, kind of cause issues.
You know, India for instance, many deployments with India invariably are linked with the Mideast and the war has basically shut down the Persian Gulf and 3% of the world's volume that's caused all sorts of chaos and routings involving India. So those are two kind of follow on effects of that.
The China typhoons of course, worst in a decade.
You know, reports are, you know, in key ports like Shanghai and other big ports, delays have been as much as seven days. So all of a sudden in the Trans Pacific, what is normally a 35 round trip voyage comes 42 days and your capacity is down 16%. You know, with China being the, the biggest origin point on all trade lanes that telegraphs, you know, into other, other markets. I mean, I guess the broader point, and Nick made a great point about the linkage, the broader point is, is really one giant global conveyance system. You know, what happens in one place is going to invariably be, you know, telegraphs into the other, invariably reduce capacity.
You know, it's bad for shippers. You know, on the flip side, the carriers have learned how to, to benefit from disruptions. Disruptions end up supercharging their earnings. You know, here in the second quarter, carriers earned $6 billion in net income. That's up 7 times the relatively palky 800 million profit in the first quarter. So we're going to see another pop up in third quarter earnings. And again, it's all disruption that has benefited the results of carriers. So everything's linked together.
[00:18:37] Speaker A: It sure is, yeah. Nothing's ever been clearer, Jimmy. For those of you watching on YouTube or Spotify, this is Zanetta's chart of daily spot rates over the past year. Everything took off together in June, but since July, the big trades have gone in opposite directions. Far Eastern North Europe has slid from around 5,500, a 40 foot box to about 3,700. While far east to US west coast has climbed past 8,000 and the US east coast is about 11,500.
Why the divergence?
[00:19:11] Speaker D: Yeah, talking to good carriers and also some of the freight forwarders, I think for the far east to North America trade in the first quarter, somehow Pessimism came in very quickly.
February, March, volume was weak. Actually it's more due to the seasonality, due to the Chinese New Year.
But with the war happening then suddenly everyone got very pessimistic. So I think you all would know that carriers like cma, Emirates pulled out capacity from transpacific and then even the bcos. I heard stories about bcos refusing to sign long term contracts thinking that, that the trade will be flat but actually it rebounded very strongly. Right. We saw that from April onwards actually in line with my prediction model it rebounded very strongly and I, I think the market got caught pocket. Right. They panicked a little bit. Bcos found it hard to find space and, and of course as John mentioned, you know, the carriers now are very adept at taking advantage, that kind of situation. And then the rates just shot off the roof. Now that's different for Price Europe because I think pessimism was not so strong in the first quarter and the growth, the rebound was not so sharp as well. And not to mention that capacity start to trickle in more through the Suez Canal. I think by now, I think the estimates were wanted of the services now going back through the Suez. So capacity also increase and I think all that contributed to the divergence of the freight rates. The increase of the freight rates for the two trades.
[00:20:53] Speaker A: Yeah, yeah, interesting. I mean we've had a whole bunch of shippers on here and the story that we were getting was a lot of front loading on the Trans Pacific in Q2. This was ahead of this big tariff deadline in July.
But it hasn't really borne out at least if you just look at rates as an indicator. Anyway, let's get. We'll come back to that a little bit later because I know you've got some forecasts, Jimmy and I'm very interested to get John's rating of the peak season. But Nick, let's talk about your new venture signal. You've said supply chains are now constrained by architecture, not capacity. What does that mean for a freight buyer who sees this growing container shipping fleet record levels and assumes there'll be plenty of space moving forward?
[00:21:41] Speaker B: Yeah.
[00:21:41] Speaker C: So it doesn't mean that a growing eternally and adding capacity doesn't matter.
That's still important. That's definitely something which we've had a
[00:21:52] Speaker A: few guests that say it doesn't matter how much capacity there is, they're always going to make profits. But I diverge. Go on, carry on.
[00:21:57] Speaker C: Yeah, well that's for them to prove maybe and let's see how the future goes. Right. But it's not that more capacity is unimportant. When I say the capacity doesn't matter and architecture does, it is really what we need to look at is the architecture of our supply chain. So our supply chain is the routes that we're exposed to. It's the ports that our goods go through. It's the way in which our supply chains come together.
I think that the more capacity that is the argument would be the more rates should go down because supply and demand, they have those or that interaction and demand is relatively predictable, those types of stuff. It's not that capacity doesn't matter.
I think the point I would make when get to the argument about architecture would be that we're all exposed to the same types of constraints on capacity. Right. So if we look at what's happening in Intra Asia right now, we definitely see that there is a constraint on capacity. But that's a market level thing. And at the market level that's great to know and interesting to be able to understand.
But my supply chain may or may not be exposed to Inter Asia.
Right. And if it is exposed to Inter Asia, then there's a way in which I can navigate my goods through Inter Asia and the same on the west coast of the U.S. right. There's a way in which my goods can get into that part of the world.
So capacity matters. But it's a bit more subtle on that side maybe than we would think.
[00:23:51] Speaker A: I can't just go excess supply. Structural excess supply lead to. Should lead to low rates as opposed to higher rates. Then that'll be too simplistic.
[00:23:59] Speaker C: Yeah, yeah.
I think what I was trying to say there is really that, you know, capacity is one part of the equation and it's easy to focus on capacity. It's easy to think that if there is congestion, there's congestion for me and for you and for everyone else.
[00:24:16] Speaker A: Let's look at demand. Then you split demand into customer demand, defensive demand and distortion demand on the container trades this year, especially the Transpac. How would you explain events there through that prism?
[00:24:30] Speaker D: Yeah. Okay.
[00:24:31] Speaker C: So customer demand is probably the demand which we focus on most. That is the demand that the end consumer is pulling through our supply chain. So we want to have one unit for every one unit of demand. Ultimately the end bit more disruption. Demand is what we see happening, especially into the US where we have front loading, where we have lots of volume going into the US which is probably over and above the level of final demand. So that's the type of defensive behaviors or defensive ordering that we See to get ahead of a potential obstruction coming up. Distortion demand is what happens when everyone does that at the same time, right? So everyone is seeing there's a potential disruption coming in terms of tariffs into the US west coast. There's a potential disruption coming in for higher rates because of what's happening in whole news and way in which, the way in which costs might rise because oil prices going up in all of those kind of pass throughs. I think that those are not necessarily saying that anything is wrong demands. They're not saying that anything is not genuine demand. But it's a way in which we can understand categories of buying behavior of shipping, behavior of volume behavior in the trades that we're interested in today. Right? Which is basically China or Asians, the US West Coast.
If we look at the underlying level of demands in the US it's not double digit demands, volume growth into, into the US So we've got some front loading of behavior. But it's very, very difficult if we look at the numbers to be able to say okay, what's genuine demand and then what is the, the kind of front loading demand that we see. But then we do see everybody, or not everybody, but certain shippers reacting and saying okay, well we need to get ahead of this. We need to make sure that our goods are here, our inventories are able to sustain over time what we have the inventory to be able to fulfill the orders that we get ahead of.
We need to have the inventory to be able to fulfill the orders that we get in the period where we might be able to or might not be able to sustain demands that we see or rather the costs might rise in such a way that we wouldn't be able to be able to be exposed to them.
And that's the distortion level. When we get to the distortion level, we have a market level shift. And that's I think what we're seeing into the US at the moment. That's why we end up with high double digits or mid teens digits level of imports.
[00:27:17] Speaker A: Nick, this summer you had your risk signal at medium high and rising. Where is it now? And what should people in container shipping be thinking about in terms of that risk? Just a quick one to finish before we have a quick break.
[00:27:28] Speaker C: Well, I guess the first thing to say is that we publish a risk signal and a rising or lower based on the individual article that we publish. So it's not like we have like a kind of a global level of risk or anything like that. But I think it depends on where you think the strategic Balance is right now. Would you rather have efficiency or would you rather have protection?
I think the efficiency is in the supply chain. Always a very important thing to have and you need to be able to manage your costs versus your availability and be able to balance that type of being able to balance those elements of a supply chain. I think the opportunity going ahead is really looking at where you have the most usable capacity versus the bad buying conditions. I think that's the kind of trade off that we're looking at. If I look at the head of the risks, I would say that there's a policy and a demand timing risk. If we're thinking in terms of at the moment, we've seen lots of front loading in the first half of 2026.
That's really kind of buying volume from the future or buying demand from the future. So we're saying we're getting ahead of the ways in which we would like to or getting ahead of the demand that we expect to come because we want to be of the tariff rises.
Those types of policy and demand timing questions. We have to see, you know, what's going to happen in, in the future, what's going to happen in terms of the, the way in which we go. We think about usable capacity. We know that we've got a lot of supply in theory it is coming online. We haven't seen much scrapping or much kind of ways in which the carriers have been pushing down.
On the other side of the equation they've got for the capacity that they bring online.
So what is available?
And that's again the headline kind of level of capacity we see in the market. But what's usable capacity as well? If I'm not exposed to particularly over subscribed or if I'm on a, a route which is oversubscribed and I'm seeing high demand levels because of front loading, what happens then? And there's those two very different interplays which are happening.
I think the big mistake that people can make at the moment is seeing a headline figure, whether that's spot rates, whether that's contract rates, whether that's capacity moving in a direction which is favorable and assuming that everything underlying that is moving in the right direction. I think that underneath that headline figure there is absolutely a lot happening and a lot more to pay attention to and something that everyone should be paying attention and making sure that for their supply chain the right way of making the decision is what they're doing.
[00:30:26] Speaker A: Thank you, Nick. We're going to take a short break there and when we come back. We've got John McCann on the Trans Pacific and US shipping policy and Jimmy Siroto's forecast for 2027. And we've got a few final thoughts from all three guests.
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Welcome back. I'm Mike King. I'm with John McCann of the McCann Report, Jimmy Siroto of NAVA analytics and Research, and Nick Bailey of the Signal House.
John, let's back on the Trans Pacific. What are the big trends you've seen in the numbers? Are we seeing. This is where I'm really interested because then you go into depth, into where the containers are entering the U.S. are we seeing any change in how that east, west coast balance and just maybe a quick thought, you touched on this before, but how the Middle east is changing that balance?
[00:31:27] Speaker B: Yes, Mike, we're seeing changes. They've been going on for a while and we're going to continue to see them.
You know, two thirds of our boxes originate in Asia and a consistent shift has been kind of the entry point. You know, it's really been going on for decades and it's driven by cost economics.
You know, if you, you know, the, the simple reality is water miles are cheaper than, than land miles. And you know, in the end, the cargo in containers correlates pretty, pretty accurately with where people live. And if you just kind of look at the mainland of the US and just kind of measure, you know, where the population is, only, only 24% of the mainland population live closer to the West Coast, 76% eastern Gulf Coast. And yet in 2025, 44% of the containers came in. So I'm not suggesting that that's going to balance out. Clearly there's a transit time advantage of a week or so and demands that. But it has been a consistent shift. It stepped up with the Panama Canal where three times larger vessels could go.
And I think over the last eight years, it's been about 40 basis points a year. And I think that'll continue probably a little bit less. Another thing driving that shift is really kind of on the Asian side. The origin point in Asia is moving westward. And you know, if you look at the nautical distances, any, any distance, any point west of Singapore is actually closer to the US east coast via the Suez Canal than the Panama Canal. And of course, the Suez Canal, you know, has even less constraint. So you're going to see those subtle shifts continue to kind of. Kind of play, you know, places like Vietnam and Thailand, you know, significant growth. You know, it's closer to get to the east coast via the Sue.
So those are trends that are driven by cost economics, and I expect they'll continue.
[00:33:37] Speaker A: How would you describe this year's peak season, John? Well, how does it compare to previous years we touched on earlier about.
It seemed like we had a whole load of front loading and then people were reacting to that, but then rates took off. So it's been quite an unusual year in that sense.
[00:33:51] Speaker B: Well, it certainly has, and front loading has driven that. I guess I'd make the point, though.
While it's been different than previous years, it's been a long time since we've. We've really had normalcy. So, you know, you have all of these different movements, and we all kind of are aware of the direct impact of this. One of the unfortunate, you know, perhaps even bigger impact of all of these catalysts and the tariffs being a key one, is that they inject uncertainty and even chaos into the system. You know, container shipping works most efficiently when everything is consistent and predictable. And one week is kind of like the last.
You know, just for instance, with the issue of tariffs, you know, you have people out there that make decisions because they think, perhaps rightly, the tariffs are going to increase. And there are others that think, well, you know, there's a chance they'll go down. So you have these diverging opinions, you know, both, both with the carriers, frankly, and the shippers. You know, everybody has to kind of adapt, you know, their side to what they think is the most rational approach. But, you know, tariffs have just thrown a lot of chaos into the system. Chaos in the system.
[00:35:09] Speaker A: So this is risk, White House risk. Then this is another risk. Did we touch on that before? It's what comes out of the White House on a Sunday night.
[00:35:17] Speaker B: Yes.
Not. Not even official White House. It's what's in social media that, you know, has people scratching their heads. Is this real? Is this, you know, so, so, yeah, it's, it's.
It's been a long time since we've. We've had normalcy, and I welcome. When we return to it, I do think we will get back to it. But at the same time, we're living in a different era of container shipping. I think that era changed permanently with the pandemic. I broadly say prior to that, it was probably advantage shipper. Right now, I'd say it's probably advantage carrier.
And the carriers have Learned obviously the significant ramp up in profits during the pandemic was a giant roller coaster. And right as that was kind of falling off the Red Sea situation, another smaller version of capacity constraint. And we're now kind of in what's kind of a bit of a third hump up, if you will, in terms of earnings driven, I think by the war and what it did with fuel and all the dislocation that it caused. And all of these are thrown into a system and their disruption that was bad for, for bad for shippers and good for carriers.
[00:36:40] Speaker A: Is this new era, John, is this a new era where we have as some people on some guests, I'll name him, Nils Rocher said this former liner executive himself, he thinks that it doesn't really matter what happens on supply. Carriers know how to, how to balance supply and demand to an extent that they're never going to be making losses again. Do you agree with
[00:37:05] Speaker B: largely, I certainly don't think they will be back to the losses that were consistent. I mean for the four years like rate wars.
[00:37:12] Speaker A: No more rates wars then?
[00:37:15] Speaker B: I don't think so. And I think the discipline that they have and the kind of the forced experiment of the pandemic had them slashing capacity.
It ended up being a little bit more than demand and they always stood kind of in front of that. So I think the, there's a new learned skill of the impact of controlling capacity. And of course the alliances give them an ability to fine tune that that they wouldn't have if they weren't in alliances. When you have 20 ships together and weekly service, if one of them comes out, that's fine tuning and reducing capacity 5%. If those 20 ships are made up by, by four different carriers each with five ships, you're not going to find any of them that's going to say, well I'll take one of my ships out, cutting my capacity 20%.
It's a subtle distinction, but it's one that really has worked to the extraordinary benefit of the carriers.
[00:38:23] Speaker A: Maritime policy more broadly. You've been on this podcast and we've been in this in a bit more depth. So just a quick summary. We've talked about the Jones act, the U.S. fleet shipbuilding, bringing maritime back to the U.S. essentially. And then there's this bunch of measures aimed at China as well. Are you still seeing any positives from this administration? Because earlier I think it was last year we spoke, there was a little bit of optimism I sense from you.
[00:38:48] Speaker B: Well, there's certainly been a lot of talk about maritime initiatives growing Our merchant marine growing our, our maritime infrastructure.
Unfortunately, there hasn't been a lot of action that really has backed that up.
And actually more concerning to me, there have been actions that run counter to that.
You mentioned the Jones act waivers. There's now been three Jones act waivers that I, and people that know the facts believe they were kind of nonsensical, that didn't have the impact they have, but we still have them them. And so that, you know, the Jones act is the very pillar of our merchant marine and somehow that we're going to build our merchant marine by constraining the Jones Act. And not only was it a nonsensical waiver that doesn't have any impact, sadly,
[00:39:46] Speaker A: this waiver, just to explain to people who don't know. So the waiver was brought in because of what was happening in the Middle East. Right. So it was like to reduce costs essentially.
[00:39:54] Speaker B: Yeah. The claim was that without the Jones act we could help, help bring down gasoline prices. And again, it's nonsensical because only, only 6% of gasoline consumed in the US moves by tanker. Almost all of that to Florida because Florida has no pipelines, pipelines is much cheaper.
Florida also has some of the lower gasoline prices in the US So it's nonsensical even at the beginning, but they put that in place. You can't really see any impact. Fact, you know, even when gasoline is moved by tanker, if you go through the numbers, it's about one and a half cent per gallon, you know, when it moves by tanker and only 6% moves by tanker. So it's really an inconsequential impact. And yet it was put in place and it's been extended a couple of times.
The, the worst impact of that, not only in terms of the it being nonsensical, but it kind of becomes a, to a lot of people that private industries that are investing money, you know, in shipyards and expansion, it's a real negative because all of a sudden, you know, people that are investing in that, you know, all of a sudden they're kind of what I call kind of an 11th hour risk. They say, wait a minute, you know, what about these waivers? Because if the Jones act were to go away, that would make, make these initiatives non economical. And so you're throwing kind of a grenade into the very people that you look to support.
Things like, I mean the steel tariffs, for instance, I mean building ships are combining labor and steel.
I've written on a number of articles that if you're going to have steel tariffs Have a mechanism where any steel that goes into building ships in the US or containers get some sort of rebate from that, you know, to have a 50% tariff on steel and say you want to start building more ships. Again, there's an inconsistency with a lot of kind of ad hoc programs that make no sense. And don't get me started about the notion of building battleships which you know, are kind of an economic nightmare there and exactly the opposite direction that, you know, one should go in. So, so yeah, I, you know, the Jones act waiver and the lack of real action raises some genuine questions. I mean, for instance, this crazy China ship fee program was really kind of the drumbeating on that initially was China is hurting our maritime industry.
You know, we need to penalize them. And they said, well, some of the money, you know, we can use some of the money to go into a maritime trust fund.
In remarks that I filed, I said, look, if you're going to say that's the reason you're doing it, all of that money has to go in. So it seems like they're kind of using maritime as a talking point but not really serious about following through.
[00:43:04] Speaker A: This is where I've got.
I agree with you there, John. I mean I was just thinking as you were talking about this consistency of policy and how difficult we've seen this on tariffs in whether you do China plus one and stuff. We don't know how long the tariffs are ever going to last. Hard to make long term decisions. But on the maritime policy, sometimes it feels like things are happening but they're like they're bargaining chips. And I don't know if this is in that category. A couple of big stories about Costco, which is state owned Chinese container shipping line, allegations of spying by their ships from the Trump administration. We've also seen the Federal Maritime Commission, which is more like a lever of the State Department is how it's been explained to me than it used to be at least. Are these just shots across the bows as part of a bigger US China trade war in your view?
[00:43:55] Speaker B: I think it's a little more latter kind of shots across the bow. There have been some allegations with with China has disputed going back. There was a case a number of years ago where Cosco ships were pretty close to a military facility in Long Beach. It is known that there's a big overlap between China commercial shipping and the Navy, but there's nothing been proven. More recently, one of the Jones act waivers had a Costco ship going into I think Tampa Bay and the route that they took was going right next to, I think it's MacDill Air Force Base, which is kind of a super sensitive area. Whereas I recall a lot of the drones are kind of piloted from there. And there was allegations, but again, nothing has been proven.
There has been a recent case where some fee hasn't been paid by Costco, a relatively minor fee, and the FMC recently came out with the strong warning that they need to pay it and pretty significant penalties. There was even a post on LinkedIn by the new chairperson of the FMC that was a little surprising, kind of somewhat political.
My hope is, I think the FMC has a very legitimate role in looking at the interest of American shippers. I do hope I, I would not like to see them become more political. In the past they've been an agency that just kind of looks at the shipping laws and, and, and kind of measures those and, and I, I, I, I wouldn't like to see them become part of this, you know, political view. Kind of almost this, you know, what seems to be, you know, directed at, at China.
[00:45:52] Speaker A: Thank you, John.
We were actually delighted to have Laura DiBella, who's the new FMC chair on the Freight Buyers Club. And she did explain in that interview, which I'll post in the notes and you can maybe see on screen if you're on YouTube or Spotify, she explained the relationship, how she sees it, between the FMC and the Trump administration and the State Department.
So please do check that out out. Jimmy, on screen for those watching is your chart of Far east and North America volumes. You say the trade is normalizing what's happening and what happens through to the end of the year.
[00:46:29] Speaker D: Yeah. Okay. So from predictive analytics perspective, and that means at the aggregate trade level, what I saw was I had a predictive model that was ongoing in 2025 and I use that model continuing to 2026. What I observed is in the earlier part of 2025, the actual volume fell below the predictions, obviously because of the tariffs and so on. But towards the end of 2025, actual volume actually moved back to the prediction line.
And not only that, it followed the prediction line well into July 2026.
So from that perspective, it's very hard not to conclude that actually, despite all this talk about front loading and AI driven demand and so on, at the aggregate level, it seems that the trend is just moving back to the baseline before tariffs.
I'm not saying that there's no front loading, I'm sure there is. But at the aggregate level that quantum doesn't seem to comes in beyond the marginal error.
So my conclusion is still that actually a lot of the growth we saw this year earlier this year was actually just moving back to the baseline and it most likely will continue until the end of the year. And so for the whole of 2026 my predictions for Pfizer North Africa is 5% around 5% year on year compared to 2020, sorry, 2026 and 2025 is about 5%.
[00:48:12] Speaker A: Jimmy, thanks for that. Far east to Europe looks very different.
You've got it on a new higher growth path since the US tariffs last year. So US tariffs had had these domino effect right across all of these other trades. John took John it before. We've had Nigel Pusey at CTF guess on here explaining how some of those other trades grew that far east of Europe up 12% so far this year. How long can that last?
[00:48:39] Speaker D: I predict that it will last until the end of the year. We are in a different growth trajectory that was posed by the tariffs. A lot of Asian exporters at the beginning of 2025 didn't find it possible profitable to sell to us. So they had to find a new market. And John mentioned about Africa.
I saw the same thing happen for Latin America and of course Europe.
So I think the Europe trade will continue at this much higher growth trajectory into the end of 2026 and 2027 as well.
[00:49:13] Speaker A: And the Gulf, you say the hit to trade from the conflict has been offset by other trades this year. But there's little buffer for 2027. What happens if hostilities carry on? They might well do.
[00:49:23] Speaker D: Yeah. Well, yeah.
So from my models and so on, I'm looking at the Gulf hostilities could affect almost up to 6 million teas per year in 2027.
So my preliminary prediction for 2027 if you like it now is a range of 2% to 5% growth over 2026. Right. And 2% is the low range. If the, the hostilities continue and full blown effect and if things normalize pretty quickly then maybe closer to 5% year on year.
[00:50:02] Speaker A: Jimmy, that's quite close to what BIMCO is forecasting. How is your.
What's different in your outlook from everyone else's? What makes you think you'll be more accurate? Why should we listen to you if I can put it so.
[00:50:14] Speaker D: Good question. No, no, no, good question. Why? Well, I have actually since about July I've shared my global trade predictions month on month until December 2026. So you go to my website, to my LinkedIn post, you can See that my accuracy actually has been quite on point, about 97, 98% every single month. And so I'm pretty confident that it will continue into December 2026 and into 2027 as well.
[00:50:42] Speaker A: What happens then? Bimco have got this container fleet growing by 9% next year. Big order book.
If demand's only 2 to 5%, what, what does that wave of new ships do the market? Are we, are we still going to see big profits for the lines?
[00:50:58] Speaker D: Okay, to me, I mean, to be upfront, I'm more a demand guy and also much of a supply guy. But I think it boils down to this.
Is there, will there be factors that will absorb those capacity next year? Like in this year? Right, right. The, the disruptions, the congestions this year absorb a lot of that?
I don't think so.
[00:51:19] Speaker B: Right.
[00:51:20] Speaker D: I think there's, there's enough research out there, good research by people like, you know, you mentioned about Lionelitika. So the founder is Tanhua Ju, who has been on your podcast. So he has got good research out there that concluded that a lot of the congestion this year due to the weather should not repeat next year. It's not structured around. Right.
I think Ellen Murphy Sientel concurred to that as well. So then on top of that, we are seeing, as I mentioned earlier on, all the ships coming through Suez again, and if that becomes almost like the norm, then you have at that capacity been thrown back into the mix again. Right. So if demand is more or less 2 to 4, 5% and you have this capacity now being released, it will have an impact. I think it will have an impact. It will start to bite and profitably, most of it will take in.
[00:52:17] Speaker A: John, you talked about this before. The suspension of the US port fees and China Link ship runs out 9th of November.
How important is that deadline for you? And more broadly, when you're looking at the US China relationship, how does it affect your analysis of the container trademark?
[00:52:34] Speaker B: Well, we are coming up on that deadline. You know, the USTR suspended for one year. The ship fees. I mean, this was the second round. The first one were even more ridiculous, but it was suspended for one year.
Despite what Secretary Besant said, that has no effect on this. You know, it actually has to. By law, the only change would come from a Federal Register notice.
So what's surprising to me is we're a month away and we haven't heard that.
Strikingly, it seems like it's inappropriate for the administration not to say anything because you now have ships that have probably started voyages. And if you're going to actually impose it, I think they deserve to know that my expectation is probably at the last minute it, it will either be extended or quite frankly, maybe even just go away, because I think it doesn't make any sense. I think there's a realization more than ever among some policymakers that all of these tariffs are just a burden on American consumers and the American economy.
We also have data to show that China has adapted. You know, their exports are still strong.
You know, it's not impacting them. You know, they, these tariffs, you know, they, they've. They've kind of adapted.
So on top of that, you know, we now know they have, you know, some, some cards in terms of the rare earth. So if these fees were to go in place, obviously it be extraordinary escalation. China would immediately respond with, with in kind.
And, you know, one of the things that the sad real. The facts to me are kind of showing that you look at all of these tariffs and broadly, they haven't really done much in terms of imports. They have hurt our exports. That's exactly the opposite of the way it's supposed to work.
One example, for instance, I looked this summer, I think, in July at the customs data, and compared that to July of 2029, you know, 2019, rather before the pandemic. And sure enough, containers inbound from China were only 35% this July, you know, down from 42%, you know, July of 2019, pretty meaningful thing, but probably less than some people would want. But if you look at the collective inbound containers from Vietnam and Thailand, number two and three, they were up almost doubled from 9% to 16%.
In fact, if you look at all of the precise numbers, and most of that delta is final assembly in China, very legal, that the administration is now suggesting that that's an illegal transshipment. It's not. That's what the law allows, present law. And so if you look at the precise numbers from this summer versus 2019, those 20 top three are a little bit more than they were. So we're kind of like trying to dry ourselves off with wax paper. It's not really having much of an effect.
But I think there's a realization that more than ever, as all of us on the call know, all of these costs are burdened, you know, paid for by Americans. So to get to the incident, I don't think anything will happen. I think there'll be some announcement that something has been reached.
You know, Costco said last time around a year ago that they weren't going to change deployments.
I think, you know, China is, you know, again, if we do something silly like that, you know, it will just be a further burden on our American economy.
[00:56:35] Speaker A: I just want to make my point here because if those 9th of November fees go in, I will eat my hat. There's no way that's happening. No way that's happening around the mid 10s.
That wasn't there. That just happened to be there. That wasn't a plan.
Where are the big risks you see next year?
And how, how should shippers, freight buyers, how should they balance resilience and efficiency?
[00:57:02] Speaker C: Yeah, balancing resilience and efficiency is a, is a tough thing. Right, because you're effectively saying, what can I invest in that will make my supply chain more effective?
I think that's a difficult thing to look at. And I would say it comes down a little bit to the architecture of your supply chain. Your architecture of your supply chain is basically the routes you use, the ports that you're going through, the modes that you're operating, the way in which your supply chain comes together and the intersections of those points.
But more than that is also your ability to make decisions quickly. And I think that's something that's very, very different today than it was pre pandemic. As we've discussed the change in the way in which the market operates, I think your ability to sense what's happening, to see what's happening, to understand the way in which stress exists in the global environment, the operating environment, the way in which you can understand trigger moments which mean you have to change something, but then to do something about it?
So I think the way that I would characterize it is we're not trying to predict what's going to happen next year. We know that next year is unpredictable. But can you do something about it quickly? Are you set up to be able to react quickly, to be able to understand it, to be able to make decisions quickly, but then also to implement those decisions quickly? And those are different things. So I think that's the thing that will separate effective supply chain in 2027.
[00:58:38] Speaker A: So thank you all once more and thanks to the Frankfurt Express Group for sponsoring the show. You can find us on all major podcast
[email protected] and of course on video on Spotify and YouTube. If you enjoy what we do and want us to keep this content free, please do take a second to like, subscribe and leave a comment. It really does help us keep things rolling.
And that's it for this episode. I'm Mike King. This is the Freight Buyers Club. See you next.
