[00:00:03] Speaker A: Coming up, rates on the move, weather turning against the supply chain, a war that isn't easing and tariffs that keep shifting plus carrier reliability heading into peak season.
[00:00:15] Speaker B: Volatility is at the core of the relationship, is at the core of what's happening.
[00:00:19] Speaker C: They're staying up there in part because of these levers that are being maneuvered to keep pricing high.
[00:00:25] Speaker B: I have friends that have been recently and they are selling the Christmas decorations.
[00:00:29] Speaker C: We've had to pivot to some of the shipments. The Woodrun Ocean on air freight.
[00:00:33] Speaker A: Are we saying that some people are maybe making the most of this or profiteering?
[00:00:36] Speaker C: We've seen an incredible increase in cost for shipments coming out of India and even tougher time getting capacity there.
[00:00:43] Speaker B: I'm going to take another crack at a saying or a provision is that I don't think cars will ever lose money again over a year.
[00:00:58] Speaker A: Hello, I'm Mike King. Coming up, I've got two of the best guests in the business. Nils Rocher, who spent his career on the carrier side at cma, cgm, Maersk and PIL and now run Sullivan's advisory. Welcome back, Nils.
[00:01:12] Speaker B: Thank you, Mike. Pleasure to be here.
[00:01:14] Speaker A: Always welcome. And he is joined by Mark Chadwick, president of the Global Shippers Association. He represents some of the world's biggest cargo owners, from appliance makers to energy companies.
So Mark's basically one of the industry's heavyweight buyers negotiating long term ocean and air freight contracts on behalf of these major global brands. And he's based over in the US but he sounds a little bit English. Welcome back, Mark.
[00:01:39] Speaker C: Thanks. Absolutely. See that? Not losing that, but yeah, thanks. Great to be here.
[00:01:44] Speaker A: Right, Great to have you both. We'll get into all of this shortly. But first, some housekeeping.
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 very proud to say that in 2026 we're averaging over 20,000 downloads a month across podcast platforms. We're now chasing 10,000 subscribers on YouTube and, well, you can help hit subscribe, hit follow. Please drop a comment telling us what you want us to cover next. And if you fancy sponsoring a show full of people who get unreasonably excited about container rate supply chains and air cargo market, well, this is what that looks like. Over to Damerco Express Group. Literally the best possible partner you could have. If you're in the business of moving cargo out of Asia to anywhere, if your supply chain runs through Asia, why not work with a Company that has been connecting Asia with the world since 1971. De Merco Express Group.
Let's get cracking then. Nils. Mark, you both appeared on this podcast last year and you both made presient calls. Mark, you said geopolitics would be the defining factor for 2026 and that the market would be a roller coaster which has held up rather well. And Nils, well we're going to listen to what you said because it went against pretty much every prevailing forecast I was hearing at the time.
[00:03:12] Speaker B: But I think 2026 might still be a good year for the carriers if not breakeven of course, but I'm even saying a little margin.
Take me on that next year we can all see together.
[00:03:22] Speaker A: So I guess Nils, congratulations you've been so shy and retiring about sharing your accurate forecast as well as barely appeared on your feed on social media.
I can't believe how modest you are.
But seriously, you didn't predict the war coming. Your point rather was that container shipping supply and demand have almost decoupled or rather the difference between supply and demand growth is not really a very good guide to where market might go. Please explain your thinking on all of that.
[00:03:53] Speaker B: All right, yeah Mark, of course I could not predict a war though I guess when you look at history you should always anticipate a war. On my bingo list though at home I had the war will spill over into EastMed which happened unfortunately with the ships attack and everything. But coming back to what you mentioned, the dynamics are fundamentally changed. That's what I'm advocating for some time or now. And yeah okay 2026 proves me right but I think more interesting will be 2027.
In short what I'm saying is supply do not matter anymore. There are ships you see more and more coming. They won't be used anyway because we don't have the infrastructure in the ports to use that. That's one thing. So supply is a non issue, is a non event. What really matters is demand right now in the new era of shipping post Covid when you have a demand signal anywhere on any trade it's fairly quickly seen of course and acted upon. What changed again compared to before is that now we have learned as carriers that we can pass a GRI of $3,000 $4,000 a T in a week and it works.
When you have that it will take some time to go down and in the meantime within the quarter that those rates or about will be in place cars will make enough money to sustain the heavy loss of Q1, if you want to call it like that. And of course the black hole is going to be Q4, so I'm going to take another the crack at a saying or a provision is that I don't think cars will ever lose money again over a year.
[00:05:38] Speaker A: Wow, a big call. We're going to come back on some of those charges. I'm very interested in the lag, the profitable lag on some of them. You mentioned GRI's there, but we've seen this on bunkers in the past as well. Mark, your call on geopolitics being the defining factor for 2026, you haven't been all over social media, but it has aged rather well.
Did you expect the year to be quite this bigger roller coaster?
[00:06:00] Speaker C: No, not at all. I mean, when we were at tpm, we were looking at carriers. It was looking pretty bleak as we were building up to TPM for the first part of the year. Then we were all at tpm. The war's kicking off literally while we're there. And you know, it was clear very quickly that prediction was going to age pretty well. But you wouldn't expect we'd still be talking about the war. There's no end in sight, but we see an escalation and then on tariffs, tariffs get thrown out by the supreme pre. Hey, here's some new tariffs. So that kind of volatility I think even exceeded what I was thinking for the year and it just sets the precedent now for the next six months plus two years until maybe we get to some normalcy at some point.
[00:06:50] Speaker A: Yeah, well, there's always a few winners out of all of this disruption. We'll come back to tariffs a bit later. Let's look at some results. We just had some right out at the end of last week. Mayors reported strong second quarter results. Revenue up 20% year on year to 15.8 billion. Also upgraded its full year guidance for the second time this year. Underlying operating profit now expected at 4.5 to $6.5 billion, up from 2 to 4 billion.
Hapag Lloyd, its Gemini cooperation partner, said separately that it took a roughly $600 million hit tide to the Middle east conflict, but profits are still pretty decent. Now. Interestingly, both carriers flag pretty much the same warning. Congestion at ports, limited trucking, road and rail capacity are creating bottlenecks that could lead to delivery delays and higher freight rates. Mark, what have these carrier profits look like from your side as a buyer and are you experiencing these bottlenecks at all at the moment?
[00:07:49] Speaker C: I mean, it's not the best. Look, we're very Happy that the carriers are profitable. The beginning of the year outlook of there being serious issues for the carriers wasn't something that we were excited about. We need healthy partners that can invest in the industry that we all rely on so much. Shippers, I think have a responsibility when there are surprises to help contribute to some of the increased costs like for the bunker fuel, for some of the security costs that have increased.
But when you see profits moving higher and higher and shippers are faced with the challenge of we can't pass all that on to our customers, otherwise we're losing orders, it does seem a little bit skewed too far in the carrier's favor. And we're looking for partners that we can find the right balance. We don't expect people to absorb crazy costs, but also not pass on this new opportunity for profits.
[00:08:45] Speaker A: Find the right balance. I mean if it's gone beyond that balance, are we talking about FMC involvement beyond that? Is that how far things have gone this so far this year, do you think?
[00:08:54] Speaker C: I don't think so. I mean even, you know, I don't think that ever ends well for anybody bringing the government into things. We need to try and find the right solutions together. But you know, we will favor the partners that act like real partners in the years to come. And that's something that we're definitely keeping in mind as we look to the next year's contracts.
[00:09:15] Speaker A: Feel free to tell us what your carrier spread looks like. But are we saying that some people are maybe making the most of this or profiteering and others are being solid partners that you'd expect them to be?
[00:09:24] Speaker C: I mean, I think certainly the profiteering is somewhat widespread, I would say as everybody.
But there are degrees of profiteering and it's the same with the forwarder base. I mean we've, we have some forwarders that have really partnered with us and done a great job and others that have really tried to milk this for every last dollar they can get out of it. And those are the ones that we won't be working with in the future.
[00:09:48] Speaker A: Nils, give us some secret sauce from the carrier side, will you? They don't really highlight how much surcharges have helped on earnings calls. But how do you turn a share charge? Whether it's bunkers, peak season, low water storms, how does that become a profit?
[00:10:05] Speaker B: Well, I, I refuse to handle any secrets obviously, but I think, you know, I'm sure you have the chart. We can take it from, from the most people so and, but I will talk to. It is basically you know profits Q2 25 versus Q2 26. Ryan Musk. If you look at that, okay, they have an increased revenue through pricing of let's say 100 points. Right. And, and they did a bit more volumes. So let's say 110 points or 120 points. Okay, fine. Next to that they have 60 points negative which is a fuel price effect, a bunker price effect. They have another point two which is port and terminal handling charges and then they have maybe a point 40 points down also on timing and other matters such as of course the logistics they had to deploy for the Red Sea almost in reality situations. Fair. So when you look at the numbers, it's not a crazy spread. And you could say that at least the cost, the extra cost they had in this Q2 is half of the extra revenue they made. Is that crazy to say that, you know, a company, not a car, let's say a company has costs that increase by again X and they're making 2x in profits.
I don't think so. In revenue. Sorry to have X plus in profits. I don't think so. So if you want to take a. I don't know specifics. You know, Mark of course knows it better than me even. But I think I like the point that he made on finding the right partners. I hear a lot of things in the markets on both sides of the aisle of some people profiting, some people, you know, coming back and or reopening a BAF surcharge. So bunker adjustment factor that has been recently discussed. I mean there is a mixed pot in there. So definitely find the people that you want to work with. That being said, do you also want is an old discussion but do you want an all in rate or do you want a small pof? Right. Basic ocean freight and then sold charges for charges. Right. Again, it's a pattern that we need to change in the industry both ways, the buyers and the sellers. I don't think it would be solved. And what we see right now is just of course an exacerbation. So an intensification of that old relationship.
[00:12:15] Speaker A: Okay, thanks Nils. Great explanation. Okay, let's look at this in a different way. If you're watching on YouTube or Spotify now, this is what these profits have looked like in terms of spot rates. Courtesy of Zanetta. Big increases across the board from April, May. But while Asia Europe is now softening, rates from Asia into the US are still rising. Mark, what are you seeing on demand in Europe? And everyone was telling me the US peak season was going to finish early but rates they're still going up. I mean they're up by big single digits to the U.S. east and west coasts last week. Are these inventories, are they ever going to be full?
[00:12:51] Speaker C: Yeah, I think for the US this is lasting longer than expected this peak. But I think by September we're going to start to see these rates going down. I can't see the. Our inventories at least for most of my shippers are pretty well stocked for the rest of the year. So we are going to see a drop in demand certainly in the fourth quarter.
Europe a little bit of a different picture E Commerce with the de minimis rules changes there. Some air freight capacity has come back into the market lowering air freight rates. Some shippers may be looking at taking advantage of that moving from ocean back to air. So that may have had an impact on demand there. But I think we need a couple of months to really work this out.
[00:13:33] Speaker A: Nils, are you calling this an early peak season or are we seeing the big two trades diverging right now? And it depends where you look at how you look at it and where you look.
[00:13:44] Speaker B: All right, listen for discussions. I have again with the industry. I think it's fair. Mark is right to say it's complicated. I would decompose a bit saying that definitely what we have seen in May seem to have been restocking but something different happened at least in the US market.
June, July it may be well that people have shipped cargo early in the sense of we all saw that the Iran war was not going to be a five weeks special operation and will dwell on and basically that will mean that the branch will go up and of course again surcharges et cetera will come to. To the. To the shippers. So I wouldn't be surprised that when we look at it afterwards we say okay maybe that period was centered around shippers shipping early to avoid some, some. Some cost which would be very logic and make a lot of sense to to me at least. Why does that continue into August? It is even difficult to say Even more some anecdotal elements I don't know Mark, if you recently have been to Costco but I have friends that have been recently and they are selling the Christmas decorations, the bowls and everything and that since July, June, July.
So definitely there have been some maybe a season worth of cargo that has been pre pawned because normally that kind of things ship closer towards the October, September, October and we see that. I agree with Mark assessment that we should see an end of it coming into September. There won't be two seasons front loaded. There won't be, you know, the path zero and the spring stuff coming already in December that I don't see happening just because it's too much capex, it's too much money for the shippers and the inventories. Exterior would we see or do we see the big trades diverging?
Yeah, I think, you know, without pretending to be too smart, I see Europe economies and the US economies being slightly different. When you are talking with people in the US there is a lot of enthusiasm, positivity where, you know, a small or medium sized company will tell you that they are growing 5, 10% this year and planning to do some next year. So things seem to be quite robust or resilient in the US And I think that sentiment made that the retail had to restock. The retail has to provide and things are going quite well in Europe. It's not the same. We are having wet towels on front of our air blower to cope for the fact that we can't pay for an aircon, nuclear power plants are stuffed by jellyfishes or water temperature being a bit too high and our good environmentalist friends there protesting everywhere. So I think those are very two different dynamics overall and maybe part of the reasons for which the volumes are different.
[00:16:40] Speaker A: A little bit of politics there from Nils. I'm sitting here sweltering so I definitely can speak to the heat mark. That was quite interesting. So we had John Gold on from the National Retailers Federation and he was talking about a really early back to school season, but nil's there. He's talking about people really bringing goods in very early even for the holiday season at the end of the year. Are you seeing a bit of that? And was any of that tied to uncertainty around tariffs?
[00:17:08] Speaker C: Absolutely, yes, we've seen that as well. Tariffs played a huge factor for us.
The tariffs have been on and first they were on, then they were off again, then they're back on, which I think caught everybody not completely by surprise but to the extent that they were brought back and the speed in which they were brought back definitely had an impact. And so we've been shipping very, very early.
That's why I think it's surprising that we're still seeing increasing rates at this time on the Trans Pacific. But it's gotta be short lived because warehouses are stuffed and demand.
I mean it sounds crazy to Europeans but gas prices in the US we consider very high. You know, $4 a gallon is terrible over the year and so I would imagine demand here certainly for the Christmas period, it's going to be pretty tough. So that's going to have an impact on inventory too.
[00:18:05] Speaker A: Just looking at that divergence in a slightly different way. It's not just by Asia Europe's TransBAC. You also need to say mind the gap between Trans Pacific Spot and contract rates. Torsten Hartman, senior director of trade management of the Transpac at Hapag Lloyd, told us a few weeks ago on this show that carriers in terms of contract rates are barely at break even. So all the money's been made on the spot. Mark, how reliant is Global Shippers association members? How reliant are they on spot bookings versus contracts? Presumably you try to avoid as much reliance on the spot market in this type of market.
It must be quite tough if you are. If you do get caught out, especially for SMEs who haven't got a lot of buying clout.
[00:18:48] Speaker C: Yeah, we get exposed to it to a degree which obviously try and minimize as much as possible with our contract rates. So we're fixed for a year, but we get exposed to it. If we have surprise volume that we didn't expect, if we have volume that's pulled in early and exceeds our mqc, then we're exposed to the spot market. And yeah, it's pretty terrible. The comparison to contract rates is insane. I mean, it's a huge difference. But for SMEs, yeah, I mean, it's killer. How can you plan a business when the pricing can be 2, 3x what you're expecting? For us, we're covered. I'd say probably 80% of what we do is managing to go on contract rates. But for that 10, 15, 20%, there's certainly a huge difference to what we're paying for the contract.
[00:19:37] Speaker A: I think in some ways this is probably like a new normal for container shipping. Obviously, every time we get this disruption, as we've been discussing, rates go up, profits go up. Let's have a little look at what this means operationally.
Again, if you're watching on YouTube or Spotify, you can see this animated on screen now. Global on time carrier performance fell for the second month running in July, down 4 points to just 33%, according to Zanetta. So just to clarify, a vessel call is on time if it arrives within plus or minus 24 hours of its pro forma birth, arrival date and time.
Basically, we had a big slump in on time arrivals in February. That's when the war broke out in the Middle east at the end of that month. Then there was a recovery through spring into May, we peak performance of 39% on time services then and then.
Since that point, things have been sliding.
Average delays have sort of moved the same way, but it's inverted of course. So they've gone from 3.5 to 4.2 days.
Essentially more vessels running late and delays compounding. Just a quick look by carrier. The spread between the best and worst performing carriers widened again in July from 44 percentage points in June to 49 again according to Zanetta. Every carrier in the ramp rankings except zim declined between 2 and 13 points with, hmm, the sharpest faller down 13 points to 14% on time. Maersk still leads the table, but slips slightly to 57%. Gemini partner Hapag Lloyd second place. Then CMA CGM1 high sits at the bottom 8% on time and an average delay of a painful 7.3% days.
So Mark, how important is reliability for you? Is it one of those metrics that actually drives carrier selection or does price still win when it's close? And maybe you feel slightly different about this this year because of what's happened this year.
And do those numbers feel right to you? I mean, there are different ways of calculating this C intelligence use a different, different metric than Zanetta. I don't want to get into the mechanics here, but does this all match up what you're seeing?
[00:21:51] Speaker C: Yeah, those numbers definitely sound right. That makes sense on time. Delivery in all aspects of logistics really depends on how you measure what you've alluded to. And if you don't include blank savings, then there's another week in many cases that you can throw into the mix. And if you're not in the high 90s percent, which maybe will never be, you can't expect to see a lot of volume moving, especially from air freight to ocean freight, which I think is a big opportunity.
We can't move that stuff unless we get into the high 90% from air to ocean because we need reliability.
So the difference between somebody who's 90ish percent and 70%, it makes no difference. You can't count on 90%.
That 10% gap could be killer for a customer. So at that point they're all kind of the same and cost ends up winning the day.
I don't think we'd pay more to be 10% more on time if we're still 10% late.
[00:22:52] Speaker A: Yeah, I get your point. Okay, so Gemini, Gemini cooperation. This is the Meir Capag Lloyd combination.
Their big selling point was they'd promised over 90% on time arrival. Now Zanetta's calculation they haven't hit that but it's semantics really.
They were according to zanetta, they were mid-60s through Q2C. Intelligence has them on target.
Is what Gemini's doing here actually what shippers want then Mark? Or is it a numbers game? It seems to be the latter for you based on what you've just told me.
[00:23:21] Speaker C: I think so. I mean it sounds, it's nice it's better to. I mean in a way it's better to be 90% on time than 80 or 70% but still that 10% is killer and I don't think it makes until we get into the high 90s we wouldn't call it reliable.
[00:23:39] Speaker A: Nils, do carriers, do they fixate on these numbers? Maybe some of them do but as we've just heard there but. Or is some of this just about marketing or do you see as a competitive advantage? How would a Linus executive look at this?
[00:23:52] Speaker B: Yeah, Mike, you're always too tough on the kios on this one.
But no, actually caios do care and I spend a bigger part of my life to have those discussions about what's the performance of the products and how to improve and what are the trade offs and why are we not taking those trade offs internally. Still likes the so believe me when I say that they care, you know, even if you don't want to believe be there is just a very logical mechanism to have is that a ship that is seven days late is a ship that you don't have it's a week that you don't have a ship departing and in current markets of course cars are doing everything they can to have the ships coming at least you know, be there to load cargo and they are deploying extra means so just for the sake of turn time of the assets and being able to load the volumes and gain market share. Of course they care.
[00:24:46] Speaker A: Now I think that's single figures on time arrivals though. I mean really, can you imagine if you only turned up on time 10%, you know what I mean?
[00:24:57] Speaker B: Yeah, no, definitely. But again that's why when you look at ports in isolation and you make the sum up of that as we are discussing the calculations here to be of course it's a disgusting number. The question is if they didn't add on this extra speeding or this port omission or maybe even a blank sailing on a service to have the ship repositioned on another service, then what would have happened? They would have had ships doing less turn meaning customers less serve a fewer number of customers serve if you prefer and less volume loaded. So even though you could say, you know, 10 or 20% or even 8% seems ugly as hell.
[00:25:31] Speaker A: Yeah.
[00:25:32] Speaker B: But like it could have been worse. It can't be negative. I give it to you. But it could have been worse because ships could have not come back as early as they did in a way and enable a customer afterwards.
[00:25:44] Speaker A: Obviously I'm going to take it very personally that I'm harsh on lines and I'm actually going to stand up for them right now. So if you're on screen now, care to see our friends at lionelitica?
This is one of the factors that gives carriers a bit of a get out clause here. I think to excuse some of those numbers, we've had this big increase in port congestion this year from May to August. Some of the usual characters, Shanghai, Busan, Kingdao, Singapore, Nils, we had this conversation a year ago. Things are now worse. Is this systemic?
[00:26:19] Speaker B: Yeah, it's systemic and it's endemic. Both we have not seen new capacity coming live in the terminals and even taking China at a level that could even be significant for the past 10 years. And that just means that again you can add and throw more ships into the port. And again, sorry if I sometimes I say, journalists say, but you can have the news saying, you know, oh, capacity is coming, order book is so big, don't worry shippers, the rates will break down. I think it's a filthy shortcut to say the least. So yes, and now you have even some big blue CEO advocating for the same thing, that there have been a lack of investment.
It's obvious both on the key but also on the trucking, on the rail, all those aspects that makes that the terminal can function, can have a certain productivity and have the ships turning fast.
[00:27:13] Speaker A: Yeah, that reference. Yeah. So Vincent Kollek, CEO of Maersk. Yeah, it was very clear that one of the problems that carriers are facing is a lack of investment. When they've been buying lots of ships, the ports haven't reciprocated. We're going to do that on a future podcast because obviously it's actually the container lines that own a lot of these ports. So when they say that people haven't been invested well, you know, there's an element of that is, well, why not?
I want to look at this in a different way. Blank capacity. Mark referenced it there a little bit earlier. It's growing far faster than actual fleet capacity on pretty much every lane. Let's look at some lanes from Asia. So Asia, North America, east coast, capacity is up 46% since 2019, but blank capacity is up 215%. And this is according to C Intelligence. We've got similar gaps on Asia, Mediterranean, Asia, North Europe, Asia, North America. West coast carriers aren't waiting for oversupply to force their hands. They're basically pulling tailings preemptively to protect rates. Or that's at least what people are saying. Nils, is that the case, do you think? And should shippers just get used to this or is this how. This is how carriers will always now balance supply and demand?
[00:28:21] Speaker B: Again, always tough on demi?
No, I think the question is most welcome.
The reality is that the dynamics have always been there. So blank settings have been part of how you operate a service. They have been part of how you have to use best your assets, et cetera. I think one of the things that changed and make me say that one of the things that has changed is that you have fewer of the carriers, you have fewer of us and concentration means intensification.
So on the same angle, I'm saying that carios will never lose money ever again is because there are fewer of them, of us that have an action on their own rate individually and they will react further, faster and better to it. Same for the blank settings today. If you have a CoastCo or an MSC blanking on the west coast, that's a huge chunk of capacity that is pulled out by one decided.
So again, there is a mixed effect. When you compare 19 or even before to today, there are fewer carriers on trail lanes, there are bigger ships. So you have both a number of carriers, you have a size of ships that have increased. So obviously a 4000T that I used to do storage planning for that is blanked is nothing compared to a 16,000 at the very end of it. Yes, I think that shippers should get used to it is simply because again, we have grown bigger ships, fewer players and again, volatility is not a buzzword anymore. Volatility is at the core of the relationship, is at the core of what's happening. And you heard Mark before Mark saying that anything below the high 90s is not worth a penny.
So, so it's, it's the game, Mark.
[00:30:06] Speaker A: Blank sailings. How does that affect your operations? Can you walk us through like you get the news off a carrier? This sailing is going to be blank. This sailing is going to be blanked.
How many people does that affect? You're a big volume shipper, presumably quite a few.
[00:30:19] Speaker C: Yes. So operationally the relationship stays between the carrier and our members, the gsa. Actually we don't get involved in the operational side of things unless there's a major escalation. So the carriers will communicate. Hopefully they communicate to the member that there's a blank sailing. Sometimes this is happening when stuff should be moving on the vessel and all of a sudden the, the shippers are finding out it's actually not moving.
Then we just wait for the next one and they just have to basically suck up that additional transit time, which again goes back to reliability.
Do you count that in the on time delivery performance or not? I mean from a shipper's point of view and their customers, it certainly does count. And it just means again, be ready with safety. Stocks have a lag of a week to 10 days in your expected transit time to account for this kind of thing.
And it's a major issue. And I think I completely agree with Neil's point. There are fewer carriers now.
Will they ever lose money again? Probably not, which is a good thing. And I'm not saying that we want carriers to lose money, but there are fewer players and they know the levers now to keep prices buoyant and to maintain what we're seeing now in Trans Pacific.
Rates should be coming down already, but they're staying up there in part because of these levers that are being maneuvered to keep pricing high for slightly longer than would be expected.
[00:31:50] Speaker A: Okay, thanks, Mark. I want to do a quick run through on what's going on in the Middle East. I don't want to be too specific because it dates very, very quickly. As we know this year. I think we've had pieces being declared 75 times or something crazy already.
So broad strokes. Traffic through Hormuz is still very thin. Some carriers are trying to push more services back through Suez and the Houthi attacks in the Red Sea seem mainly focused on Saudi linked tankers at the moment.
There's a few services going back through there, but it's changing really quickly. We've got no final deal at the moment and any deal is going to take a while to process even if we even want something signed. Again, Mark, how has all this actually played out for your members and your cargo that you're shipping? Is it more of what we've just been talking about?
Is it bunker surcharges? Is that the main effect that you're having except for Middle east specific trades? Maybe? Did you lose some cargo back in March? Are you rerouting over land to serve the Middle East?
How's it played out for you?
[00:32:52] Speaker C: The bunker surcharge has absolutely been the Biggest impact for us.
But for the Middle east we've had to diversify to different ports. We have had some freight moved in through Europe ground, which is tricky. I mean you've got to go through Syria.
You need specialist logistics to really get freight moved in. So air freight, we've had to pivot to some of the shipments. The Watergate ocean have gone air freight.
I think one of the maybe unexpected impacts, but it's been really tough has been India outbound from India has been a real challenge because it was already tight before. Capacity was very tight there.
And then this war has had a huge impact there. We've seen an incredible increase in cost for shipments coming out of India and even tougher time getting capacity there. So that's been a huge challenge and it's going to take a while for things to calm down. This Red Sea situation now, vessels moving back into the Red Sea, but with the Houthis, how long's that going to last? I mean it's like every day I'm expecting that to on the news of that stopped again. So huge challenges.
[00:33:58] Speaker A: Anyone who's watched air cargo impact, which I co host with Neil Jones Shah would know. Yeah. That Indian air freight market's also seen some big increases in cost.
Nils, you obviously you talk a lot to carrier executives. They're all your best friends. Come on. We know that's true. How are they looking at making more moves back into the Red Sea? Is there a pathway back to normal at any point this year? Because people, I think one of the big, One of the CEOs said in the results that oh well, maybe by the end of the year, do you see a pathway?
[00:34:29] Speaker B: There is definitely a push internal, sometimes shoulder, sometimes you're on board to resume more savings, if not all through the Red Sea. I think that, you know, what was yesterday is still today and Marx is spot on here is that threat of life at sea.
It's still here, didn't go away. So if yesterday you were coming in front of camera and saying, you know, our safaris are priority, right. And then our ships and then our cargo, then you can't really switch your gun in a month or two or three.
So what I mean by that is the conditions that will be needed to have a scale, scale return to Red Sea, they are not there. And unfortunately, and again, I'm no geopolitic expert, but for whatever we have seen, there is nothing that gives us certainty that in a month we will have peace and in six months we can resume. So that's where it stands what you see right now is some vessels, more and some announcements of services going through. And it's normal because you can fight for so long when you have such pressure coming onto you to say, okay, you're losing ground, you're having more cost, somebody else is going through at least on some services, why not us? Why are we different in the profiling? And there are answers to that. But at the end of the day, everybody has to answer to someone. And I think it's very natural that you see here and there vessels and services. Will that last? Will next week everything not be off? I joined Mark here. I think it can very well flip in the day.
[00:36:11] Speaker A: Yeah, it's very changeable. Thanks both. We'll just take a short break then. We've got tariffs, forecasts and well, I'm an Englishman. What could be better? We're going to look at the weather back soon.
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Welcome back. It's Mike King here and I'm with Nils Rocher who spent his career on the carrier side of cma, cjm, Maersk and PIL and now runs Sullivan's Advisory. And Mark Chadwick who's president of the Global Shippers Association.
Now guys, as, as I trail there, let's turn to the weather. We've got, I don't know what you want to call it.
[00:36:58] Speaker C: It's.
[00:36:59] Speaker A: It doesn't look very good. We've got Panama Canal water levels are falling. The canal authorities cut draft limits five times this year.
This is El Nino strengthening which is having effects at different parts of the world. The Rhine's at record low water. But then over in Asia we've had a run of big storms with our over 2.4 million TEU capacity stranded at one point.
Nils, I don't want to be too English on this because as a Frenchman you probably get bored of it, but let's talk about the weather more specifically. How is it affecting our industry in Europe, particularly low water levels on the Rhine. It doesn't help congestion in those northern European terminals, does it?
[00:37:40] Speaker B: No, definitely.
And we are at levels which really trigger a change in pattern for supply chain. So you have points that are now below 1 meter of water level in the Rhine. So barge cannot operate at those.
I'm in some specific places in mind but no need to them drop. The idea is that basically a barge today of capacity on the Rhine you need about 100 to 150 trucks to compensate for those. It's massive and we don't have that readily available. I mean it's a good news for the trucker associations throughout Europe but it's quite terrible and it will delay the operations in the inlands which means that of course terminals will also get swamped and they were already under tremendous delays for comparison to previous years. So that's just going to get worse. On top of that you're going to have soon fall and winter, lack of manpower and all the good things that makes that this will get even rougher.
We don't have much, much time And I'm actually doing a special on El Nino. I had Dr. Johnson from NOAA's in the USA so methodologist coming to talk with me about what is El Nino and the consequences.
[00:38:59] Speaker A: It may have it on your own channel. Will it Nils?
[00:39:02] Speaker B: Yeah, but I will flip it to you obviously and you know it's just there are so many effects that an NINJA can have in the positive and the negative. And you know you just talked about the storms that Asia is experiencing. Actually you know it's hard to see on a short like a 20 year span a real trend. Are there more? Not really. Are there stronger?
There have been some strong but to say that in average they're stronger is actually not correct. So I'll flip you some visuals for this segment but basically we're going to have more challenging conditions again on an infrastructure that is not ready for it.
This is just going to add up.
[00:39:38] Speaker A: Yeah, I'm actually going to cover this. I'm looking at the bulk shipping for World Grain magazine. I mean there's quite a lot going there as well. Low water on Panama Canal. We've got Black Sea ports are getting bombed all the time where a lot of grain is exported from. None of this is particularly and obviously the harvests are all going to be affected by this weather that we've got at the moment.
Just carrying on on that point. This is the storms in Asia. My good friend Nick Savides in Sea Trade is reporting that carriers are heading back to the Red Sea due to delays because of those storms. So this is one of those push things that we were talking about Nils, about people trying to get use the sewers if they can or where they need to. Elsewhere the US west coast is preparing for more traffic as Panama restrictions are forcing carriers to limit loads prompting some to introduce surcharges.
At the moment though transit numbers around about where they would normally would be. It's more that load sizes are down.
It's a lot of moving parts during peak season. Nils.
[00:40:36] Speaker B: Yeah, and again, sometimes we have not seen this movie play before. We had impacts of that magnitude and it's a bis repetita. But yeah, the timing is just. It's stable for the shippers. It's actually challenging for everyone Today on the 10,000 TU ship location, you may lose 500 TEU for the line to rearrange this cargo for the planet to rework on it, et cetera. It's tremendous work for everyone.
But maybe it will support again this lengthy peak towards September. But I think the worst impact you're going to see if an INHOS continues on the path it is now is actually going to be in the winter.
So wait and see, you know. Let's talk again.
[00:41:21] Speaker A: Yes. Yeah, well, yeah, These things do tend to have a domino effect. Mark, are you, what are you seeing at the moment? Are you seeing. Are you having to reroute anything, Any. Any cargo? Are you getting any new surcharges, any delays?
[00:41:33] Speaker C: So Panama, I think we, we've lived through situation with Panama to maybe different degree, but we've, we kind of know how to handle that. The thing that's really worrying me is, is Europe with the situation, with the ride.
As far as I can remember, we've not seen this before. Nothing like this has happened before. I think the impact is massive and I think it's just starting now. I think it's going to get worse and shipper, I don't think any of us are ready for it. The impact this is going to have on trucking in Europe is monumental in terms of price, access to capacity, delays and this can affect all modes, air and ocean. It's going to be really tough.
[00:42:12] Speaker B: You also have the Mississippi river by the way. Right. That is affecting.
[00:42:17] Speaker C: Yeah, absolutely.
[00:42:19] Speaker A: Not a lot of containers moving on the Mississippi, but again that's a big factor for anyone who's exporting grains out of the US into Asia, which is normally the route they would go if they go down the Mississippi. Panama is not looking great for that trade. Just back on tariffs. I just want to set something. I'm quite interested to know how you process tariffs, Mark. I'll just run through what's actually happened. So there's quite a lot of movement. I'm not going to go into too much detail. China vessel fees are now suspended until November 9th. So not repealed. Paused separately. We talked about this before the wider US tariff regime got rebuilt in July. The old global surcharge expired Replaced same day by new tariffs on 60 countries.
Forced labor was what it was built upon, about as dubious as it could get. So basically the overall rate barely moved. Just the reason that they were imposed changed. Brazil got hit with some big tariffs. USA is reneging on USMCA renewal in its current form. Just to summarise it, but Mark, just tell us how this shift in US trade policy, how does it play out for you? Do you get involved with the actual payment of tariffs? The refunds have been going a lot smoother, by all accounts, but. But it's still a lot of paperwork.
There's a lot of administration, I would guess. Or are you not too involved?
[00:43:41] Speaker C: We're not super involved. We do have with the GSA manage our brokerage contracts, customs brokerage for the shippers.
So in many cases it's through the brokers that we've been processing these refunds.
You say refunds have been coming? It's been going pretty smooth. I would say. Some would disagree. We've seen there is that some of them are shippers really suffer delays. They know that the brokers receive the money, but they've not got it back yet. So I was talking to one recently. This week, they're waiting just. Just one relatively small shipper waiting for $800,000 back from one of their brokers. And this is one of many. So we're Talking of over $100 million worth of duty payments that need to come back to our shippers. And it's been challenging.
And, you know, how do you keeping track of that? We have. We have huge teams at our shippers that are monitoring that and monitoring processing of all of that. It's very labor intensive. Big challenge, you know, and now we've got these new tariffs and when they get repealed, which, you know, probably some of them will in the future, we'll be looking after that money again. This is chaotic and at the end of the day, it's bad for consumers. Right. We end up paying more, more when we buy things. And how much of that money is refunded to consumers is still yet to be seen.
[00:45:01] Speaker A: Yeah, I think it's easy to forget that. Okay, there's a lot of these. The original IPA tariffs are being refunded, but as you say, it's a bit hit and miss about who's getting their money. SMEs seem to be at the back of that queue quite often.
[00:45:14] Speaker C: Absolutely.
[00:45:14] Speaker A: But of course, even as they're trying to chase that old money, they've still got the new tariffs to get their head round which adds again, if you've got the economies of scale of a big company, these are things that are easier to do. It gives you almost a competitive advantage. If you're an SME, this could be terrible for your cash flow. You say we've seen quite a few go bankrupt.
[00:45:32] Speaker C: This is yes. Killer for SMEs. Really tough. I mean how can they, they can't scale up and recruit the teams to manage this. They're exposed to much higher increase, high increase of costs from the customs brokers to be able to manage it on their behalf.
It's really killing. If you've got to wait six months to get your money back, that might be too long. You may be out of business by then, you know, which is such a shame. Terrible for business, Nils.
[00:46:00] Speaker A: For carriers, I mean, I guess it's just a bit of a paper chase, isn't it? It's just adding a complexity to everything.
[00:46:06] Speaker B: Yes. In virtual. Yes. Am I a fan of it? No, actually because even as in my current position in Songblance advisory, you have really to read hundreds of pages to get what is the purpose of this or that tariff. Right. So some recent tariffs have been announced and then when you look at the his code, it has nothing to do with what the name of the tariff or hereby mentioned is about.
So it's just, you know, headache for everyone.
[00:46:36] Speaker A: Okay, thanks Nils. Okay, both of you, I want to just finish up with a quick fire round.
Three things you're each watching for the rest of 2026 and into 2027. Nils, do you want to go first?
[00:46:50] Speaker B: I am much honored to go first again. I will show that I'm not stealing any of Mark's id, so that's good.
Okay, so I'm gonna go a bit of a tangent here, but the first thing I have in my head about what I'm watching is actually the imo, the MEPC coming up in very few words and trying to layman terms here. The world has to decide if they want to have a tax on fuels, on the legacy fuels. So the fuels that today 99% of the ships are using and the world has to decide that. So that levy, because it's a levy, it's a pure tax on non performance or not. Adoption of new fuels will likely anyway be passed by the carriers to the shippers again through a surcharge of emissions or new fuels, et cetera.
So that's actually quite important. That's what's going to happen in the coming months. About that.
Nothing that I'm pro against Right. I just think it's going to be very, very important.
El Nino is the second one I have been experiencing myself. All the effects of the storms and the congestion. So be it at sea or when working in operations or trade myself, I think this one has the potential to be strongest in history.
They call it one of the Godzilla elinio. Right. So let's see. Yeah. The third thing I'm gonna look forward to see is how carriers are gonna differentiate themselves in the struggling times. What I mean by that is I think Mark also maybe alluded to or some views on that. But you have carriers today such like as from the Evergreen that really are doing their best to honor the words to do block store to provide you services to have this really relationship. They don't want new customers, they want to stay with the existing base and they build on that. And then you have carriers that of course are still much, much more growing. We even have now Musk CEO talking about maybe it's time to order ships. Yeah. So there's going to be a differentiation on how you run business as carriers. I'm sure of that. It has to happen and I'm much looking forward to see it for 2027.
[00:49:00] Speaker A: I wish I was on that call with Vincent Kler because I would have actually pointed out if you're going to be buying chips, maybe you should get APM to build some more terminals.
Anyway, Mark, over to you.
[00:49:11] Speaker C: So yeah, the three things I think to Niels Point carrier partnerships.
We've really got to drill in over the next weeks as we start heading to negotiations. Okay, who are the carriers that are really partners with us this year? That doesn't mean they didn't charge us any additional costs but the ones that were fair, that's something we're going to focus on as we look to the next contract season that's about to start. So that's a huge thing.
The other thing we're watching the straight of Hormuz and the Red Sea. Obviously as soon as we get some stability there, that's going to have a massive impact on all of us. And until that happens, we've got to monitor that pretty much daily to see what we can expect to happen in the coming days and weeks.
And then the third point we talked about the Rhine, we've not spent enough time, I don't think any of our shippers on what the impacts are going to be. How do we mitigate that?
The time is of the essence. We've really got to get around that very quickly. And this is not a couple of weeks problem. This is going to be months, many months if you think about how much is it going to have to rain in Europe to get these levels back up to where they need to be, to somewhere that they've been, you know, it's not been like this for 20, 30 years, if ever.
That's going to take time. So that's a huge focus in the weeks and months ahead.
[00:50:37] Speaker A: Mark Chadwick, president of the Global Shippers association, and Nils Roche, founder of Solzen's Advisory, thanks both for joining me today.
[00:50:46] Speaker C: Thank you. It was great.
[00:50:47] Speaker B: Thank you, Mike. Thank you for letting me share the scene with such an esteemed guest.
[00:50:51] Speaker A: I thought you were going to say me then for a second, Nils. Obviously not.
Thanks, of course, to DiMerco Express Group for continuing to support independent journalism. Big shout out to El Nino, because this is the first time I've ever recorded a podcast in what feels like a sauna.
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