Episode Transcript
[00:00:03] Speaker A: You are listening to the Freight Buyers Club, a home for those interested in international trade, shipping, procurement, logistics and air freight. In fact, all things supply chain in the Americas, Asia and beyond. This podcast is brought to you by your host, Mike King and produced in partnership with Demurco Express Group, a global 3 PL that specializes in managing logistics to from and within the Asia Pacific region.
[00:00:30] Speaker B: Hello everyone. Welcome to the Freight Buyers Club. I'm Mike King. This episode is produced with the support of Dimeco Express Group. And today we've got insight from thought leaders, from analysts and operators as we unpack what's going on in global freight markets. And a lot of this insight comes from the massive Transport Logistic and Air cargo exhibition that took place in Munich at the start of June, in which the Freight Buyers Club was delighted to attend. And if you all thought that the uncertainty in our world might slow exhibition sales, well think again, because Transport Logistic featured 2722 exhibitors from 73 nations, more than 77,000 visitors and an exhibition area that was a huge 150,000 square meters.
Oh, and there was a robot.
In fact, more than one.
Suffice to say, the Freight Buyers Club got talking to a lot of people and we walked a lot of miles. And to give you an idea, from the press centre to the two air cargo Europols in A1 and A2, it was about a kilometer if you were walking. And if you look at A1 and B1 at one end and A6 and B6 at the other, they actually were easiest reached by different train stops. I kid you not. So. So if you send your staff to Transport Logistic and haven't been there yourself, there's a reason why everyone's exhausted. And it wasn't just all the parties. The many conversations that we had there inform the analysis in this show today because as you all know, there's a lot of uncertainty in freight markets right now and a lot of it stems from trade policy. And our friend in the White House, who, let us not forget, he's having a few of his own difficulties, isn't he? Maybe Bromance is indeed dead.
Let's start with air cargo, though frankly, uncertainty is the right word across all freight markets at the moment. Let's start the scene with a good friend of this podcast. It's Sean Dolan, CEO of NorthLink Aviation.
[00:02:36] Speaker C: The air cargo market is used to uncertainty and disruptions and there's no question that the end of de minimis for Chinese imports and the introduction of tariffs, I mean, what I affectionately refer to as tariff palooza has created a lot of uncertainty, but I think with that uncertainty and volatility, it's created a number of opportunities that the air carriers that we're working with are looking to take advantage to ensure that their customers are receiving the best possible service.
But you know, from an investment standpoint, there's no question that everybody throughout the sector is looking for more certainty and visibility and hopefully this summer will allow us to kind of get to a situation where people know the rules, know what they're working with as we head into peak season and we'll get this behind us and folks can kind of get back to something that resembles more business as usual.
[00:03:31] Speaker B: Optimism there from Sean amid what is a very uncertain air cargo market. Zenetta reports that air cargo volumes rose in May by 6% year on year, but respite from a tariff truce between China and the US mid month didn't stop spot rates from softening, and Zanetta expects further rate declines ahead, especially with so much uncertainty around what happens next in the Trade wars of 2025.
Now do subscribe to this channel because I will be explaining how the impact of changes to de minimis rules in Europe and the US are affecting air cargo, and that will be out in the next few weeks before we turn to shipping, probably the biggest air freight story at the Air Cargo Europe Trade Fair was the announcement that the cargo divisions of Qatar Airways, IAG and Mass Cargo intend to form a joint global cargo business. This is subject to regulatory approvals, but a launch date in Q4 is expected. The idea is that customers will get seamless services globally via a unified platform.
You can find a longer video of me talking to David Shepherd, IAG Cargo CEO, about this on YouTube, on LinkedIn and on Spotify and in audio form wherever else you get your podcast, amongst other things. I asked him why this would work when so many other alliances had failed.
Certainly for shippers, speed and transparency are often the key buying deciders. David was clear that this new platform will deliver on both.
[00:05:02] Speaker D: Well, they certainly see speed benefits because we will treat the transfer of cargo at our hubs in exactly the same way, from a partner aircraft to our own aircraft in exactly the same way as it would be if it were two of our own aircraft today. That's certainly not something that's possible today, so that's certainly a speed benefit. I think from a transparency point of view, being able to see your tracked information all the way through from start to the end of the journey, regardless of which airline it's on, is again a tangible benefit that hasn't been there before. And we intend to put a loyalty program off over the top of this that doesn't exist within the industry with our market leading Avios program as well.
[00:05:44] Speaker B: So pivoting to container shipping as transport logistics closed on 5 June, Drury's latest whale Container Index was released. And if you're watching this, you can see now exactly what's going on with rates on the major trades on the Trans Pacific. We've seen how President Donald Trump's pause on import tariffs led to a resumption of US bound traffic after the initial collapse of Trans Pacific volumes on Liberation Day at the start of April.
Shanghai rates to Los angeles are up 117% since 8 May. That's just four weeks ago.
Rates to New York are up 96% over the same period.
But this global reset of supply and demand is also hitting the Asia Europe trade, where freight rates jumped around a third in the first days of June and where port delays are an ongoing issue. There's certainly quite a few factors at play at those ports. In Munich, I was told everything from high volumes to tariff uncertainty, new alliances, changes to networks, lack of terminal space, even a buildup of materials for rebuilding. Ukraine, another one that a few people mentioned was dumping from China post Tariff Liberation Day as markets in the US became less attractive. We also heard, we were told, low water levels and labor issues in the northern range all playing a factor on rates and on congestion and vessel delays at ports up there.
Quite a. Well, I don't know. Do you? Call it excuses, but take your pick from all of the above.
For its part, the Port of Rotterdam responded to an email from the Freight Buyers Club and it said that like other ports in Northern Europe, it was having to deal with new sailing schedules, new alliances, work stoppages and bad weather.
And the pause also said the situation was still busy, but it was improving.
What happens next in ocean freight market? Well, as ever, so much depends on the White House. Drury expects rates to weaken again in the second half, but adds that the volatility and timing of rate changes will depend on the outcome of legal challenges to Trump's tariffs and on capacity changes related to the introduction of US penalties on Chinese ships, which remain uncertain. But as Lars Carlson, global head of trade and customs consulting at Maersk, told me, there are other challenges facing shippers. He believes there are ways to mitigate all this risk.
[00:08:06] Speaker E: I think the main challenges are the uncertainty we see right now in international trade and we've only seen the tip of the Iceberg, there will be more challenges coming along along the same line. So obviously tariffs are there and the uncertainty around that. And the important thing for that is really to look into how can you actually mitigate it, being agile and being those who actually can handle it in a good way. But there are other challenges as well. We see the ESG rules or regulations or multi tier type of supply chain regulations coming along. So we've had four in place already with LPA in the US and forced labor legislation there, and of course the carbon or adjustment mechanism in Europe and EUDR deforestation coming in as well. And that will be a real challenge for many importers and exporters, but basically for the industry and for chip and zone overall. But I think that the way to do it again is of course to look at what you're doing on major challenges like environment and green and round digitalization and so forth. Because at the end of the day, it's all around data. You need to have and own your own data. And if you do that or so have it with somebody, a trusted partner that can manage and help you doing that together with the network you have, then I think you're in a better place. And the important thing is to be ahead of your competition, because customs have never been more important than now, but it will be more important tomorrow. So put in the effort to actually do that in a correct way and you will be in a good place.
[00:09:35] Speaker B: Rolf Haben Janssen, CEO of Hapag Lloyd, told me that his carrier, which of course is now in alliance with Maersk as the Gemini cooperation, had been shuffling capacity in reaction to this rapidly changing environment, including by putting bigger ships back into the Trans Pacific market where demand is surging. And apologies here for the poor audio quality, we had a technical issue during this interview.
[00:09:59] Speaker F: I think we've done a good job actually in adjusting to that changing landscape. If I take as an example the trade between China and the U.S. when the tariffs of 145% came, demand dropped. We were able to then deploy simply smaller ships, but still sail weak, which was also the promise that we had made in contact with Gemini. And now that the tariffs have temporarily been paused, we've again redeployed bigger ships. So we were able to react within a few weeks, which I think is actually quite good.
[00:10:26] Speaker B: Rolf also told me that Gemini services are now hitting the 90% reliability level that the two carriers promised from the outset did. Despite all of this disruption out there, looking ahead so much about the container shipping demand balance and therefore the cost of moving Cargo rests on continued diversion of ships around Southern Africa as they avoid the Suez Canal. The Houthis have said they are no longer targeting shipping, but this came with a number of riders, none of them massively reassuring to owners of ships or cargo. It has to be said. Haben Janssen, for one, isn't expecting container shipping to return on master Red Sea anytime soon.
[00:11:05] Speaker F: In the end, what you want is that it's safe and it also is going to remain safe so we can see about three trucks. What you don't want is to go through the Suez Canal for argument's sake in a couple of weeks, but then having to back out again some weeks later because it turns out that it's still not safe.
So I think we are watching that situation closely, but for now we do not believe that it is sustainably safe.
[00:11:29] Speaker B: We what is very clear right now on container shipping is that carriers are not having any issues with making money. Q1 profits did drop, but not by that much. Jan Tiedemann, shipping analyst at Alpha Liner, said he was rather bemused at how carriers were continuing to rack up profits because even with Red Sea diversions, there's a lot of capacity out there.
[00:11:51] Speaker G: Honestly, I don't even know how they did that.
What we did see is, well, we thought that the carriers will have to do a lot with all these new ships coming in and with demand maybe waning to balance that, to somehow keep that in check and to make sure that the rates are not dropping endlessly. However, the thing that surprised everyone is that over the last few months, demand has been surprisingly strong and constant.
Every two weeks, my company, we do a scan of the ships which are unemployed and for many years it's virtually zero. I'm already and my colleagues were struggling to write something about the unemployment. We could just write on the page, hey look, look at last week and the week before and the week before.
So the entire liner fleet is used right now. How exactly where that comes from is to me like a little bit of a mystery, to be honest. There's front loading effects, there's front loading effects related to the tariffs coming in later. You know, better safe than sorry. Get the cargo into the US or to Europe now.
But quite frankly, I don't have a proper answer to that.
[00:12:58] Speaker B: And you can find the full version of that Jan Tiedemann interview on YouTube, Spotify, LinkedIn and in audio form wherever you get your podcasts. So lots of disruption for you all to cope with and a fair number of unknowns. The Freight Buyers Club had a great time seeing everyone at Transport Logistic.
I want to close out by considering what might deliver some more certainty to our industry and probably no prizes for guessing what over. Once more to NorthLink Aviation's Mr. Dolan.
[00:13:28] Speaker C: Going forward, I think that, you know, in a perfect world, we would see an agreement in place between the United States and China, the United States and other key trading partners. And again, allowing everyone to understand the rules and have visibility that, you know, the investments that they're making, the strategic decisions that they're making will not be upended by regular regulatory interference.
[00:13:54] Speaker B: Thanks again to Demerco Express Group for supporting independent journalism. If you found this useful or interesting, please do like, follow or subscribe wherever you get your content.
Big thanks to Kyron Ball and Tom Matthews for all their help in bringing this channel to life. And massive grasshopper you to you all for listening and watching. We'll be back soon.
