WEBVTT
00:00:01.439 --> 00:00:04.240
Hi there and welcome to today's episode of Container Victoria.
00:00:04.400 --> 00:00:06.480
Your ten minute update on the latest integrator.
00:00:06.799 --> 00:00:10.240
I'm Julia Frowe, as always joined by Judah Levine of Radio.
00:00:11.039 --> 00:00:11.759
Judah, how are you doing?
00:00:12.960 --> 00:00:13.199
Good.
00:00:13.279 --> 00:00:13.599
How are you?
00:00:14.400 --> 00:00:15.519
Yeah, I'm doing okay, thank you.
00:00:16.800 --> 00:00:17.760
So let's kick off.
00:00:17.839 --> 00:00:25.280
There's new drama in the Middle East this time from the Houthis as they've taken control of a port and island directly on the Red Seas of Balmandem straight.
00:00:25.519 --> 00:00:27.039
What could this mean for container shipping?
00:00:27.440 --> 00:00:36.320
So the Houthis basically until now have been in control of uh elevated ground, maybe a few tens of miles away from the coast.
00:00:36.640 --> 00:00:47.679
Um and now they have seas, kind of these strategic port and on, which are directly on um the strait, which is that very narrow part of the Red Sea that passes by um the coast of Yemen.
00:00:47.920 --> 00:00:58.079
So as we know, the the Houthis had no difficulty attacking ships and basically diverting the vast majority of container traffic since 2023, even from that higher position.
00:00:58.399 --> 00:01:05.680
But this certainly means kind of uh a solidification of their control and kind of an escalation of the threat.
00:01:05.840 --> 00:01:17.120
Um this advance probably has a bigger impact on uh or or threat to um crude oil flows, because there are a lot of oil tankers that are going through there, especially from Saudi Arabia.
00:01:17.200 --> 00:01:25.040
Um, and there's been uh an attack by another uh Iranian proxy group probably um on a Saudi pipeline also this week.
00:01:25.120 --> 00:01:31.680
So these are kind of increasing the threats to global uh energy uh flows, and I think that's the point.
00:01:31.840 --> 00:01:39.760
Um some experts watching crude oil prices and looking at bunker prices as well see that they've gone back to kind of highs we haven't seen since May.
00:01:39.840 --> 00:01:46.239
Um prices were already elevated above pre-war levels, but this is kind of a back to higher level than we saw before.
00:01:46.400 --> 00:02:08.080
Um and so it seems that you know, with the prospect that the Hormuz is not opening anytime soon, the strategies that we've been relying on, which a lot of it has been drawing from uh reserves, especially for China, uh, it seems like those are kind of wearing thin and they could lead to an actual fuel crisis, which basically we've had high fuel uh costs, but not uh a real fuel crisis or real shortages just yet.
00:02:08.159 --> 00:02:11.039
And so that's kind of the the threat and the and the significance.
00:02:11.280 --> 00:02:32.400
And that has significance for container shipping in terms of uh price, uh you know, in terms of uh fuel costs and therefore uh freight rates, but um you know you would think that this would have an impact on steps that carriers have taken back towards the Red Sea because we've seen increases um basically since June when there are increased threats.
00:02:32.560 --> 00:02:38.800
What we've seen before is that carriers that started going back to the Red Sea turned around, and that's not what we're seeing now, really surprisingly.
00:02:38.960 --> 00:02:50.800
Um so, according to uh estimates made by sea intelligence, more than a quarter of Asia Europe capacity will go through the Red Sea on September, um, much more on Asia Mediterranean than Asia North Europe.
00:02:50.879 --> 00:02:56.639
For Asia Mediterranean is also much more on the backhaul, about 50% compared to the uh head hall, which they estimate at 35%.
00:02:57.039 --> 00:03:00.560
North Europe is something only like 6% of headhall and 30% of backhaul.
00:03:00.639 --> 00:03:05.199
But this is much more than we've seen, you know, at any point since late 2023.
00:03:05.439 --> 00:03:24.159
Um and I think the calculus here is that there are much higher fuel costs and also really significant congestion, both in North Europe from just kind of persistent congestion, and we also have low water levels in the Rhine, and now the real congestion is also in the Far East, where we've had just typhoon after typhoon, that has really caused significant congestion that continues.
00:03:24.240 --> 00:03:28.159
It might continue until even after uh Golden Week and into October.
00:03:28.719 --> 00:03:33.199
Okay, is the increase in the Red Sea transits also impacting container rates?
00:03:34.240 --> 00:03:40.319
So, as we said, kind of especially for Asia Mediterranean, there's been a pretty good chunk that's now going moving much faster.
00:03:40.479 --> 00:03:45.439
And so that is um may be having an impact on container rates.
00:03:45.520 --> 00:03:50.479
So if we look at rates, Asia North Europe prices fell about 3% last week to 4,300.
00:03:50.639 --> 00:04:02.000
Asia-Mediterranean rates dropped 12% to 4,200, but if we look at rates so far this week, both are around$3,800 per container, which is still city significant pretty significant, but well down from where it was before.
00:04:02.080 --> 00:04:04.719
But there's a sharper drop for Asia and Mediterranean prices.
00:04:04.800 --> 00:04:14.240
So those are down$3,000 from their July peak, whereas uh North Europe rates are down$2,000 and also a much higher percentage, like more than 50% for Asian Mediterranean.
00:04:14.319 --> 00:04:24.079
And so that might reflect the higher rate of Red Sea transits for Asia and Mediterranean and that kind of uh freeing up more capacity and speeding things along compared to what we're seeing for North Europe.
00:04:24.240 --> 00:04:31.759
We should keep in mind though that even with you know, rates are falling mostly because we are post-peak season uh on these lanes, right?
00:04:31.839 --> 00:04:35.439
The peak volumes are behind us and demand is falling, so rates are falling.
00:04:35.600 --> 00:04:49.120
We're saying, you know, faster for Asia Med maybe because of the Red Sea, but for both these lanes, for Asia, North Europe and for Asian Mediterranean, they're still 20% to 50%, respectively higher than they were before peak season demand started.
00:04:49.199 --> 00:04:58.879
So if demand levels are back to where they were, rates are still much higher than they were before, and that's probably because of this congestion that continues, again, both in Europe, but also especially in the Far East.
00:04:59.199 --> 00:05:02.800
Okay, can you share what's been happening on the Trans-Pacific routes?
00:05:03.519 --> 00:05:05.360
Yeah, so kind of a different story here.
00:05:05.519 --> 00:05:08.800
As we said before, we had an early start to peak season across these lanes.
00:05:08.879 --> 00:05:12.480
We started to have an early end to peak season for Asia, Europe, and Mediterranean.
00:05:12.560 --> 00:05:20.319
On Trans-Pacific, we saw uh demand and rates really just stay at peak levels since July, and they continue to do so this week.
00:05:20.639 --> 00:05:28.399
Part of what's keeping rates up is probably also this far east congestion, but we've had kind of you know uh sustained demand on these lanes.
00:05:28.560 --> 00:05:34.240
Now, the National Retail Federation they project that October arrivals are going to be 9% lower than September.
00:05:34.399 --> 00:05:39.439
They're measuring arrivals, that means those are bookings that are being made, you know, have been made or are being made just now.
00:05:39.519 --> 00:05:49.839
So that probably means that we're either a little bit post you know peak season um uh bookings um or already or we will start to come down a little bit more significantly pretty soon.
00:05:50.079 --> 00:05:57.839
And so um as we approach Golden Week, um and so we should probably start to see rates uh falling as well.
00:05:57.920 --> 00:06:06.240
Uh carriers are blanking sailings already, probably a sign that some of that demand is easing, also blanking sailings over uh uh Golden Week, which is typical.
00:06:06.319 --> 00:06:10.240
Um so we'll probably start to see rates come down, you know, as we move into October.
00:06:10.480 --> 00:06:19.839
But as we said, this congestion issue is going to mean that even when demand is easing, rates are going to stay more elevated than otherwise they would, just like we're seeing for the Asia Europeanes.
00:06:20.240 --> 00:06:22.160
Okay, let's move to air cargo for a minute.
00:06:22.399 --> 00:06:27.680
Thousands of flights in and out of the UK were disrupted last week from an air traffic control system outage.
00:06:27.920 --> 00:06:31.759
What's the latest there and in air cargo market more generally?
00:06:32.879 --> 00:06:42.079
Yeah, so the outage uh was actually only about three hours long that the system was actually down, but it disrupted you know almost 2,000 flights.
00:06:42.160 --> 00:06:45.040
Um and that recovery has really lasted into this week.
00:06:45.120 --> 00:06:46.639
So this happens last Tuesday.
00:06:46.720 --> 00:06:50.079
Uh now it looks like things are normalizing, but certainly was a big disruption.
00:06:50.240 --> 00:07:04.639
In terms of the overall market, if we look at our Fredos Air Index global benchmark, the global rate is down 5% from recent uh uh highs in the last few weeks, possibly from typhoon-related disruptions that things are recovering.
00:07:04.720 --> 00:07:18.639
And it's also decreased 15% from levels or from the high that it hit um, you know, just as the war broke out, but it's still 25% higher than it was a year ago, and that's because uh jet fuel costs remained really high because of the closure of the street of hormouse.
00:07:18.879 --> 00:07:30.720
Um, nonetheless, kind of global volumes have been strong, something like four or five percent global um volume growth year to date, according to Ayada, which only goes through through July, we can expect that as continued.
00:07:30.879 --> 00:07:35.120
Nonetheless, you know, some in the industry aren't expecting a very strong peak season.
00:07:35.199 --> 00:07:38.000
I don't think anyone's saying that peak season isn't going to materialize.
00:07:38.160 --> 00:07:44.639
They're not expecting a very um uh impressive peak season in terms of volumes or impact on rates.
00:07:44.800 --> 00:07:52.000
And this is partially due because some of the or a good chunk of the volume strength of the growth that we've had this year has been to AI-related hardware.
00:07:52.079 --> 00:07:57.680
Right, this big build-out of data centers, things that are going by air, and those are not seasonal goods, right?
00:07:57.759 --> 00:08:00.959
Those are coming as fast as they can and will continue to do so.
00:08:01.199 --> 00:08:08.319
And it's also limited to some lanes, particularly Taiwan and South Korea, as well as some East Asian countries and mostly to the US.
00:08:08.639 --> 00:08:18.959
On these lanes, though, some foragers are saying that you know capacity probably will be quite tight over peak season as well, and might push some volumes to ocean or some shippers moving to sea air options.
00:08:19.040 --> 00:08:32.080
Um, I think that we will see an increase in volumes and an increase in rates uh for peak season across the typical lanes, and maybe not as strong as usual, just because general cargo has not been as strong as some of these other sectors.
00:08:32.320 --> 00:08:34.960
Um and uh yeah, so I think that's what we'll see.
00:08:35.039 --> 00:08:41.039
And just to remember or keep in mind that we're starting from a very elevated price point because of the war impact.
00:08:41.200 --> 00:08:44.720
So if prices increase, they're gonna be climbing from that already elevated spot.
00:08:45.120 --> 00:08:45.840
All right, great.
00:08:45.919 --> 00:08:46.639
Thank you, Judy.
00:08:46.799 --> 00:08:48.159
That's all we have time for today.
00:08:48.399 --> 00:08:53.120
If you enjoyed this episode, please hit the subscribe button and you'll get notified about all our future episodes.
00:08:53.440 --> 00:08:54.879
Thank you for listening and goodbye.
00:00:01.439 --> 00:00:04.240
Hi there and welcome to today's episode of Container Victoria.
00:00:04.400 --> 00:00:06.480
Your ten minute update on the latest integrator.
00:00:06.799 --> 00:00:10.240
I'm Julia Frowe, as always joined by Judah Levine of Radio.
00:00:11.039 --> 00:00:11.759
Judah, how are you doing?
00:00:12.960 --> 00:00:13.199
Good.
00:00:13.279 --> 00:00:13.599
How are you?
00:00:14.400 --> 00:00:15.519
Yeah, I'm doing okay, thank you.
00:00:16.800 --> 00:00:17.760
So let's kick off.
00:00:17.839 --> 00:00:25.280
There's new drama in the Middle East this time from the Houthis as they've taken control of a port and island directly on the Red Seas of Balmandem straight.
00:00:25.519 --> 00:00:27.039
What could this mean for container shipping?
00:00:27.440 --> 00:00:36.320
So the Houthis basically until now have been in control of uh elevated ground, maybe a few tens of miles away from the coast.
00:00:36.640 --> 00:00:47.679
Um and now they have seas, kind of these strategic port and on, which are directly on um the strait, which is that very narrow part of the Red Sea that passes by um the coast of Yemen.
00:00:47.920 --> 00:00:58.079
So as we know, the the Houthis had no difficulty attacking ships and basically diverting the vast majority of container traffic since 2023, even from that higher position.
00:00:58.399 --> 00:01:05.680
But this certainly means kind of uh a solidification of their control and kind of an escalation of the threat.
00:01:05.840 --> 00:01:17.120
Um this advance probably has a bigger impact on uh or or threat to um crude oil flows, because there are a lot of oil tankers that are going through there, especially from Saudi Arabia.
00:01:17.200 --> 00:01:25.040
Um, and there's been uh an attack by another uh Iranian proxy group probably um on a Saudi pipeline also this week.
00:01:25.120 --> 00:01:31.680
So these are kind of increasing the threats to global uh energy uh flows, and I think that's the point.
00:01:31.840 --> 00:01:39.760
Um some experts watching crude oil prices and looking at bunker prices as well see that they've gone back to kind of highs we haven't seen since May.
00:01:39.840 --> 00:01:46.239
Um prices were already elevated above pre-war levels, but this is kind of a back to higher level than we saw before.
00:01:46.400 --> 00:02:08.080
Um and so it seems that you know, with the prospect that the Hormuz is not opening anytime soon, the strategies that we've been relying on, which a lot of it has been drawing from uh reserves, especially for China, uh, it seems like those are kind of wearing thin and they could lead to an actual fuel crisis, which basically we've had high fuel uh costs, but not uh a real fuel crisis or real shortages just yet.
00:02:08.159 --> 00:02:11.039
And so that's kind of the the threat and the and the significance.
00:02:11.280 --> 00:02:32.400
And that has significance for container shipping in terms of uh price, uh you know, in terms of uh fuel costs and therefore uh freight rates, but um you know you would think that this would have an impact on steps that carriers have taken back towards the Red Sea because we've seen increases um basically since June when there are increased threats.
00:02:32.560 --> 00:02:38.800
What we've seen before is that carriers that started going back to the Red Sea turned around, and that's not what we're seeing now, really surprisingly.
00:02:38.960 --> 00:02:50.800
Um so, according to uh estimates made by sea intelligence, more than a quarter of Asia Europe capacity will go through the Red Sea on September, um, much more on Asia Mediterranean than Asia North Europe.
00:02:50.879 --> 00:02:56.639
For Asia Mediterranean is also much more on the backhaul, about 50% compared to the uh head hall, which they estimate at 35%.
00:02:57.039 --> 00:03:00.560
North Europe is something only like 6% of headhall and 30% of backhaul.
00:03:00.639 --> 00:03:05.199
But this is much more than we've seen, you know, at any point since late 2023.
00:03:05.439 --> 00:03:24.159
Um and I think the calculus here is that there are much higher fuel costs and also really significant congestion, both in North Europe from just kind of persistent congestion, and we also have low water levels in the Rhine, and now the real congestion is also in the Far East, where we've had just typhoon after typhoon, that has really caused significant congestion that continues.
00:03:24.240 --> 00:03:28.159
It might continue until even after uh Golden Week and into October.
00:03:28.719 --> 00:03:33.199
Okay, is the increase in the Red Sea transits also impacting container rates?
00:03:34.240 --> 00:03:40.319
So, as we said, kind of especially for Asia Mediterranean, there's been a pretty good chunk that's now going moving much faster.
00:03:40.479 --> 00:03:45.439
And so that is um may be having an impact on container rates.
00:03:45.520 --> 00:03:50.479
So if we look at rates, Asia North Europe prices fell about 3% last week to 4,300.
00:03:50.639 --> 00:04:02.000
Asia-Mediterranean rates dropped 12% to 4,200, but if we look at rates so far this week, both are around$3,800 per container, which is still city significant pretty significant, but well down from where it was before.
00:04:02.080 --> 00:04:04.719
But there's a sharper drop for Asia and Mediterranean prices.
00:04:04.800 --> 00:04:14.240
So those are down$3,000 from their July peak, whereas uh North Europe rates are down$2,000 and also a much higher percentage, like more than 50% for Asian Mediterranean.
00:04:14.319 --> 00:04:24.079
And so that might reflect the higher rate of Red Sea transits for Asia and Mediterranean and that kind of uh freeing up more capacity and speeding things along compared to what we're seeing for North Europe.
00:04:24.240 --> 00:04:31.759
We should keep in mind though that even with you know, rates are falling mostly because we are post-peak season uh on these lanes, right?
00:04:31.839 --> 00:04:35.439
The peak volumes are behind us and demand is falling, so rates are falling.
00:04:35.600 --> 00:04:49.120
We're saying, you know, faster for Asia Med maybe because of the Red Sea, but for both these lanes, for Asia, North Europe and for Asian Mediterranean, they're still 20% to 50%, respectively higher than they were before peak season demand started.
00:04:49.199 --> 00:04:58.879
So if demand levels are back to where they were, rates are still much higher than they were before, and that's probably because of this congestion that continues, again, both in Europe, but also especially in the Far East.
00:04:59.199 --> 00:05:02.800
Okay, can you share what's been happening on the Trans-Pacific routes?
00:05:03.519 --> 00:05:05.360
Yeah, so kind of a different story here.
00:05:05.519 --> 00:05:08.800
As we said before, we had an early start to peak season across these lanes.
00:05:08.879 --> 00:05:12.480
We started to have an early end to peak season for Asia, Europe, and Mediterranean.
00:05:12.560 --> 00:05:20.319
On Trans-Pacific, we saw uh demand and rates really just stay at peak levels since July, and they continue to do so this week.
00:05:20.639 --> 00:05:28.399
Part of what's keeping rates up is probably also this far east congestion, but we've had kind of you know uh sustained demand on these lanes.
00:05:28.560 --> 00:05:34.240
Now, the National Retail Federation they project that October arrivals are going to be 9% lower than September.
00:05:34.399 --> 00:05:39.439
They're measuring arrivals, that means those are bookings that are being made, you know, have been made or are being made just now.
00:05:39.519 --> 00:05:49.839
So that probably means that we're either a little bit post you know peak season um uh bookings um or already or we will start to come down a little bit more significantly pretty soon.
00:05:50.079 --> 00:05:57.839
And so um as we approach Golden Week, um and so we should probably start to see rates uh falling as well.
00:05:57.920 --> 00:06:06.240
Uh carriers are blanking sailings already, probably a sign that some of that demand is easing, also blanking sailings over uh uh Golden Week, which is typical.
00:06:06.319 --> 00:06:10.240
Um so we'll probably start to see rates come down, you know, as we move into October.
00:06:10.480 --> 00:06:19.839
But as we said, this congestion issue is going to mean that even when demand is easing, rates are going to stay more elevated than otherwise they would, just like we're seeing for the Asia Europeanes.
00:06:20.240 --> 00:06:22.160
Okay, let's move to air cargo for a minute.
00:06:22.399 --> 00:06:27.680
Thousands of flights in and out of the UK were disrupted last week from an air traffic control system outage.
00:06:27.920 --> 00:06:31.759
What's the latest there and in air cargo market more generally?
00:06:32.879 --> 00:06:42.079
Yeah, so the outage uh was actually only about three hours long that the system was actually down, but it disrupted you know almost 2,000 flights.
00:06:42.160 --> 00:06:45.040
Um and that recovery has really lasted into this week.
00:06:45.120 --> 00:06:46.639
So this happens last Tuesday.
00:06:46.720 --> 00:06:50.079
Uh now it looks like things are normalizing, but certainly was a big disruption.
00:06:50.240 --> 00:07:04.639
In terms of the overall market, if we look at our Fredos Air Index global benchmark, the global rate is down 5% from recent uh uh highs in the last few weeks, possibly from typhoon-related disruptions that things are recovering.
00:07:04.720 --> 00:07:18.639
And it's also decreased 15% from levels or from the high that it hit um, you know, just as the war broke out, but it's still 25% higher than it was a year ago, and that's because uh jet fuel costs remained really high because of the closure of the street of hormouse.
00:07:18.879 --> 00:07:30.720
Um, nonetheless, kind of global volumes have been strong, something like four or five percent global um volume growth year to date, according to Ayada, which only goes through through July, we can expect that as continued.
00:07:30.879 --> 00:07:35.120
Nonetheless, you know, some in the industry aren't expecting a very strong peak season.
00:07:35.199 --> 00:07:38.000
I don't think anyone's saying that peak season isn't going to materialize.
00:07:38.160 --> 00:07:44.639
They're not expecting a very um uh impressive peak season in terms of volumes or impact on rates.
00:07:44.800 --> 00:07:52.000
And this is partially due because some of the or a good chunk of the volume strength of the growth that we've had this year has been to AI-related hardware.
00:07:52.079 --> 00:07:57.680
Right, this big build-out of data centers, things that are going by air, and those are not seasonal goods, right?
00:07:57.759 --> 00:08:00.959
Those are coming as fast as they can and will continue to do so.
00:08:01.199 --> 00:08:08.319
And it's also limited to some lanes, particularly Taiwan and South Korea, as well as some East Asian countries and mostly to the US.
00:08:08.639 --> 00:08:18.959
On these lanes, though, some foragers are saying that you know capacity probably will be quite tight over peak season as well, and might push some volumes to ocean or some shippers moving to sea air options.
00:08:19.040 --> 00:08:32.080
Um, I think that we will see an increase in volumes and an increase in rates uh for peak season across the typical lanes, and maybe not as strong as usual, just because general cargo has not been as strong as some of these other sectors.
00:08:32.320 --> 00:08:34.960
Um and uh yeah, so I think that's what we'll see.
00:08:35.039 --> 00:08:41.039
And just to remember or keep in mind that we're starting from a very elevated price point because of the war impact.
00:08:41.200 --> 00:08:44.720
So if prices increase, they're gonna be climbing from that already elevated spot.
00:08:45.120 --> 00:08:45.840
All right, great.
00:08:45.919 --> 00:08:46.639
Thank you, Judy.
00:08:46.799 --> 00:08:48.159
That's all we have time for today.
00:08:48.399 --> 00:08:53.120
If you enjoyed this episode, please hit the subscribe button and you'll get notified about all our future episodes.
00:08:53.440 --> 00:08:54.879
Thank you for listening and goodbye.
