WEBVTT
00:00:00.160 --> 00:00:02.399
Hello and welcome to today's episode of Container Bikes.
00:00:02.640 --> 00:00:08.400
If you want to have an update on the latest information as always joined by Judah and I'm right now.
00:00:17.839 --> 00:00:18.640
We'll make it short.
00:00:20.239 --> 00:00:21.519
Let's see how we go.
00:00:21.920 --> 00:00:25.199
Alright, let's start with the Strait of Homo's for a change.
00:00:25.839 --> 00:00:29.679
Things seem to be heating up again, but afraid is it just more of the same?
00:00:30.239 --> 00:00:34.880
So it had kind of been turned into something of a cold war in the strait.
00:00:34.960 --> 00:00:38.640
Yes, there were periodic attacks here and there, but it was kind of status quo.
00:00:38.799 --> 00:00:41.759
Part of, I guess, the cold part of the war was Iran and Oman.
00:00:42.079 --> 00:00:51.200
If we'd get closer to signing an agreement for sharing authority over the strait, it's not clear entirely what that would mean on a practical level if a U.S.
00:00:51.280 --> 00:00:55.840
blockade was still in place, but it was kind of uh some change to the to the status quo.
00:00:56.159 --> 00:01:01.759
Um but just in the last few days, we've seen more actual um strikes back and forth.
00:01:02.000 --> 00:01:02.640
The U.S.
00:01:02.799 --> 00:01:08.319
had reported making a lot of progress in demining kind of the main channel through the through the center of the street.
00:01:08.560 --> 00:01:10.079
And then the U.S.
00:01:10.239 --> 00:01:18.879
struck some rocket launchers near the coast, which were possibly going to be used to deploy more mines by rocket.
00:01:19.040 --> 00:01:23.359
Um, if that's uh something that Iran has capability of.
00:01:23.439 --> 00:01:27.519
And that's kind of spurred some back and forth um additional strikes, including on U.S.
00:01:27.840 --> 00:01:29.680
sites in the region.
00:01:30.079 --> 00:01:34.319
Um, but unfortunately for freight, it really means it really has meant more of the same, right?
00:01:34.400 --> 00:01:36.079
The price of oil is still elevated.
00:01:36.159 --> 00:01:38.239
Um, there's very little traffic in and out.
00:01:38.319 --> 00:01:42.799
Um, and so certainly for uh container traffic to the Gulf, it's still very disruptive.
00:01:43.120 --> 00:01:50.480
Okay, so turning now to container rates, peak season, as we know, got off to an early start across east-west lanes back in about mid-May.
00:01:50.879 --> 00:01:56.560
But it seems that while the early start meant an early end for Asia Europe, the Trans-Pacific is still going quite strong.
00:01:56.879 --> 00:01:58.640
So why are we seeing this divergence?
00:01:59.200 --> 00:02:03.200
Yeah, so we've definitely seen buying strength continue through August.
00:02:03.280 --> 00:02:07.280
Uh, and it seems, you know, into the start of September on the Trans-Pacific.
00:02:07.439 --> 00:02:12.800
Rates to both lanes ticked up by 2% last week to new peak season highs.
00:02:12.879 --> 00:02:21.599
So for the West Coast, prices are above$7,600 per 45th container to the West Coast,$9,800 FEU to the East Coast.
00:02:21.759 --> 00:02:30.319
Carriers are increasing capacity a little bit, at least scheduled capacity for September, which kind of shows there's anticipation that there's going to continue to be demand.
00:02:30.479 --> 00:02:36.719
There may even be additional rate increases, particularly for the East Coast where there's been less space, has been a little bit tighter.
00:02:37.120 --> 00:02:42.639
And then Golden Week starts in October, and we're seeing blank sailings scheduled for then or already announced for then.
00:02:42.719 --> 00:02:45.680
So that's probably when this demand will start easing.
00:02:45.919 --> 00:02:57.759
There's no clear single explanation for why demand has been kind of surprisingly resilient beyond, you know, I think people thought that the peak was going to be in um already in July.
00:02:57.919 --> 00:03:00.080
Um, there are a couple possible contributors.
00:03:00.159 --> 00:03:01.199
It's probably more than one.
00:03:01.360 --> 00:03:05.199
One is that we didn't have uh a sharp tariff hike in July.
00:03:05.280 --> 00:03:23.439
So if some shippers were kind of front loading ahead of anticipation of higher tariffs and those didn't materialize, tariffs are more or less replaced with um tariffs at similar levels to the expiring ones, uh, that might be a reason that we're seeing demand continue into, you know, what is kind of typically still part of peak season into August and September.
00:03:23.599 --> 00:03:33.120
The other possibility, and this is something there's just been a report of this week, is that hardware and kind of materials for building data centers is starting to move, or a lot of it is starting to move by ocean.
00:03:33.199 --> 00:03:47.520
So we've seen this in air where a lot of the kind of really high value parts of those um components and things like that are moving by air, but we're seeing a lot of kind of the heavier materials moving by ocean, and that's already starting to be a factor, which is really not seasonal at all.
00:03:47.599 --> 00:03:51.520
It's just where demand has been really surging and is projected to kind of continue to be very strong.
00:03:51.599 --> 00:03:52.800
So that might be a factor.
00:03:52.960 --> 00:04:01.520
The other part, and you know, this is kind of a relatively new development, is that some of the big retailers are starting to get big tariff refunds from the EPA tariffs paid last year.
00:04:01.759 --> 00:04:13.520
And so um are starting to reduce prices, and that might be increasing sales, and that might be, you know, increasing expectations for inventory levels that they were going to want to have for the coming holiday season.
00:04:13.599 --> 00:04:15.439
So that might be another factor as well.
00:04:15.599 --> 00:04:20.319
Um, one other thing, just in terms of uh rates on these lanes, is Panama Canal.
00:04:20.399 --> 00:04:22.480
And we spoke about this, I think, the last couple of weeks.
00:04:22.639 --> 00:04:26.959
The Panama Canal, we had it in El Niño, they had lower than expected rainfall since May.
00:04:27.040 --> 00:04:31.279
They're expecting drought conditions until the start of rainy season next year.
00:04:31.439 --> 00:04:37.600
And so they're already taking um pretty moderate steps, but steps nonetheless to um conserve water.
00:04:37.759 --> 00:04:44.560
So that means that they're allowing fewer vessels to go through and that they're allowing uh kind of a shallower maximum draft.
00:04:44.639 --> 00:04:46.879
And those are starting to go into effect in September.
00:04:46.959 --> 00:04:58.720
Some of them have been postponed until October, but carriers are introducing surcharges for uh containers passing through the Panama Canal, and that might put pressure on East Coast rates in particular this month or certainly down the road.
00:04:59.120 --> 00:05:03.040
But even Asia Europe container rates aren't back to where they were pre-peak season.
00:05:03.199 --> 00:05:04.399
Why do you think that is?
00:05:05.040 --> 00:05:08.319
Yeah, so prices have cooled on Asia Europe lanes.
00:05:08.399 --> 00:05:09.680
They peaked in mid-July.
00:05:09.839 --> 00:05:24.319
They're cooling on easing demand, but we have capacity constraints from port congestion that might be helping to keep rates higher than they were, higher than like going back to, let's say, normal before uh where they were before peak season in late May.
00:05:24.399 --> 00:05:29.920
So Asia to North Europe prices have eased by more than$1,000 for FEU since mid-July.
00:05:30.079 --> 00:05:36.720
They're at about$4,600 now, but that's still about 70% higher to where they were before peak season demand started back in May.
00:05:36.879 --> 00:05:39.040
For the Mediterranean, rates are at$4,800.
00:05:39.360 --> 00:05:42.720
That's down more than$2,000 from the high, but still 40% higher than before.
00:05:42.800 --> 00:05:49.040
So something is keeping rates higher than they were, assuming that that you know demand has really um eased, which seems to be the case.
00:05:49.199 --> 00:06:01.759
The you know, one part of congestion for North Europe has been low water levels in the Rhine River, and that's uh caused kind of backups to some of those ports that rely on the Rio 4 for uh inland transportation.
00:06:01.920 --> 00:06:05.279
Some rain has improved the water levels there, but it's still a factor.
00:06:05.439 --> 00:06:20.560
But the bigger factor, and this is a factor for Trans Pacific as well, though we did mention earlier, is really the unrelenting congestion in the Far East because of just a series of now we're up to five major typhoons that have really disrupted operations at some of the major ports, including Shanghai and Ningbo.
00:06:20.720 --> 00:06:28.399
So just last week or late last week, Typhoon Sao Dell closed ports in Shanghai and Ningbo for for more than a day.
00:06:28.560 --> 00:06:37.759
It disrupted operations as far north as Busan, and it could stay strong enough that it's going to kind of move back north and impact Shenzhen later this week.
00:06:37.920 --> 00:06:44.079
So these series of storms have kind of you know disrupted operation, caused the backlog, things start to recover, and then there's another storm.
00:06:44.160 --> 00:06:47.600
And so the backlog just isn't being able to be cleared completely.
00:06:47.759 --> 00:06:58.639
There are reports from portcasts that there's as many as 90 ships waiting and you know, waiting up to 11 days for a slot in Shanghai, and and you know, weights of more than a day on some of the other ports in the area as well.
00:06:58.720 --> 00:07:18.160
So that's causing a lot of disruptions, backup delays, absorbing uh container capacity because vessels are waiting and also causing a lot of delays and some congestion kind of unaffected ports because containers are being transshipped to other ports, are being moved to other ports or transhipping as well because cars are kind of skipping port calls at places like Shanghai where things are very congested.
00:07:18.240 --> 00:07:24.639
So that's probably a big factor in why we're seeing rates higher than they were pre-peak season, even if we're past um the high peak season demand.
00:07:24.879 --> 00:07:36.480
One other flay that we didn't mention that we don't mention very often because it's kind of less volatile, is the transatlantic, and we've seen rates increase$400 per container over the second half of August up to about$2,600 per container.
00:07:36.639 --> 00:07:41.759
It seems that this is really a function of carriers reducing capacity because volumes just weren't there.
00:07:41.920 --> 00:07:50.000
There are big increases announced for September, but we'll see if they'll take, given the fact that demand doesn't seem to be there, in order to get a big increase of F they'd have to reduce capacity a lot more.
00:07:50.319 --> 00:07:50.959
Okay, interesting.
00:07:51.120 --> 00:07:51.360
Okay.
00:07:51.519 --> 00:07:52.160
Lots going on.
00:07:52.480 --> 00:07:53.920
All right, that's all we have time for.
00:07:54.079 --> 00:07:55.439
Thank you as always, Judah.
00:07:55.519 --> 00:08:00.399
If you enjoyed this session, please hit the subscribe button and you'll get notified about all our future episodes.
00:08:00.720 --> 00:08:02.560
Thank you for listening and have a great day.
00:00:00.160 --> 00:00:02.399
Hello and welcome to today's episode of Container Bikes.
00:00:02.640 --> 00:00:08.400
If you want to have an update on the latest information as always joined by Judah and I'm right now.
00:00:17.839 --> 00:00:18.640
We'll make it short.
00:00:20.239 --> 00:00:21.519
Let's see how we go.
00:00:21.920 --> 00:00:25.199
Alright, let's start with the Strait of Homo's for a change.
00:00:25.839 --> 00:00:29.679
Things seem to be heating up again, but afraid is it just more of the same?
00:00:30.239 --> 00:00:34.880
So it had kind of been turned into something of a cold war in the strait.
00:00:34.960 --> 00:00:38.640
Yes, there were periodic attacks here and there, but it was kind of status quo.
00:00:38.799 --> 00:00:41.759
Part of, I guess, the cold part of the war was Iran and Oman.
00:00:42.079 --> 00:00:51.200
If we'd get closer to signing an agreement for sharing authority over the strait, it's not clear entirely what that would mean on a practical level if a U.S.
00:00:51.280 --> 00:00:55.840
blockade was still in place, but it was kind of uh some change to the to the status quo.
00:00:56.159 --> 00:01:01.759
Um but just in the last few days, we've seen more actual um strikes back and forth.
00:01:02.000 --> 00:01:02.640
The U.S.
00:01:02.799 --> 00:01:08.319
had reported making a lot of progress in demining kind of the main channel through the through the center of the street.
00:01:08.560 --> 00:01:10.079
And then the U.S.
00:01:10.239 --> 00:01:18.879
struck some rocket launchers near the coast, which were possibly going to be used to deploy more mines by rocket.
00:01:19.040 --> 00:01:23.359
Um, if that's uh something that Iran has capability of.
00:01:23.439 --> 00:01:27.519
And that's kind of spurred some back and forth um additional strikes, including on U.S.
00:01:27.840 --> 00:01:29.680
sites in the region.
00:01:30.079 --> 00:01:34.319
Um, but unfortunately for freight, it really means it really has meant more of the same, right?
00:01:34.400 --> 00:01:36.079
The price of oil is still elevated.
00:01:36.159 --> 00:01:38.239
Um, there's very little traffic in and out.
00:01:38.319 --> 00:01:42.799
Um, and so certainly for uh container traffic to the Gulf, it's still very disruptive.
00:01:43.120 --> 00:01:50.480
Okay, so turning now to container rates, peak season, as we know, got off to an early start across east-west lanes back in about mid-May.
00:01:50.879 --> 00:01:56.560
But it seems that while the early start meant an early end for Asia Europe, the Trans-Pacific is still going quite strong.
00:01:56.879 --> 00:01:58.640
So why are we seeing this divergence?
00:01:59.200 --> 00:02:03.200
Yeah, so we've definitely seen buying strength continue through August.
00:02:03.280 --> 00:02:07.280
Uh, and it seems, you know, into the start of September on the Trans-Pacific.
00:02:07.439 --> 00:02:12.800
Rates to both lanes ticked up by 2% last week to new peak season highs.
00:02:12.879 --> 00:02:21.599
So for the West Coast, prices are above$7,600 per 45th container to the West Coast,$9,800 FEU to the East Coast.
00:02:21.759 --> 00:02:30.319
Carriers are increasing capacity a little bit, at least scheduled capacity for September, which kind of shows there's anticipation that there's going to continue to be demand.
00:02:30.479 --> 00:02:36.719
There may even be additional rate increases, particularly for the East Coast where there's been less space, has been a little bit tighter.
00:02:37.120 --> 00:02:42.639
And then Golden Week starts in October, and we're seeing blank sailings scheduled for then or already announced for then.
00:02:42.719 --> 00:02:45.680
So that's probably when this demand will start easing.
00:02:45.919 --> 00:02:57.759
There's no clear single explanation for why demand has been kind of surprisingly resilient beyond, you know, I think people thought that the peak was going to be in um already in July.
00:02:57.919 --> 00:03:00.080
Um, there are a couple possible contributors.
00:03:00.159 --> 00:03:01.199
It's probably more than one.
00:03:01.360 --> 00:03:05.199
One is that we didn't have uh a sharp tariff hike in July.
00:03:05.280 --> 00:03:23.439
So if some shippers were kind of front loading ahead of anticipation of higher tariffs and those didn't materialize, tariffs are more or less replaced with um tariffs at similar levels to the expiring ones, uh, that might be a reason that we're seeing demand continue into, you know, what is kind of typically still part of peak season into August and September.
00:03:23.599 --> 00:03:33.120
The other possibility, and this is something there's just been a report of this week, is that hardware and kind of materials for building data centers is starting to move, or a lot of it is starting to move by ocean.
00:03:33.199 --> 00:03:47.520
So we've seen this in air where a lot of the kind of really high value parts of those um components and things like that are moving by air, but we're seeing a lot of kind of the heavier materials moving by ocean, and that's already starting to be a factor, which is really not seasonal at all.
00:03:47.599 --> 00:03:51.520
It's just where demand has been really surging and is projected to kind of continue to be very strong.
00:03:51.599 --> 00:03:52.800
So that might be a factor.
00:03:52.960 --> 00:04:01.520
The other part, and you know, this is kind of a relatively new development, is that some of the big retailers are starting to get big tariff refunds from the EPA tariffs paid last year.
00:04:01.759 --> 00:04:13.520
And so um are starting to reduce prices, and that might be increasing sales, and that might be, you know, increasing expectations for inventory levels that they were going to want to have for the coming holiday season.
00:04:13.599 --> 00:04:15.439
So that might be another factor as well.
00:04:15.599 --> 00:04:20.319
Um, one other thing, just in terms of uh rates on these lanes, is Panama Canal.
00:04:20.399 --> 00:04:22.480
And we spoke about this, I think, the last couple of weeks.
00:04:22.639 --> 00:04:26.959
The Panama Canal, we had it in El Niño, they had lower than expected rainfall since May.
00:04:27.040 --> 00:04:31.279
They're expecting drought conditions until the start of rainy season next year.
00:04:31.439 --> 00:04:37.600
And so they're already taking um pretty moderate steps, but steps nonetheless to um conserve water.
00:04:37.759 --> 00:04:44.560
So that means that they're allowing fewer vessels to go through and that they're allowing uh kind of a shallower maximum draft.
00:04:44.639 --> 00:04:46.879
And those are starting to go into effect in September.
00:04:46.959 --> 00:04:58.720
Some of them have been postponed until October, but carriers are introducing surcharges for uh containers passing through the Panama Canal, and that might put pressure on East Coast rates in particular this month or certainly down the road.
00:04:59.120 --> 00:05:03.040
But even Asia Europe container rates aren't back to where they were pre-peak season.
00:05:03.199 --> 00:05:04.399
Why do you think that is?
00:05:05.040 --> 00:05:08.319
Yeah, so prices have cooled on Asia Europe lanes.
00:05:08.399 --> 00:05:09.680
They peaked in mid-July.
00:05:09.839 --> 00:05:24.319
They're cooling on easing demand, but we have capacity constraints from port congestion that might be helping to keep rates higher than they were, higher than like going back to, let's say, normal before uh where they were before peak season in late May.
00:05:24.399 --> 00:05:29.920
So Asia to North Europe prices have eased by more than$1,000 for FEU since mid-July.
00:05:30.079 --> 00:05:36.720
They're at about$4,600 now, but that's still about 70% higher to where they were before peak season demand started back in May.
00:05:36.879 --> 00:05:39.040
For the Mediterranean, rates are at$4,800.
00:05:39.360 --> 00:05:42.720
That's down more than$2,000 from the high, but still 40% higher than before.
00:05:42.800 --> 00:05:49.040
So something is keeping rates higher than they were, assuming that that you know demand has really um eased, which seems to be the case.
00:05:49.199 --> 00:06:01.759
The you know, one part of congestion for North Europe has been low water levels in the Rhine River, and that's uh caused kind of backups to some of those ports that rely on the Rio 4 for uh inland transportation.
00:06:01.920 --> 00:06:05.279
Some rain has improved the water levels there, but it's still a factor.
00:06:05.439 --> 00:06:20.560
But the bigger factor, and this is a factor for Trans Pacific as well, though we did mention earlier, is really the unrelenting congestion in the Far East because of just a series of now we're up to five major typhoons that have really disrupted operations at some of the major ports, including Shanghai and Ningbo.
00:06:20.720 --> 00:06:28.399
So just last week or late last week, Typhoon Sao Dell closed ports in Shanghai and Ningbo for for more than a day.
00:06:28.560 --> 00:06:37.759
It disrupted operations as far north as Busan, and it could stay strong enough that it's going to kind of move back north and impact Shenzhen later this week.
00:06:37.920 --> 00:06:44.079
So these series of storms have kind of you know disrupted operation, caused the backlog, things start to recover, and then there's another storm.
00:06:44.160 --> 00:06:47.600
And so the backlog just isn't being able to be cleared completely.
00:06:47.759 --> 00:06:58.639
There are reports from portcasts that there's as many as 90 ships waiting and you know, waiting up to 11 days for a slot in Shanghai, and and you know, weights of more than a day on some of the other ports in the area as well.
00:06:58.720 --> 00:07:18.160
So that's causing a lot of disruptions, backup delays, absorbing uh container capacity because vessels are waiting and also causing a lot of delays and some congestion kind of unaffected ports because containers are being transshipped to other ports, are being moved to other ports or transhipping as well because cars are kind of skipping port calls at places like Shanghai where things are very congested.
00:07:18.240 --> 00:07:24.639
So that's probably a big factor in why we're seeing rates higher than they were pre-peak season, even if we're past um the high peak season demand.
00:07:24.879 --> 00:07:36.480
One other flay that we didn't mention that we don't mention very often because it's kind of less volatile, is the transatlantic, and we've seen rates increase$400 per container over the second half of August up to about$2,600 per container.
00:07:36.639 --> 00:07:41.759
It seems that this is really a function of carriers reducing capacity because volumes just weren't there.
00:07:41.920 --> 00:07:50.000
There are big increases announced for September, but we'll see if they'll take, given the fact that demand doesn't seem to be there, in order to get a big increase of F they'd have to reduce capacity a lot more.
00:07:50.319 --> 00:07:50.959
Okay, interesting.
00:07:51.120 --> 00:07:51.360
Okay.
00:07:51.519 --> 00:07:52.160
Lots going on.
00:07:52.480 --> 00:07:53.920
All right, that's all we have time for.
00:07:54.079 --> 00:07:55.439
Thank you as always, Judah.
00:07:55.519 --> 00:08:00.399
If you enjoyed this session, please hit the subscribe button and you'll get notified about all our future episodes.
00:08:00.720 --> 00:08:02.560
Thank you for listening and have a great day.
