WEBVTT
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Hi and welcome back to Container Bites, your 10-minute update on the latest in freight.
00:00:04.559 --> 00:00:09.039
I'm Judia Frewine, joined as always by Judah Levine, our FreightOffs head of research.
00:00:09.199 --> 00:00:10.640
Judah, how are you today?
00:00:11.439 --> 00:00:12.400
Good, how are you doing?
00:00:12.720 --> 00:00:14.080
I'm doing well as well, thank you.
00:00:14.320 --> 00:00:15.519
All right, let's kick off.
00:00:15.679 --> 00:00:22.239
This week we've seen further escalations in the Saudi Arabia Houthi conflict, including attacks on airports in Riyadh and elsewhere.
00:00:22.399 --> 00:00:24.559
What has this meant for the freight markets?
00:00:26.000 --> 00:00:34.479
So there have been multiple attacks, actually multiple attacks on the airport in Riyadh, some of them deadly or quite deadly last week and into this week.
00:00:34.640 --> 00:00:38.719
There were interceptions of attacks at other airports in Saudi Arabia as well.
00:00:38.799 --> 00:00:44.000
This has led to disruptions and cancellations at a lot of these hubs across the country.
00:00:44.240 --> 00:00:57.039
For air cargo, uh Saudi Arabia is not a major kind of international hub for air cargo or transshipment hub like some of the other Gulf countries, particularly UAE and Qatar.
00:00:57.359 --> 00:01:01.200
So probably the cargo disruptions will be felt locally, right?
00:01:01.359 --> 00:01:09.840
So on kind of shippers or exporters who are uh dependent on those airports specifically, but probably not for their broader market.
00:01:10.319 --> 00:01:18.159
Um, you know, the escalation has come with retaliations, and Saudi Arabia has hit uh oil and fuel sites in Yemen.
00:01:18.319 --> 00:01:22.719
Now the Houthis have attacked Aramco headquarters, so kind of the saga continues.
00:01:22.879 --> 00:01:27.120
For the broader market, the question is what this could do to oil prices.
00:01:27.280 --> 00:01:29.519
Um, and the other factor is the Red Sea.
00:01:29.599 --> 00:01:39.439
So the Houthis have sought to kind of close the Babil Mandeb Strait, um, the southern part of the Red Sea to Saudi lakes traffic since July.
00:01:39.599 --> 00:01:50.400
There were attacks on several vessels into August, but they're, you know, following nine months really of no attacks on vessels in the Red Sea, um, but there haven't been any attacks since August.
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So the question is whether the current escalation is going to mean an increased likelihood of attacks on vessels in the Red Sea.
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Okay.
00:01:57.120 --> 00:02:02.480
And the increase in the Red Sea transits was one factor in the falling container rates for Asia Europe lanes.
00:02:02.719 --> 00:02:05.680
Is that trend expected to continue now that we've passed Golden Week?
00:02:06.000 --> 00:02:06.159
Right.
00:02:06.239 --> 00:02:20.400
So container carriers really on Asia, Europe lanes, so Asia, North Europe, and Asia Mediterranean have been gradually increasing Red Sea transit since June, which is kind of surprising because we just had attacks restarted after a long pause in July.
00:02:20.639 --> 00:02:32.879
But the attacks, according to the Houtis, are limited to just Saudi-linked vessels, even though earlier they had, you know, in principle limited to U.S.-linked vessels or Israel-linked vessels and that had caused everyone to turn away.
00:02:33.039 --> 00:02:37.680
Nonetheless, we've seen kind of a gradual and consistent return to the Red Sea.
00:02:37.759 --> 00:02:41.840
Now all the major alliances are returning.
00:02:42.240 --> 00:02:47.599
As we said, you know, if things really deteriorate, will we see them turn around again?
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We might, but you know, that remains to be seen.
00:02:50.319 --> 00:02:58.879
It has been a one factor in putting downward pressure on rates on those lanes that we've seen increased effective capacity because vessels are taking this shorter route.
00:02:59.039 --> 00:03:08.639
And it's been more so for Mediterranean than North Europe, but really for both lanes, much bigger factor, and the main driver of rates falling has been just being post-peak season.
00:03:08.719 --> 00:03:13.360
So peak season started early, ended by uh, you know, started easing already by mid-July.
00:03:13.439 --> 00:03:16.639
We've seen rates um falling since then.
00:03:16.800 --> 00:03:19.840
Right now, though, we're post-Golden Week, as you said.
00:03:20.319 --> 00:03:27.759
And for Asia Europe lanes, annual contract negotiations usually start around now because contracts are usually finalized by the end of the year.
00:03:27.919 --> 00:03:42.639
So last year, this time, you know, we had seen rates fall post-peak season, and carrier started increasing rates through um reducing capacity and through passing, uh pushing through GRIs, really one after another, almost up to the end of the year during that negotiation.
00:03:42.879 --> 00:03:49.919
Rates were starting at a very low starting point last year, uh, around this time, probably a several year low at that point.
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This year, rates are above$3,000 to both lanes.
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That's relatively high, 70% higher than it was last year.
00:03:56.000 --> 00:03:58.879
Nonetheless, we've seen some carriers announcing GRIs.
00:03:58.960 --> 00:04:00.479
We've seen rates tick up a little bit.
00:04:00.639 --> 00:04:03.759
Last week they increased 7% for Asia Mediterranean.
00:04:03.919 --> 00:04:10.400
Um, so it's possible that carriers will try to increase rates anyway as we're entering this um negotiating season.
00:04:10.719 --> 00:04:15.919
But um rate levels right now are being supported by a few things that might change, right?
00:04:16.079 --> 00:04:17.360
One is congestion.
00:04:17.439 --> 00:04:18.959
So we have congestion in North Europe.
00:04:19.040 --> 00:04:32.079
There was nearly um uh a very broad strike um called in Germany that was just uh kind of a verte, as there was uh uh an agreement reached between uh port labor and then port operators.
00:04:32.240 --> 00:04:34.800
Um so we have congestion in North Europe.
00:04:34.879 --> 00:04:39.120
Um we know there's really still congestion in the Far East from these series of typhoons.
00:04:39.279 --> 00:04:42.959
So that's one thing holding up rates to be higher than they otherwise would be.
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We also have fuel costs that are higher.
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It's possible that that will change next year.
00:04:46.959 --> 00:04:49.040
And on top of that, we have fleet growth, right?
00:04:49.120 --> 00:04:51.600
We know that there's new vessels being delivered all the time.
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The largest ones are delivered to these lanes.
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And we have this possibility that Red Sea capacity is going to continue, Red Sea transits are gonna continue to increase and increase capacity and all those things, right?
00:05:02.079 --> 00:05:10.959
If congestion subsides, if fleets grow, if fuel rates go down, and if Red Sea transits increase, all those things would put downward pressure on rates.
00:05:11.040 --> 00:05:22.319
So you're seeing some uh shippers being a little bit hesitant to enter negotiations right now and reports that some of them are are are asking for uh extending current contracts for a few months to wait and see where it goes.
00:05:22.399 --> 00:05:26.720
So that's another kind of um element of what's going on in those lanes right now.
00:05:27.040 --> 00:05:27.680
Okay, got it.
00:05:27.759 --> 00:05:29.839
And as you mentioned, Golden Week is now behind us.
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Is there any effect on Trans-Pacific rates?
00:05:34.000 --> 00:05:36.399
So on the Trans-Pacific, there's been a different story.
00:05:36.480 --> 00:05:45.040
We had the same early start to peak season, but we just kind of had sustained um uh demand through really right up till Golden Week.
00:05:45.120 --> 00:05:48.959
Um, there seems to be some signs that demand is starting to ease right now.
00:05:49.120 --> 00:05:52.720
So just in terms of freight rates, you've seen them at at peak levels.
00:05:52.959 --> 00:06:06.720
Right last week, um, Far East US West Coast rates dipped 2% to um about$8,150 per FEU, which is still very elevated, but it's maybe uh an indication that we're gonna start to see rates come down post-Golden Week.
00:06:06.879 --> 00:06:13.279
The National Retail Federation they project that November arrivals are gonna be 11% lower month on month compared to October.
00:06:13.360 --> 00:06:21.279
So that's another indication that we're just finally past that kind of peak season demand and you know a further easing into December.
00:06:21.519 --> 00:06:30.319
But here too, we have congestion in the Far East, we have relatively strong demand, so rates will probably stay more elevated than they maybe otherwise would have.
00:06:30.480 --> 00:06:34.879
And it's not that long until pre-lunar new year demand will kick in.
00:06:34.959 --> 00:06:43.199
So they'll probably be starting at a kind of higher uh starting, a higher floor from which you know that demand will start to push uh rates up.
00:06:43.279 --> 00:06:48.560
But we probably are past peak season finally, and we'll probably see rates uh easing.
00:06:48.639 --> 00:06:54.240
But again, how far, how fast they'll they'll uh fall is probably um a question.
00:06:54.639 --> 00:06:56.480
Okay, let's talk a bit about air cargo.
00:06:56.639 --> 00:07:01.839
So we touched already a little bit on it with the Saudi Arabia, but what are the trends in the broader air cargo market?
00:07:03.360 --> 00:07:18.240
So as we've been saying, kind of the big trends are some slowing in growth and even contraction in e-commerce volumes to some markets, but the emergence of AI, you know, data center-related hardware being a big driver of growth.
00:07:18.399 --> 00:07:23.439
So we've kind of seen reports of capacity shifting where those two factors are at play.
00:07:23.519 --> 00:07:33.759
So you have kind of capacity shifting away from Asia Europe, where the minimum rules changed in in July, and towards um the Trans-Pacific, where there's been this big growth in um AI-related hardware.
00:07:33.920 --> 00:07:37.759
And overall, there's been, you know, globally, there has been volume growth.
00:07:37.839 --> 00:07:40.319
So, and we also have the Fredo's Air Index.
00:07:40.480 --> 00:07:48.560
If we look at global rates, rates now are up 33% compared to where they were last year and 29% higher than they were before the street of hormone.
00:07:48.800 --> 00:08:02.000
So that shows um kind of the drive uh increased fuel prices is kind of across the board and um one element of what's going on here, and also just reasonable demand at some points outstripping capacity.
00:08:02.240 --> 00:08:09.519
If we look at rates on um specific lane levels, so if we look at Southeast Asia or North America, similar to the global benchmark, right?
00:08:09.680 --> 00:08:14.800
40% higher than they were last year, and that reflects that data center growth, especially on those lanes.
00:08:14.959 --> 00:08:26.240
But if we look at China-Europe, prices last week dipped a little bit to$3, about 60 cents per kilo, and that's down 9% year on year and up just 4% compared to before the war.
00:08:26.399 --> 00:08:37.759
So even with those increased fuel prices, it seems that on the China-Europe spot market, with um, you know, this big decrease in in e-commerce volumes, even with capacity shifting away, we're seeing downward pressure on rates.
00:08:37.840 --> 00:08:39.759
And this really seems to be more or less the outlier.
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On most other lanes, it's more similar to what we've seen in South States or North America, this big increase because of fuel costs before um coming with with the war and kind of uh you know come down a little bit since then by kind of remaining at that more elevated level, which is something we're not seeing for China Europe for now.
00:08:55.360 --> 00:08:55.919
All right, great.
00:08:56.000 --> 00:08:56.720
Thank you, Judah.
00:08:56.799 --> 00:08:58.159
That is all we have time for today.
00:08:58.320 --> 00:09:02.320
If you enjoyed this session, it's really easy to stay updated about all our future episodes.
00:09:02.399 --> 00:09:03.679
Just hit the subscribe button.
00:09:04.000 --> 00:09:05.600
Thank you for listening and have a great day.
00:00:00.239 --> 00:00:04.320
Hi and welcome back to Container Bites, your 10-minute update on the latest in freight.
00:00:04.559 --> 00:00:09.039
I'm Judia Frewine, joined as always by Judah Levine, our FreightOffs head of research.
00:00:09.199 --> 00:00:10.640
Judah, how are you today?
00:00:11.439 --> 00:00:12.400
Good, how are you doing?
00:00:12.720 --> 00:00:14.080
I'm doing well as well, thank you.
00:00:14.320 --> 00:00:15.519
All right, let's kick off.
00:00:15.679 --> 00:00:22.239
This week we've seen further escalations in the Saudi Arabia Houthi conflict, including attacks on airports in Riyadh and elsewhere.
00:00:22.399 --> 00:00:24.559
What has this meant for the freight markets?
00:00:26.000 --> 00:00:34.479
So there have been multiple attacks, actually multiple attacks on the airport in Riyadh, some of them deadly or quite deadly last week and into this week.
00:00:34.640 --> 00:00:38.719
There were interceptions of attacks at other airports in Saudi Arabia as well.
00:00:38.799 --> 00:00:44.000
This has led to disruptions and cancellations at a lot of these hubs across the country.
00:00:44.240 --> 00:00:57.039
For air cargo, uh Saudi Arabia is not a major kind of international hub for air cargo or transshipment hub like some of the other Gulf countries, particularly UAE and Qatar.
00:00:57.359 --> 00:01:01.200
So probably the cargo disruptions will be felt locally, right?
00:01:01.359 --> 00:01:09.840
So on kind of shippers or exporters who are uh dependent on those airports specifically, but probably not for their broader market.
00:01:10.319 --> 00:01:18.159
Um, you know, the escalation has come with retaliations, and Saudi Arabia has hit uh oil and fuel sites in Yemen.
00:01:18.319 --> 00:01:22.719
Now the Houthis have attacked Aramco headquarters, so kind of the saga continues.
00:01:22.879 --> 00:01:27.120
For the broader market, the question is what this could do to oil prices.
00:01:27.280 --> 00:01:29.519
Um, and the other factor is the Red Sea.
00:01:29.599 --> 00:01:39.439
So the Houthis have sought to kind of close the Babil Mandeb Strait, um, the southern part of the Red Sea to Saudi lakes traffic since July.
00:01:39.599 --> 00:01:50.400
There were attacks on several vessels into August, but they're, you know, following nine months really of no attacks on vessels in the Red Sea, um, but there haven't been any attacks since August.
00:01:50.480 --> 00:01:56.319
So the question is whether the current escalation is going to mean an increased likelihood of attacks on vessels in the Red Sea.
00:01:56.719 --> 00:01:57.040
Okay.
00:01:57.120 --> 00:02:02.480
And the increase in the Red Sea transits was one factor in the falling container rates for Asia Europe lanes.
00:02:02.719 --> 00:02:05.680
Is that trend expected to continue now that we've passed Golden Week?
00:02:06.000 --> 00:02:06.159
Right.
00:02:06.239 --> 00:02:20.400
So container carriers really on Asia, Europe lanes, so Asia, North Europe, and Asia Mediterranean have been gradually increasing Red Sea transit since June, which is kind of surprising because we just had attacks restarted after a long pause in July.
00:02:20.639 --> 00:02:32.879
But the attacks, according to the Houtis, are limited to just Saudi-linked vessels, even though earlier they had, you know, in principle limited to U.S.-linked vessels or Israel-linked vessels and that had caused everyone to turn away.
00:02:33.039 --> 00:02:37.680
Nonetheless, we've seen kind of a gradual and consistent return to the Red Sea.
00:02:37.759 --> 00:02:41.840
Now all the major alliances are returning.
00:02:42.240 --> 00:02:47.599
As we said, you know, if things really deteriorate, will we see them turn around again?
00:02:47.680 --> 00:02:50.080
We might, but you know, that remains to be seen.
00:02:50.319 --> 00:02:58.879
It has been a one factor in putting downward pressure on rates on those lanes that we've seen increased effective capacity because vessels are taking this shorter route.
00:02:59.039 --> 00:03:08.639
And it's been more so for Mediterranean than North Europe, but really for both lanes, much bigger factor, and the main driver of rates falling has been just being post-peak season.
00:03:08.719 --> 00:03:13.360
So peak season started early, ended by uh, you know, started easing already by mid-July.
00:03:13.439 --> 00:03:16.639
We've seen rates um falling since then.
00:03:16.800 --> 00:03:19.840
Right now, though, we're post-Golden Week, as you said.
00:03:20.319 --> 00:03:27.759
And for Asia Europe lanes, annual contract negotiations usually start around now because contracts are usually finalized by the end of the year.
00:03:27.919 --> 00:03:42.639
So last year, this time, you know, we had seen rates fall post-peak season, and carrier started increasing rates through um reducing capacity and through passing, uh pushing through GRIs, really one after another, almost up to the end of the year during that negotiation.
00:03:42.879 --> 00:03:49.919
Rates were starting at a very low starting point last year, uh, around this time, probably a several year low at that point.
00:03:50.000 --> 00:03:53.199
This year, rates are above$3,000 to both lanes.
00:03:53.360 --> 00:03:55.840
That's relatively high, 70% higher than it was last year.
00:03:56.000 --> 00:03:58.879
Nonetheless, we've seen some carriers announcing GRIs.
00:03:58.960 --> 00:04:00.479
We've seen rates tick up a little bit.
00:04:00.639 --> 00:04:03.759
Last week they increased 7% for Asia Mediterranean.
00:04:03.919 --> 00:04:10.400
Um, so it's possible that carriers will try to increase rates anyway as we're entering this um negotiating season.
00:04:10.719 --> 00:04:15.919
But um rate levels right now are being supported by a few things that might change, right?
00:04:16.079 --> 00:04:17.360
One is congestion.
00:04:17.439 --> 00:04:18.959
So we have congestion in North Europe.
00:04:19.040 --> 00:04:32.079
There was nearly um uh a very broad strike um called in Germany that was just uh kind of a verte, as there was uh uh an agreement reached between uh port labor and then port operators.
00:04:32.240 --> 00:04:34.800
Um so we have congestion in North Europe.
00:04:34.879 --> 00:04:39.120
Um we know there's really still congestion in the Far East from these series of typhoons.
00:04:39.279 --> 00:04:42.959
So that's one thing holding up rates to be higher than they otherwise would be.
00:04:43.040 --> 00:04:44.560
We also have fuel costs that are higher.
00:04:44.639 --> 00:04:46.879
It's possible that that will change next year.
00:04:46.959 --> 00:04:49.040
And on top of that, we have fleet growth, right?
00:04:49.120 --> 00:04:51.600
We know that there's new vessels being delivered all the time.
00:04:51.759 --> 00:04:54.079
The largest ones are delivered to these lanes.
00:04:54.240 --> 00:05:02.000
And we have this possibility that Red Sea capacity is going to continue, Red Sea transits are gonna continue to increase and increase capacity and all those things, right?
00:05:02.079 --> 00:05:10.959
If congestion subsides, if fleets grow, if fuel rates go down, and if Red Sea transits increase, all those things would put downward pressure on rates.
00:05:11.040 --> 00:05:22.319
So you're seeing some uh shippers being a little bit hesitant to enter negotiations right now and reports that some of them are are are asking for uh extending current contracts for a few months to wait and see where it goes.
00:05:22.399 --> 00:05:26.720
So that's another kind of um element of what's going on in those lanes right now.
00:05:27.040 --> 00:05:27.680
Okay, got it.
00:05:27.759 --> 00:05:29.839
And as you mentioned, Golden Week is now behind us.
00:05:30.000 --> 00:05:32.399
Is there any effect on Trans-Pacific rates?
00:05:34.000 --> 00:05:36.399
So on the Trans-Pacific, there's been a different story.
00:05:36.480 --> 00:05:45.040
We had the same early start to peak season, but we just kind of had sustained um uh demand through really right up till Golden Week.
00:05:45.120 --> 00:05:48.959
Um, there seems to be some signs that demand is starting to ease right now.
00:05:49.120 --> 00:05:52.720
So just in terms of freight rates, you've seen them at at peak levels.
00:05:52.959 --> 00:06:06.720
Right last week, um, Far East US West Coast rates dipped 2% to um about$8,150 per FEU, which is still very elevated, but it's maybe uh an indication that we're gonna start to see rates come down post-Golden Week.
00:06:06.879 --> 00:06:13.279
The National Retail Federation they project that November arrivals are gonna be 11% lower month on month compared to October.
00:06:13.360 --> 00:06:21.279
So that's another indication that we're just finally past that kind of peak season demand and you know a further easing into December.
00:06:21.519 --> 00:06:30.319
But here too, we have congestion in the Far East, we have relatively strong demand, so rates will probably stay more elevated than they maybe otherwise would have.
00:06:30.480 --> 00:06:34.879
And it's not that long until pre-lunar new year demand will kick in.
00:06:34.959 --> 00:06:43.199
So they'll probably be starting at a kind of higher uh starting, a higher floor from which you know that demand will start to push uh rates up.
00:06:43.279 --> 00:06:48.560
But we probably are past peak season finally, and we'll probably see rates uh easing.
00:06:48.639 --> 00:06:54.240
But again, how far, how fast they'll they'll uh fall is probably um a question.
00:06:54.639 --> 00:06:56.480
Okay, let's talk a bit about air cargo.
00:06:56.639 --> 00:07:01.839
So we touched already a little bit on it with the Saudi Arabia, but what are the trends in the broader air cargo market?
00:07:03.360 --> 00:07:18.240
So as we've been saying, kind of the big trends are some slowing in growth and even contraction in e-commerce volumes to some markets, but the emergence of AI, you know, data center-related hardware being a big driver of growth.
00:07:18.399 --> 00:07:23.439
So we've kind of seen reports of capacity shifting where those two factors are at play.
00:07:23.519 --> 00:07:33.759
So you have kind of capacity shifting away from Asia Europe, where the minimum rules changed in in July, and towards um the Trans-Pacific, where there's been this big growth in um AI-related hardware.
00:07:33.920 --> 00:07:37.759
And overall, there's been, you know, globally, there has been volume growth.
00:07:37.839 --> 00:07:40.319
So, and we also have the Fredo's Air Index.
00:07:40.480 --> 00:07:48.560
If we look at global rates, rates now are up 33% compared to where they were last year and 29% higher than they were before the street of hormone.
00:07:48.800 --> 00:08:02.000
So that shows um kind of the drive uh increased fuel prices is kind of across the board and um one element of what's going on here, and also just reasonable demand at some points outstripping capacity.
00:08:02.240 --> 00:08:09.519
If we look at rates on um specific lane levels, so if we look at Southeast Asia or North America, similar to the global benchmark, right?
00:08:09.680 --> 00:08:14.800
40% higher than they were last year, and that reflects that data center growth, especially on those lanes.
00:08:14.959 --> 00:08:26.240
But if we look at China-Europe, prices last week dipped a little bit to$3, about 60 cents per kilo, and that's down 9% year on year and up just 4% compared to before the war.
00:08:26.399 --> 00:08:37.759
So even with those increased fuel prices, it seems that on the China-Europe spot market, with um, you know, this big decrease in in e-commerce volumes, even with capacity shifting away, we're seeing downward pressure on rates.
00:08:37.840 --> 00:08:39.759
And this really seems to be more or less the outlier.
00:08:39.919 --> 00:08:55.039
On most other lanes, it's more similar to what we've seen in South States or North America, this big increase because of fuel costs before um coming with with the war and kind of uh you know come down a little bit since then by kind of remaining at that more elevated level, which is something we're not seeing for China Europe for now.
00:08:55.360 --> 00:08:55.919
All right, great.
00:08:56.000 --> 00:08:56.720
Thank you, Judah.
00:08:56.799 --> 00:08:58.159
That is all we have time for today.
00:08:58.320 --> 00:09:02.320
If you enjoyed this session, it's really easy to stay updated about all our future episodes.
00:09:02.399 --> 00:09:03.679
Just hit the subscribe button.
00:09:04.000 --> 00:09:05.600
Thank you for listening and have a great day.
