No Stop Button, No Filter: What's Going on in Global Shipping This Week?

You're now listening to the Supply Chain Secrets Podcast. The ultimate insider's guide for all things ocean shipping. Presented by NYSEX. Hi, everyone. You're listening to the Supply Chain Secrets Podcast. I'm your co-host, Caroline Weaver, and with me is Lars Jensen. Lars, how are you doing? I'm doing great, thanks. Calling in here from Singapore this week. Awesome. Well, thanks for joining us. Kind of late at your time. We always appreciate it.

Let's go ahead and get started with rates. What are we seeing right now in the market? Well, across most of the trade lanes right now, we don't see much movement. But there's one thing I want to highlight. That's the development we're seeing right now on the Trans-Pacific, where...

The SCFI quoted spot rates went up quite a bit here on the reading of Friday, both to the East Coast and West Coast. I think we have a graph here where we can show what I'm talking about. Because when we say rates went up... I think we've been discussing this a few times before, but of course it's interesting to distinguish between a rate quote and then what actually at the end of the day has been paid for spot rates on order share. What I'm showing here...

are two lines. The blue line is the NIFI and the orange line is the FDFI. So SCFI being great quotes, NIFI being what is actually being paid. And in this case, the SCFI has been shifted forward by three weeks. Because it typically takes three weeks from a quote until that results into a booking. That booking results into somebody actually picking up an empty container, filling the container, driving that one back down to the terminal.

Ship arrives, container gets loaded on the ship. So NIFIRE only measures when it's actually loaded on the ship. Because prior to that point, there's a lot of elements. I won't say it can go wrong, but a lot of elements that might need to. a genuine quote not actually result people might not

Book on the quote, it might be too high, or they might book, but then decide they're not going to fulfill the booking because the rates went down. Or the carrier might decide, I'm not going to load the cargo because rates went up a lot more. There's a lot of things that can change between the quote until loaded.

What is interesting to see here, obviously the two are usually quite well correlated. But we can then see at times the market becomes overly exuberant. Let's take a look at the huge spike we discussed back in summer as well. where we could see a sudden spike this was when there was a pause on the u.s china tariffs for the first time that led to this rapid spike but we can see how the scfi went all the way up in this case to more than five and a half thousand dollars

But three weeks later, the corresponding spike in the NIFI that measures what actually gets loaded is more than $1,000 lower. So what that shows at that point in time was, yes, it was correct. The market absolutely did tighten, but it did not tighten quite as much as what was indicated by the quotes initially. Then fast forward here to, it was basically the SCFI when we got into September that started increasing.

Years again shifted three weeks, so the spike shows up in the beginning of October. But we can see in the blue knife file that the increase we saw in SCFI was widely reported as now there are significant increases in the spot rates. actually turned out not to be the case. Yes, there were increases in the genuine quotes, but at the end of the day, that did not lead to an increase de facto in the spot rates of cargo actually being moved.

So it was a sentiment-driven spike in the quotes at the time. So when we're looking at the increase we saw just now, that's the end point of the orange line. Of course, we cannot see that in the knife eye this week. Because again, there's a three-week lag time. So the quotes that we just now saw increasing, the open question is, is this going to also result in an increase in the actual date spot rates three weeks from now?

If we look at the carriers' attempts at getting the rates up in early September, that definitely failed. And given the negative impact still lingering on the U.S. markets from the trade war, I would be somewhat down for whether this new increase...

in quoted rates actually leads to a decrease in the paid rates. We'll of course know that for sure when we have the data three weeks from now. But if we look at the development early September, I think everybody that monitors all the different ratings is out there.

should be very mindful that there is this difference between the sentiment in the market when a vote is made and what then subsequently actually happens, where the sentiment-driven spike in September here can certainly be seen not to really have impacted the underlying market.

Yeah, it'll be interesting to see how it plays out. I think in last week's episode, we were talking about carriers trying to implement a GRI and a pretty steep one at that. So we'll have some interesting data points to look at in the coming weeks as that either materializes or doesn't. Exactly. And the one thing also to maybe clarify here when we say it's sentiment driven, it doesn't necessarily or it doesn't only mean carriers try to talk the market up.

It can also very legitimately be, I mean, let's use the massive spike over summer as an example, when the quoted rate first made this moonshot that they did. It was on the backdrop of a market that was genuinely phenomenally under pressure. because you had a lot of cargo that was ready to go in China. But what then happened in a very short time span was, as the carriers brought in more capacity, the U.S. importers changed their minds in terms of front-loading.

So the actual underlying market fundamentals changed so rapidly. So I would not say that the only reason for the spike was carriers trying to drive up prices just for the sake of driving up prices. The underlying fundamentals were somewhat with them but changed rapidly Yeah, there's definitely a lot of variables that go into how the price ends up working out. That's a good thing to keep in mind. Are there any other patterns or call-outs maybe for what we're seeing in terms of the rate level?

Another thing, I mean, this graph we're showing here is just to the U.S. West Coast from China. The NiFi part only goes to 25. The full data series of the spot race goes all the way back to 2023 for the NiFi index. And when I look at... the overall Asia-US West Coast and Asia-US East Coast.

as well as the subcomponents, rates are actually at their lowest levels over these two years that the Wi-Fi has existed. I would be somewhat hesitant to say historically low levels because the data series only goes back two years. But the important element here is that means we are at spot rate level territories that are now lower than where we were before the Red Sea crisis, which also goes to show the weakness right now that we see in the Pacific model.

Barring some sort of extraneous event that we have not yet encountered, do you foresee that the rates are going to continue pretty low for a while? Like if we're drawing parallels back to about 2023, the end of the year, like should we expect to kind of stay in this down market? I mean, if the market conditions continue as they are, we should likely also expect these rates to remain relatively subdued for a while. Things that can change it is...

Either a massive sudden change in U.S. tariff policy that might lead to a surge in demand. That would be one thing. But likely that would only happen after Trump meets with President Xi later here about that nine days time or so. So that would be one wild card. The other wildcard is if the carriers suddenly blank a lot more capacity than they do, we should also keep in mind that's a tool they have at their disposal. What we have seen the last five years is that that tool has usually not...

been effective in trying to drive rates up. But what it does seem to be effective in at times is to prevent rates from collapsing in a very weak market. So that might also be a tool in use. But the only other thing that would drive rates up It's time because as time goes by, we are then approaching the usual ramp up towards Chinese New Year peak six. Yeah. All right. Thank you for sharing your thoughts there. Any other notes to add about the rates right now?

No, again, for most of the trades, they seem to be relatively benign. Asia and Europe increasing just a little bit. Nothing really massive to report on there. There was a spike also in the SCFI rate from Asia to South America. But just as the comment on Pacific, the open question right now is whether that is going to also be reflected in the actual cargo or whether it is a quote-driven spike that does not necessarily.

end up being reality. All right. Awesome. Thank you for that. So let's shift gears a little bit and talk about some news that we spoke about last week. And then there's been some updates. So the IMO had their meeting. What was the outcome of it?

And what should we expect from it? I mean, let's be clear, before the meeting, basically all observers, myself included, had as a baseline that this would be voted through, it would be contentious, especially with the U.S. pressure, but it would be voted through. That did not happen. It also wasn't turned down. It was put in a condition of being a zombie proposal, for want of a better word. It's been...

kicked off to the side and say, let's look at it again a year down the line. There are multiple ways to look at it. You can either have the optimistic part and say, fine, on the timeline of decarbonization out to 2050, what does one year more or less actually matter? Even argument may not matter all that much. On the other hand, why did this one not go through? It would appear that a lot of this comes down.

just as much to geopolitics as it does to an environmental discussion. Some of the underlying vibes that are clear here also from some of the threats made by the U.S. prior to this basically points in the direction that it's... Overall geopolitics for the U.S. It's a U.S. that, by the way, is not really fond of the multilateral system. That's not a surprise either. And on that backdrop, it's a reasonable question to ask, well, if we push it a year, will anything have changed a year from now?

And to the extent it's geopolitics, it's hard to see what would have changed in the event. At least from what we have seen so far. The likelihood of this one being revived a year from now might not necessarily be all that good. What is more likely to then begin to happen is to see more national and regional environmental legislation come in.

I mean, we already know the EU have been first movers on this. We had the ETS from 2024, then we had fuel EU coming here in 2025, which are all de facto various forms of... taxation on emissions from shipping. And we might then expect the countries that were in favor of the net zero framework to maybe lose a little bit of patience and say, fine, then we're going to move on our own. We cannot wait for this, which...

On one hand, it means you're going to get more environmental push. You're not going to get as much. As from the Net Zero framework, the challenge with that one is twofold. First of all, the more countries or country blocks, I mean the EU is a country block, the more countries or country blocks that introduce their own legislation, the more difficult it will then be in the future to find one common global way of doing it.

Because that requires a lot of countries to suddenly back off what they have done. So that is problematic. The other problematic issue with this patchwork approach is it very likely creates more loopholes rather than less loopholes in terms of circumventing some of them. And we already know, for example, from the ETS, the obvious loophole being having as many portcalls as possible just outside the EU before going to and from the EU. We don't know how other countries might necessarily do this.

But that might realistically be the way the path the world is moving down. We should also keep in mind that back in 2023, that is basically when IMO settled on the idea that... shipping should decarbonize. They actually don't say at 2050, they say on or about 2050, so there's a bit of flexibility in that. And that was later then followed up with these targets for reductions in 2030, 40, and 50. The net zero framework was intended to provide a push towards achieving the 2030 targets.

At the very best, everything in the net zero framework is now moved a year. That means the first taxation payments for want of a better work will start to take effect in 2029. And the first target is in 2030. I find it very difficult to see how this... 2030 target can be reached. Of course, this goes for all of shipping. If we look at the major cargo shipping sectors and container shipping, it's clearly the sector that has been the most progressive.

with massive amounts of orders of lower emitting ships, tanker and bulker, not so much. When I say that we're not going to meet the 2030 targets, that's when I look at shipping overall.

I would also be surprised if container shipping overall, including every single shipping line in the world, reaches it. There will certainly be some individual companies that will reach it. But from an overall industry perspective, that's another discussion that's looming at some point in the future at IMO as well. adjusting those targets because the 20, 30 targets are unlikely to be met at an industry-wide scale, especially with the net zero framework now being in the state of a zombie.

Yeah, that's what I was going to ask. So if they have these targets 2030, 2040, 2050, what even happens if they don't meet the targets that they've established? Is it just a matter of moving it back officially? Yeah, exactly. Right now, there are not really any repercussions to do it. So the challenge then is something that already...

happens now because when you're moving the net zero framework a year that means you are going to have to reopen all the details because one practical matter is you're going to need to change dates and the moment you start Opening such a massive agreement, you will likely have all sorts of negotiations and discussions on it.

underlying parameters in it as well. So I would expect it won't be right here over the next 12 months. Yeah, it's probably a bit of a frustrating experience for those that have kind of put it together in the first place. I think what you mentioned about, you know, countries might start to take matters into their own hands is kind of interesting. Because if you start to make these investments in infrastructure and massive changes, it takes time, right?

I would almost imagine that you don't see a lot of countries taking matters into their own hands because of how complicated it could end up being, trying to match it later on. No, because when it comes to this for a number of countries, this quickly turns into be politics more than anything else. In that sense, it's easier for countries just to say, well, we're going to tax X, Y, and Z, just like you did with the ETFs, for example. We think this is going to have more tangible short-term effects.

would be on the investment into the facilities that are intended to produce the greenfield. Because the shipping lines are clearly not, at least the container shipping lines, again, that's... not enrolling the tankers and boaters here. The container shipping lines have not been shy in the past few years of ordering a sizable proportion of their vessels in dual fuel, which means they can run an LNG and, at least with some modifications, likely be transitioned also to

more green fuels in the future. But the Achilles heel here is not the shipping line's willingness to invest in these new ships. The Achilles heel is the ramp-up and the pipeline for building enough facilities to produce enough green fuel.

These are massive industrial-scale units that take years to build, very, very expensive. And on the basis of the code-fonement or the zombification of the net-zero framework, my expectation would be that a lot of the investors that were... sitting on the sidelines waiting to invest billions into these facilities but taking one look at this and say well we're not going to invest an enormous amount into producing green fuels when right now it's in significant doubt how rapidly

demand for those green fuels are actually going to pick up. Yeah, that's a good point. And something else I was wondering about was, in general, like vessel capacity. With this framework, was it anticipated that we would have to... retire some of the older vessels that were producing more emissions or that wouldn't have met the guidelines.

And that's changing now or maybe just postponing? No, I wouldn't necessarily see it that way. I see it the other way around. I mean, all the vessels that are poised to be scrapped anyway, they are old vessels that are relatively high emitting per TVU compared to newer vessels. We have an overhang of ships.

are going to be scrapped anyhow when the market normalizes. But what this, of course, does is when you are not penalizing the use of fossil fuels, That means that at least some of the older vessels might get their lifespan just prolonged by, say, a year or two, because vessels that under the NCF would be completely unviable to run, say, in 28. might still be able to run in 28 or 29 without too much penalty.

provided the market from a survive-man perspective, but not so weak that these vessels are going to go to happen anyhow. Yeah. All right. Awesome. Any final thoughts there? Should we move on to the Red Sea crisis and updates there? Let's move from one crisis to another. Okay.

Happy news all day. Oh, yes. So what's the latest here? We all are probably aware of the ceasefire, what's happening in terms of ocean shipping. Yeah. I mean, in terms of the ceasefire, the good news, of course, is that there's a ceasefire.

On the shipping news, that means there's nothing new. Shifts are still going around Africa. The carriers are erring on the side of caution. We should, of course, remember that there was also a ceasefire from late January until March, which then broke down. At that point, shipping lines had not changed. They're clearly approaching this one with caution. We are recording this one on Monday. And within the last 24 hours, there has been some level of hostilities between Israel and Hamas.

Whether that will then die down again, we don't know, but it definitely shows that the ceasefire is fragile at the moment. So with the current status on the ground from that alone, there would not be any shipping line that would contemplate. shifting back to a Suez rally right now compared to what we're already seeing. Houthis still have not announced a ceasefire, so they will still shoot at vessels linked to Israel, at least according to their perspective. So that's also still the case.

And then we saw yesterday there was an LPG, so liquid petroleum gas carrier, that suffered an explosion. And the knee-jerk reaction, of course, would be, okay, so that's another Houthi attack. But we might need to hold off a little bit on that. The military authorities down there, both UK and EU forces, are labeling this as an incident, not as an attack.

The Houthis have denied involvement. Of course, we shouldn't really trust very much that the Houthis say on this front. But in the past, they definitely have not been shy about bragging about attacks if they did it, so that they're saying they didn't do it. It might actually also be true. There's also been information linked out there that this vessel may or may not have been linked to the Iranian dark fleet, and it might actually be saving fuel.

to the Houthis in one of their ports. Iran has denied any involvement as well. Again, Iran is not really the epitome of truth either to believe here. So the only fact we know is that there's an LPG carrier that had an explosion and a fire. 24 people were saved, two were lost at sea, at the vessel right now, and it's abandoned. But who exactly is involved and what happened?

is unknown. I can say from a practical perspective, if I was a carrier, I'm not. But if I was a carrier, I'd also look at this and monitor and start thinking through if this really is solid and it holds up. The best time to start rearranging my networks would then be from the middle of February, because that's right after Chinese New Year.

The best point for all carriers when you're going to do these major rearrangements, especially of your Eastwards network, is typically after Chinese New Year, because that's the massive slump. That's where you have a lot more. flexibility in your networks to actually do this. Yeah. And that would be between kind of the peak seasons that we look at too, right? Yeah, exactly. So you would start this rearrangement. You also have a massive amount of blank savings right after Chinese New Year.

And again, Chinese New Year 26 is on February 17th, as far as I recall. That would be February, March could be a transition period. But that requires that we get all the way into basically January or so. it really is going to look like a solid peace agreement which is not where we are right now

Yeah. All right. Well, we'll keep an eye on that and report as anything happens or hopefully as nothing happens. That would be ideal. But we'll keep moving along here. So what is the latest on tariffs? Has there been any announcements? Anything go into effect?

There's not been any new announcement, nothing new going into effect. There's a couple of things that are worthwhile monitoring. There was a minor news clip last week from Treasury Secretary Scott Besson that he was at least claiming to have... the backing of some 85 senators to potentially give Trump leverage to put up to 500% tariffs on China. I wouldn't put much credence into this. I don't see it there as a headline, oh, we're going to get 500% tariffs. I see this slightly differently.

Remember that Trump is going to meet with President Xi, I think it's nine days from now. So of course, it's a negotiation game going on. And if we look at the way... US and China have approached the trade war ever since it began more than six months ago. Both parts seem to be following the same strategy they have done all along. China very simply follows a strategy of tit-for-tat.

Whatever the U.S. does, then China will do that inclined back. The latest example we saw was the USTR retaliation, for example. So that is very clear. That's China's approach to this. The U.S. approach seems all along to have been to ratchet up the threats of extremely high tariffs, as high as possible, in the hope that this kind of threat would bring China to acquire some of the U.S. claims.

So far in the trade war, it seems that China has had the upper hand in some of these ones. Whether that would be the case with what we're going to come into in nine days, of course, we don't necessarily know. But in leading up to that... we should probably expect to see the U.S. come with more threats of massive tariffs or other elements. I mean, let's keep in mind, tariff by now is...

not just tariff on goods. I would tend to see, for example, USTR under that same hat as well. It's an extended arm of the trade war. So we might see more of those things thrown on the table. Okay. Also, in looking at the strategy, in previous months, you've only really seen Trump will go to Truth Social and announce, hey, we're going to have a tariff on this commodity. It's kind of a different tactic to have it come from the Treasury Secretary.

Or have we seen that before? I haven't been monitoring whether we have seen that before, so I can't actually say neither. That's a fair... Fair answer there, Lars. You already know quite a lot about U.S. politics, not even being a citizen here. I'm not following every cabinet member and all their social profiles, let me be honest. Well, so you started talking about USTR. Let's talk about the updates there.

Both U.S. and China. Yeah. I mean, technically, they came into effect here in the week that just went by here on the 14th. So now you've got to pay if you're moving your...

Chinese-built ship into the U.S. or U.S.-controlled ship into China. Now, of course, for the USTR on the U.S. side, that has been... prepared for for months by the carrier so the number of chinese build ships coming in are very limited of course costco 00co are still being significant the impact over on the chinese side let's call it the china ustr for want of a better word

The Ketreus have not really had much time to prepare because this one was spawned by the Chinese almost at the last moment. But they are beginning to adjust just as you would expect in the case of Gemini. A good example is the one, Musk calls it the TP-7. Huppert calls it their WC-5 service. It used to call basically from Ningbo as a direct service over to the U.S. and then also calls Busan, for example. But a couple of the next ships are U.S. flat.

And they have simply said that, fine, we're not going to call Lingbo, which means they're not going to call China on that one. Cargo to and from Lingbo on that service will now be put on feeders and trans-ship in Busan or in Gwangiakob in Korea. So that's one of the tangible examples that the carriers are going to do exactly what you would expect. They will limit their cost exposure, try to shuffle vessels around to change vessel rotations so that...

They don't necessarily have to pay the China USTR, just like what we've seen to do over the US. Of course, it becomes more complicated now that you've got two different parties involved on both sides. Yeah, it's definitely more complicated. And then if you're having to tranship, essentially, to get around it, it's quite a headache, I imagine. All right. Well, we'll keep monitoring that as things progress.

anything changes, we'll be sure to let our listeners know. The last thing I wanted to ask you about was any poor congestion going on in Europe. Yeah, I mean, Rotterdam and Antwerp are definitely issues. both had labor actions up in Rotterdam. There was a strike by a 222 lashing company that built with lashing. That strike was basically cleared and done roughly a week or so ago, but the problem is you still have lingering congestion.

from that problem and take some time to work through. Down in Antwerp, it was the pilots that had labor actions, and that has led to a massive congestion problem right now. I believe here just before the weekend, there was... And then a pause, a 10-day pause announced in the labor action. So now it's business as usual, you could say, but of course it's not because it's a matter of trying to get to grips with the massive congestion that we see. And it's only a 10-day pause, so we don't know.

Either there's then a resolution of their issue and we can continue to try to get rid of the congestion. or the strike is going to be back on in a bit over a week. So congestion issues being worked through in Rotterdam, but are a significant issue at Rotterdam. How long were they on strike for? How much of a backlog is it? I believe it was about a week or so for the pilots. I can't remember the exact number.

They were not fully on strike, but they were working a lot less than what they usually did. Okay. And just in case some of our listeners do not know, can you explain what a lashing company is? The word is, I was about to say, centuries old. Think of a good old wooden ship with cargo crates and boxes on the deck. You would have somebody put a net and rope and lash it down, tie it down.

You do the same thing with modern container ships, except you're not using ropes, you're using giant steel rods and the like to put it down. But still the same principle, lashing is...

securing your cargo to the deck of the ship. Okay. All right. A little history lesson for everyone as well. All right. Anything else you want to talk about? Where are you venturing to next? You're in Singapore right now. What's the upcoming travel plans for you? I'm venturing all over the place.

going to go to the US and Canada for a couple of excellent conferences there. But then I'm looking very much forward to, before I finally make it back home to Copenhagen, to make a stopover in London on November 6th, where NYSEX have their faithful. futures event they put on there. That's going to be really exciting. One of the reasons I think it's going to be extremely exciting is I get to talk on stage with potentially one of the most interesting men right now that can...

put information also about what's going to happen, not just in shipping, but geopolitically, because NYSEX have managed to get Sir Richard Dillard in as one of the speakers. For those who have... No idea about that name. It used to be the head of the British intelligence service, MI6. So if anybody knows what goes on under the hood in a lot of geopolitical instability, what are driving this instability, where might we go?

he would be the guy. So for that event, I mean, first I get to talk to him about the geopolitical problems and then I will look at, okay, if these are the issues, what does that then mean for container shipping? How should we approach some of these issues? So for anybody in or around London with the ability to come to London, I would suggest reach out to the NYSEX team and let it be known you want to join. Yes, you can also look on LinkedIn. I know there's a lot of...

invites there and links so you can sign up if you haven't already but it's definitely going to be a really cool event. I'm a little jealous that I can't make it but Lars I know that you're going to have an awesome conversation with Sir Richard and really get down to some interesting details on things. have a good perspective going into next year of what we can maybe expect.

All right. Well, I think that's our episode for today. Thank you, everyone, for tuning in. If you haven't already subscribed, be sure to subscribe on Spotify, Apple Music, YouTube, wherever you listen to the podcast. And we'll be back next week with some more news. Hope you all have a great week.

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