Tariff Whiplash, Demand Surprises, and Crew Change Chaos

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 kind of okay. I'm, as usual, out traveling. I'm in seashells. They're supposed to be beautiful, but...

I've been holed up here for the last day due to a small bout of food poisoning. But I'll live. All will be good again. Oh, gosh. I think it gets everyone at some point, especially with how much you travel. So it's kind of surprising that's the first time it's happened.

trying to record here. All right, let's get started. So let's start off with rates like we usually do. What's the latest there? Yeah, the latest and greatest is if you look at Asia Europe, it's just a confirmation of what we've been talking about the last few weeks as well. The peak season is definitely...

the over if you look at the scfi spot rates they continue downwards which is not surprising The rate level, if you look, for example, at Asia North Europe right now, at least the quoted rates as per SCFI are now around $1,300 per TEU, which is how they measure it at SCFI. This is somewhat on par with the slack level that we saw just after Chinese New Year earlier this year. Actually, it was slightly lower than that.

So that's probably some more room for that one to continue to slide further over the next month or two. But that's really to be expected seasonal. On the Pacific, it's a bit more interesting. If you look at the paid spot rates, the NiFi rates, they are now leveling out at a relatively low level that we've also talked about the last few weeks.

really interesting point to pick out here that we saw in the data coming on Friday is actually a slight increase in the paid spot rates from Northeast Asia to U.S. West Coast. Not from Southeast Asia or China, but actually from Northeast Asia. But it's a minor increase. If we look at the quoted rates on the SCFI, it has been going up over the past two weeks, roughly around $500 per 40 foot, both to the west and east coast.

which seems to be there's a little bit of last moment rush here before a Chinese golden week. Would we expect to see more increases? I would not necessarily be so sure. There was a bunch of carriers that had announced the GRIs here from September 1st. They had announced increases in the range between $1,000 and $3,000 per FFP.

But usually when you see these increases, if you look, for example, at the SCFI, that would usually manifest itself within one or two weeks. So I think we got the most of what the carriers could get there. Then it's the last petering off. Then we've got golden week, and then you're going to see a decline again on the Pacific as well, both on quoted and on paid rate.

Do you know if we've seen any increase in blank sailing announcements from carriers in the last couple of weeks? Yeah, we definitely have seen quite a few announcements of blank sailings. Not so much on the Pacific, more on the Asia-Europe. But so far the announcements we have seen are also more or less in line with what you would expect. I would not be surprised if you see a bit more announcements of blank sailings. And again this is fairly normal for this.

point in time. Of course, when you're planning your supply chain, it is annoying that some of the regular services you use do get blank. But again, let's be real. Demand tapers off. You can't have ships running around 70% full. it has to follow each amount. Yeah. All right. Awesome. Anything else to add about rates here? Should we move on to our favorite tariffs?

Let's move on to our favorite terrorist. I was about to say the gift that keeps on giving, at least in terms of topics that are interesting for shippers out here. And this last week didn't disappoint either. There were two executive orders that shippers need to... note here. Let's take the newest one first, the one that came on Friday. That was an executive order that suddenly, at least I had not seen the comment, it seems to come completely out of the blue, there's now suddenly an exception.

for about 800 to 900 different commodities. It's a very long list. It's a 37-page long list of all these different commodities. And it was announced, as I said, in an executive order on Friday. It actually comes into effect today. So a very, very quick turnaround. Yeah, no kidding. When I look at it, it's kind of an odd mix. It's a number of industrial materials, chemical compounds, but then there are also...

elements such as plywood and books and different elements that come on top of this. I can't quite make heads or tails in terms of any pattern in what we're seeing there. And again, it was surprising that it just came more or less out of the blue. And we're not talking just a handful of commodities, as I said, it's about

800 to 900 different ones at the ATHT-SUS level. There's another wrinkle in that specific executive order because the annex is actually not 37 pages. It's more than 100 pages. The 37 pages... Those are for the commodities where there is actually an exception in effect from today. The remaining part is an annex where in the executive order it states, paraphrasing slightly,

that when the US begins to negotiate trade deals with other countries, there might be exceptions to other commodities. These potential exceptions are the ones then listed in what's called Annex 3. So these are not commodities that are exempted, but they could potentially be exempted. And to make this even more weird, the executive order then also states that since they don't know how these negotiations will fare, the actual commodities that will get...

exemptions may or may not actually be the ones that are then listed in this content page document. I'm not quite sure what shippers should use that information for at all, to put it bluntly. It seems it would more be a matter of at least just look at the 37 pages and see. if some of your commodities are suddenly on that one. And this just came over the weekend.

I mentioned there were two executive orders. The other one actually came earlier last. That was an executive order codifying the so-called trade deal with Japan. And given that the... Executive order is relatively high level. It basically just states some of the highlights that we've seen in headlines already. So a 15% basically reciprocal tariff and a few of these other highlights.

And then it states in there, this was issued on September 4th, by the way, that within seven days, the specific impact on specific commodities should then be listed also in the federal register. This is now four days ago. That has not yet been listed. So there's a deadline three days from now. So anybody importing anything from Japan should keep their eyes out on the Federal Register because within the next few days, there's likely going to come another very, very long list.

of commodities with changes in tariff regulations. And as I mentioned, the other one here with the exemptions, that came out on Friday, a ballot from today. That's the second time in a month. We have seen this happen. There was also about a month ago, another change at a commodity level that was also announced on a Friday, effectively from a Monday. So we're beginning to see a pattern emerge here where...

When you get to the nitty-gritty parts of tariffs at a commodity level, details are not part of the executive orders. And when they are announced, it basically gives you almost no time as a shipper to actually prepare. Yeah. Well, it sounds like even... The commodities that are listed in the annex part of that document might be helpful for some shippers to know like, OK, my products might be part of a larger tariff initiative that's happening soon.

But also what we've seen is a lot of empty threats of that happening. And then it's just more work, more chaos. Exactly. And when you're looking at a 60-page annex and the executive order says... It may actually not be these commodities. It may be other commodities.

I have a hard time seeing the value of spending a lot of time trying to sift through them at this point in time. Yeah, it's almost like when you make a PowerPoint deck and you have all the extra slides at the end and you hide them, but they just decided to publish them all instead.

Yep, something to that effect. All right. Well, more news to come there. I'm sure we'll probably be talking about, you know, what happens over the week next week. But let's shift gears a little bit and talk about CTS demand data that came out.

Yeah, I mean, this is container trace statistics. They come out with global demand data every month and still, at least in my view, probably the most. accurate measurement. It's not 100% accurate. That doesn't exist. There are pockets around the world where it's hard to get solid data. But as data goes, I would say CTS is the best standard for demand measurement at a global level by far. And if you look at the new data for July, mind you, this is cargo loaded in July. So don't...

confound that with when you're seeing, for example, fierce data in the U.S. or imports into the U.S. that's measured when the cargo arrives. BTS data is when it's loaded. The cargo loaded in July. If I look at the global demand. It's up a bit more than 5% a year. This is actually incredibly strong growth, continues the pattern we have seen most of 2020. The U.S. is clearly...

the odd one out. If I look at and separate the data, so we have one bucket that's purely North American imports and exports and another bucket that is everything else around the world except cargo to and from North America. What you will then find is that the rest of the world actually grew 7% in July, roughly in line with what we've seen the last few months as well. The rest of the world is growing.

very strongly when it comes to demand. North American imports and exports combined, they declined for the fourth consecutive month. And mind you, when I'm measuring changes, I'm measuring year on year, not month on month. So if I look at the last four months, which are also the four months of the trade war, it is very clear that this has had a major negative impact.

on container volumes specifically to the U.S. In the accompanying newsletter that the CTS comes out with, they actually have a couple of data points I find are extremely interesting to highlight this. They see in their more detailed data. that specifically China's volumes to the US, they are now down 11%. If you measure year to date, you look solely at July, China to US volumes are down 15%. At the same time,

Also, if you look year-to-date, Southeast Asia to the US are up 21%. So this seems to also lend some credence to US importers potentially changing some of their suppliers around Southeast Asia. I don't have the full underlying at the country level from CTS, and the assumption here might be that some of this massive push might have been seen, especially when there was the 145% tariff on China, but not so much on the other Southeast Asian countries.

So it's very clear also from the US data here that the global container demand is very healthy in the entire world with US as the main notable exception. It's very negatively impacted by the trade war. I mean, I think the US demand being down, that's not entirely surprising. I think a lot of people maybe could have guessed that. But the global demand being high is...

Maybe a little surprising to me. Is that kind of what was expected going into this year? No, it's stronger than what was expected going into the year. I mean, overall, you would have expected coming into the year, also based on how we were expecting the economy to grow, with rates of maybe around...

three, call it three and a half percent or so, that we are now seeing global growth of five percent and actually the world excluding North America growing around seven percent is very, very strong indeed. All right.

Well, interesting. Thank you for sharing that. Let's talk about HMM. They're making some news lately here. At least they're coming to some of the headlines. At least there are market rumors out there that the Korean Development Bank or KDB will... So their majority stink. The name that's been mentioned is POSCO. For those that have no idea who they are, I was amongst one of them when I first saw the name.

It's apparently a large steel conglomerate in Korea that might be interested in trying to acquire that majority share. A little bit of free history here for those that have been around for a few years. You might recall that there was an attempt by KDB. to also sell their shares in Hyundai three years ago. At that point in time, Habak Lloyd was one of the frontrunners, together with a couple of other Korean conglomerates or industrial.

When you were approaching the final part of that round, Hapak Lloyd was then seemingly thrown out of the bidding round. It would appear that the Korean government did not want the German control of the Korean carrier. Then of the other industrial companies in Korea that were bidding, none of them ended up being allowed to acquire it and the process was basically halted.

I don't know exactly why my assumption would be that someone in the government and or KDB were looking at the potential suitors at the time. and maybe found that they were not necessarily the right companies to run what is basically the flagship Korean line as it is right now. Whether POSCO will be looked at in a different light remains to be seen, but it certainly does show that...

KDB is again active out there and basically saying that they don't have a need necessarily to own the control and share. All right. Kind of interesting to hear about that. Also, just for our listeners, make sure you understand it's POSCO with a P, not Costco. Interesting company name to compare, given that Costco is an ocean liner.

Awesome. All right. We'll keep track of that as things progress and provide updates. The last thing that we were going to talk about today is an interesting story about the U.S. visas for seafarers and how...

The rules might be changing there. Yeah, I mean, I also came across it here earlier this morning, and it's one of these where I don't want to take credit away from the ones who actually come up with it. So credit in this case, at least as I see, it goes to... splash 24 7 that broke this story it would appear that the u.s have been changing their visa rules for seafarers

This means that it would likely now become much more difficult for shipping lines to do crew change in U.S. ports. As I understand it, in the past you used to be able to get multi-entry visa that was... client for multiple journeys for the seafarers, it seems that that possibility has now gone. So you need a single entry visa every single time. You need a seafarer to then do a crew change in a U.S. location somewhere, which of course... is a logistical problem.

for shipping line usually a lot of seafarers would have a contract where they have a set amount of time they're on the ship if the ship then gets delayed you don't necessarily know three months in advance exactly which quarter gun the crew change in that could change That, of course, then becomes problematic if you can't have a multi-entry visa if you use the US a lot. Is that going to bring shipping to a halt in the US? Very likely not. What this would do is it would add a bit of cost.

to the shipping lines we all know where those costs tend to end up and i would assume shipping lines will do what they always do they will look at it and say okay can we then shift at least a larger share of the crew changes away from the us and do it in

other ports around the region in the Caribbean and Mexico and Canada, wherever the ships are otherwise calling. But it is one of these things that tends to also fly under the radar, but changing visa rules for seafarers is actually something that is... a practical and administrative problem for some shipping company. Yeah, I could definitely see that. Well, I'd be curious if any of our listeners are closer to this topic and have more details if you want to share in the comments. Be curious to...

I hear more about that. This is kind of news to me. I don't really understand how all of it works, but it seems like it would be a big issue. Could definitely be. All right. Anything else to add for today's episode, Lars?

no i think we covered most of it i mean all bets are off for the next week if we're going to get more changes in tariff levels because And I know it's becoming kind of a cliche that it's becoming ever more unpredictable. But with the executive order that also came on Friday, accepting hundreds of commodities, the level of unpredictability is staggering. I mean, I really do not envy.

the importers that need to sift through this, especially when a lot of these are industrial components or chemicals. The problem is if you are importing a lot of industrial products that might be half assembled, for example. you need to sift through how much of this applies to part of the product you are importing. On the other hand, if you are a customs broker out there, I mean, these must be bonanza times in terms of having people clamoring for your service.

because this is not an easy thing to navigate. Yeah, I mean, I think the demand for a good customs broker is definitely really high, but then the people that are actually doing it are... probably drowning in work trying to keep up with all of the changing rules and making sense of what's actually real versus what's just, you know, people are posting about and not actually law.

That's also why for this, I tend to focus mostly on what has actually been signed into executive orders or what have come out in the federal registry, because that is real. all the other press headlines in terms of what may or may not happen. I mean, the latest press headlines are...

Now Trump might put sanctions on Russia like they put the 25% penalty tariffs on India for buying Russian oil. But all of this is just words, speculation. Nobody has the slightest clue where that one is going to land up. So it's better to simply stick to what has de facto been signed into law, either in an executive order or coming out through the federal regime. Yeah, very good advice. All right. Well...

I think that's it for today's episode. Thank you all for listening. If you haven't subscribed, be sure to on Apple Music, Spotify, on YouTube, wherever you listen to the podcast. And until next week, I hope you all have a good one. Thanks for listening to Supply Chain Secrets Podcast presented by Nice Shacks. Be sure to subscribe on your favorite podcast app. Want to be a part of the show? Register to attend a live recording at the link below.