Speaker 1: Uncertainty over the Straighthorf horror moves is keeping pressure on
Speaker 1: global shipping, with vessel traffics still below pre war levels.
Speaker 1: Let's ask Craig Fuller, CEO of Freight Waves, a company
Speaker 1: that provides real time data on freight demand, pricing and
Speaker 1: capacity across.
Speaker 2: The global logistics market.
Speaker 1: Craig, I want to have a broader discussion with you,
Speaker 1: But first, any developments around the straight of horm moves.
Speaker 1: Have we reached the cap beyond which you know, hiring
Speaker 1: a ship just isn't doable because there is no harm
Speaker 1: war for the price to go.
Speaker 3: No. I mean, ultimately, the logistics market is responding to
Speaker 3: this higher prices for containers, higher prices for shipping. But
Speaker 3: that's the great thing about logistics companies, as they respond
Speaker 3: to these events, they price it accordingly. And we're seeing
Speaker 3: freight rerouted to account for this disruption, which is just
Speaker 3: one of many many disruptions that we've had over the
Speaker 3: last you know, inevitably over the last decade.
Speaker 2: What about insurance costs? Do they continue to rise?
Speaker 1: Do we have any kind of fall off and insurance
Speaker 1: costs even when we got the memorandum of understanding.
Speaker 3: Well, I think Ultimately, a lot of the cost, the
Speaker 3: insurance cost is priced into the current conditions. While there
Speaker 3: are some attacks on civilian vessels, I think largely the
Speaker 3: sort of kinetic conflict is we'll call it simmering a
Speaker 3: little bit, but not explosive. And so ultimately, insurance companies
Speaker 3: and ship owners understand the risks and that is priced
Speaker 3: into the market currently.
Speaker 1: Craig, I want your thoughts as well on this new
Speaker 1: Arctic route that's being reported on today. So apparently a
Speaker 1: China shipping company is going through the Arctic because polar
Speaker 1: ice caps melting allow it to traverse from Asia to
Speaker 1: Europe in twenty days as opposed to the regular forty
Speaker 1: days it takes generally. Is this a route that could
Speaker 1: take off and help other shipping companies avoid these dangerous
Speaker 1: chow points.
Speaker 3: Yeah. I mean this has been something that's been talked
Speaker 3: about for at least the last decade. The fact that
Speaker 3: the polarized caps are melting, which will provide new sea lanes.
Speaker 3: Russia has has some break some ice breakers to be
Speaker 3: able to clear the lanes. This is one of the
Speaker 3: reasons that Donald Trump has wanted Greenland is because ultimately,
Speaker 3: if you're coming across the Arctic, You're going to pass Greenland,
Speaker 3: and it provides a much from a strategic standpoint, provides
Speaker 3: a really interesting sort of outcome. But this is really
Speaker 3: a continuation something that shouldn't be a surprise to anybody
Speaker 3: because of something we've been watching and monitoring for the
Speaker 3: past at least decade, and is certainly the dream of
Speaker 3: the Chinese, the dream of the Russians to get access
Speaker 3: to the North Atlantic because and the Arctic Ocean, because
Speaker 3: ultimately this provides you know, avoids the bottleneck that is
Speaker 3: in the Middle East and allows them to route more
Speaker 3: direct traffic to North America.
Speaker 1: Craig just more broadly, port volumes are surging. Ocean carrier
Speaker 1: rates obviously have gone through the roof, and they're passing
Speaker 1: on those costs. Energy sorry, charges have been very, very
Speaker 1: widespread and are getting more widespread.
Speaker 2: Truck manufacturing is tightening.
Speaker 1: All of this is a negative for the consumer and
Speaker 1: for those that are importing, but it's great news for
Speaker 1: the freight industry. Right is the freight recession definitively a
Speaker 1: thing of the past.
Speaker 3: Oh, the freight recession has been over since November, and
Speaker 3: everybody's celebrating because it's been a misable existence. Osha container
Speaker 3: Lines they were out of a recession pretty quickly, they
Speaker 3: had about eight month recession. But trucking has been was
Speaker 3: in a recession really since twenty twenty two, and it
Speaker 3: ended in November of this past year of twenty five,
Speaker 3: and so everyone feels relief. I would dispute your comment
Speaker 3: about it bad for the consumer, because ultimately, when freight's moving,
Speaker 3: that is good for consumers. I mean, transportation cost is
Speaker 3: about three percent of finished goods prices that consumers pay,
Speaker 3: So even if we see a doubling of freight rates,
Speaker 3: it's still a marginal impact for consumers in terms of inflation.
Speaker 3: So ultimately things are moving. The industry is feeling incredibly bullish,
Speaker 3: and we're seeing volumes pick up on the international container
Speaker 3: market as well as in domestic trucking and rail. It's
Speaker 3: up into the right for the freight industry, and I
Speaker 3: think that sells us a lot about consumer activity, but
Speaker 3: more importantly tells us a lot about industrial activity.
Speaker 1: Just on that point, everything I just mentioned, do they
Speaker 1: only add up to incremental costs for the consumer.
Speaker 2: Is this not a significant inflation push at all?
Speaker 3: Then it's not a huge impact to inflation. Ultimately retailers
Speaker 3: will absorb those prices. The biggest risk to retailers and
Speaker 3: really manufacturers is losing cells, so they will pay the
Speaker 3: higher freight rates and ultimately eat it in some of
Speaker 3: their margins. But look, we've seen in the past earnings,
Speaker 3: this past earning cycle that corporate profits are at record highs,
Speaker 3: so there is some ability for retailers and manufacturers to
Speaker 3: absorb higher freight rates. Ultimately, they want to get their
Speaker 3: products into the country, They want to get their products
Speaker 3: moving to end consumers, so they'll pay the higher rates,
Speaker 3: and ultimately consumers are going to see a marginal impact,
Speaker 3: not anything to worry about. What we worry about more
Speaker 3: about is demand the erosion, which right now we're seeing
Speaker 3: the opposite. We're seeing, particularly the industrial side, things pick
Speaker 3: up and consumer activity looks pretty strong consumer volumes, you
Speaker 3: can look at the container lines. The reason the ports
Speaker 3: are doing so well is because consumers are buying goods,
Speaker 3: and retailers are feeling much more confident about consumer activity,
Speaker 3: which I think is very strong. I wouldn't take any
Speaker 3: of the higher freight rates as a concern. Remember we
Speaker 3: were at twenty two thousand dollars in container prices, spot
Speaker 3: prices back during the peak of COVID, and we're only
Speaker 3: at seven thousand dollars right now, so there's a lot
Speaker 3: of room to go before I think there'll be substantial inflation.
Speaker 1: So give us an update then on the intra freight
Speaker 1: carrier wars. Right, So we have FedEx freight down more
Speaker 1: than four percent since it's spin off back in May,
Speaker 1: partially because Amazon has entered the scene.
Speaker 2: What's going on with terrain? Who's winning?
Speaker 3: Yeah, I mean ultimately Amazon. I mean it's sort of
Speaker 3: the worst kept secret Amazon was known to get into it.
Speaker 3: FedEx spin it off when it spun off is really
Speaker 3: a reflection of just how I mean, it's spun off
Speaker 3: at a very high valuation. It's called off a bit
Speaker 3: from where the original spin off was. There's been a
Speaker 3: little bit of just I think investors have rallied the
Speaker 3: transports for the last seven eight months and really calling
Speaker 3: up here a little bit of profit taking. I think
Speaker 3: everybody's wanting to see the second half and get confirmation
Speaker 3: that things are continuing to be bullish and we're continuing
Speaker 3: to see things ramp. That is, our channel checks have
Speaker 3: shown that there's been a bit of modal shift. We're
Speaker 3: seeing freight move off of trucking slightly into intermodal, which
Speaker 3: is by rail, simply because there's been a lot of
Speaker 3: movement in freight rates in trucking and so that we're
Speaker 3: seeing things put onto the railroads. And right now the
Speaker 3: spread between trucking rates and reil freight is thirty four
Speaker 3: That isn't near an all time high, and therefore the
Speaker 3: railroads are the primary beneficiaries, and companies like JB Hunt
Speaker 3: Hub Group that are public are really picking up a
Speaker 3: lot of share right now. Wow.
Speaker 2: Interesting.
Speaker 1: Finally, Craig, and we don't have much time left, but
Speaker 1: you have advocated in the past for a domestic marine
Speaker 1: industry right to ensure security and supply chains and so on.
Speaker 1: Are you hearing anything about the administration potentially taking stakes
Speaker 1: in any businesses surrounding supply chains, the network, marine industry,
Speaker 1: trucking industry, or anything like that, any whisperings at all
Speaker 1: in the community.
Speaker 3: Well, I mean, look, I don't think the administration is
Speaker 3: going to take any trucking investments. It's the most fragmented market.
Speaker 3: But when we talk about maritime, there is certainly some
Speaker 3: different bills executive orders that have tried to encourage maritime investment.
Speaker 3: There was a story not too long ago about a
Speaker 3: startup that's going to build ships, commercial ships that was
Speaker 3: originally supposed to go in California, but they moved it
Speaker 3: to Texas because of some issues with local immunis, power
Speaker 3: holdies and some things that they were not willing to
Speaker 3: do in California. Not a shock, and they moved it
Speaker 3: to South Texas. So I do think there's a movement
Speaker 3: and investment, and certainly administration has been very public about
Speaker 3: wanting more marine investments. It is providing incentives, but these
Speaker 3: you know, if we're going to build out a marine industry,
Speaker 3: we're talking we need a lot of money, hundreds of
Speaker 3: billions of dollars to really restore marine investments in the
Speaker 3: United States, and this is going to take many years.
Speaker 3: So a lot of the movement is very slow, it
Speaker 3: feels like from my perspective, but it's certainly moving in
Speaker 3: the right direction, but it's going to take a lot
Speaker 3: more than where we see today.
Speaker 1: All Right, Craig always a pleasure to talk to you.
Speaker 1: That is Craig for our CEO of Freightways