1 00:00:07,600 --> 00:00:10,360 Speaker 1: Hi everyone, this is Lee Clascow when We're Talking Transports. 2 00:00:10,440 --> 00:00:14,120 Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 3 00:00:14,360 --> 00:00:19,280 Speaker 1: Lee Clasgow, senior freight, transportation and logistics analysts at Bloomberg Intelligence, 4 00:00:19,520 --> 00:00:22,320 Speaker 1: Bloomberg's in house research arm of almost five hundred analysts 5 00:00:22,360 --> 00:00:25,959 Speaker 1: and strategists around the world. A quick public service announcement 6 00:00:25,960 --> 00:00:29,440 Speaker 1: before we dive in. Your support is instrumental keep bringing 7 00:00:29,480 --> 00:00:32,720 Speaker 1: great guests and conversations to you, our listeners, and we 8 00:00:32,800 --> 00:00:35,760 Speaker 1: need your support. So please, if you enjoy this podcast, 9 00:00:35,920 --> 00:00:38,440 Speaker 1: share it, like it and leave a comment. And if 10 00:00:38,479 --> 00:00:41,080 Speaker 1: you have any ideas or feedback or just want to 11 00:00:41,080 --> 00:00:43,960 Speaker 1: talk transports, I'm always happy to connect. You can find 12 00:00:43,960 --> 00:00:47,840 Speaker 1: me on the Bloomberg terminal LinkedIn, or on x at Logistics. 13 00:00:47,920 --> 00:00:48,600 Speaker 2: Lee. 14 00:00:48,760 --> 00:00:50,800 Speaker 1: Today we're going to do something a little different. This 15 00:00:50,840 --> 00:00:55,000 Speaker 1: episode will be co hosted by my Bloomberg Intelligence colleague, 16 00:00:55,080 --> 00:00:59,800 Speaker 1: Stefan Covicheck. Based in London, Stefan has over thirteen years 17 00:00:59,840 --> 00:01:02,960 Speaker 1: of credit experience, with a focus on European high yield 18 00:01:03,000 --> 00:01:07,120 Speaker 1: and crossover issuers. Prior to joining Bloomberg in twenty eighteen, 19 00:01:07,520 --> 00:01:13,000 Speaker 1: he was a high heeled analyst at RBS covering European industrials, 20 00:01:13,160 --> 00:01:18,520 Speaker 1: transportation and service companies. Stephen moderated a panel at a 21 00:01:18,680 --> 00:01:22,720 Speaker 1: Bloomberg Intelligence Shipping event at our London offices on September sixteenth. 22 00:01:22,880 --> 00:01:26,679 Speaker 1: The event was in conjunction of London International Shipping Week. 23 00:01:26,840 --> 00:01:28,560 Speaker 1: Welcome to the podcast, Stefan. 24 00:01:28,680 --> 00:01:31,280 Speaker 3: Hi Lee, thanks for having me. We had a great 25 00:01:31,319 --> 00:01:36,039 Speaker 3: discussion with two credit rating analysts covering container shipping, Daniel 26 00:01:36,120 --> 00:01:40,440 Speaker 3: Harld of Moodies and Raman Singla of Fitch. We focused 27 00:01:40,480 --> 00:01:43,520 Speaker 3: on three teams that could shape the sector in twenty 28 00:01:43,600 --> 00:01:48,559 Speaker 3: twenty six. Number one tariffs. US tariffs are disrupting trade 29 00:01:48,560 --> 00:01:53,480 Speaker 3: flows and injecting uncertainty into shipping networks. Tariffs have already 30 00:01:53,520 --> 00:01:57,600 Speaker 3: pulled demand forward, creating a risk of software activity in 31 00:01:57,680 --> 00:02:00,880 Speaker 3: late twenty twenty five and into two twenty twenty six. 32 00:02:01,480 --> 00:02:06,480 Speaker 3: Number two structural overcapacity. The global container fleet is projected 33 00:02:06,480 --> 00:02:09,720 Speaker 3: to grow by eleven percent by n twenty twenty six, 34 00:02:10,160 --> 00:02:14,360 Speaker 3: while trade volumes are expected to rise only about five percent. 35 00:02:15,000 --> 00:02:18,840 Speaker 3: This gap could pressure freight rates and margins across the sector. 36 00:02:19,480 --> 00:02:24,240 Speaker 3: And number three, the financial resilience of carriers. Despite the 37 00:02:24,240 --> 00:02:28,320 Speaker 3: weak market outlook, liners are entering twenty twenty six with 38 00:02:28,560 --> 00:02:32,680 Speaker 3: historically strong balance sheets. This could buy the invaluable time 39 00:02:32,760 --> 00:02:36,840 Speaker 3: to face near term risks. According to our panel, overall, 40 00:02:36,880 --> 00:02:40,760 Speaker 3: the panel struck a cautious tone. While liners are better 41 00:02:40,840 --> 00:02:45,960 Speaker 3: positioned than in past downturns, weaker create metrics look likely 42 00:02:46,200 --> 00:02:47,360 Speaker 3: in twenty twenty six. 43 00:02:47,560 --> 00:02:49,040 Speaker 1: Well let's hear what panel had to say. 44 00:02:49,440 --> 00:02:53,640 Speaker 4: Good afternoon everyone, and welcome, welcome back. My name is 45 00:02:53,680 --> 00:02:58,880 Speaker 4: Stefan Kovachev, senior credit analyst covering cyclical industrials and container 46 00:02:58,880 --> 00:03:03,040 Speaker 4: shipping here Intelligence in London. So today we will be 47 00:03:03,080 --> 00:03:09,120 Speaker 4: discussing container shipping outlook with a specific focus on challenges 48 00:03:09,160 --> 00:03:11,240 Speaker 4: and opportunities for twenty twenty six. 49 00:03:12,120 --> 00:03:12,840 Speaker 5: And for this. 50 00:03:12,840 --> 00:03:16,720 Speaker 4: Discussion, we are very fortunate to have a wonderful panel 51 00:03:16,960 --> 00:03:22,040 Speaker 4: here with us bringing together the big three credit rating 52 00:03:22,240 --> 00:03:26,000 Speaker 4: agencies who will share in a minute their view on 53 00:03:26,040 --> 00:03:30,560 Speaker 4: the outlook for container shipping. I'm delighted to welcome Daniel Harltt, 54 00:03:31,400 --> 00:03:34,320 Speaker 4: senior credit officer for container Shipping at Moodies. 55 00:03:34,680 --> 00:03:36,040 Speaker 5: Great to have you, Daniel, Thank you. 56 00:03:36,480 --> 00:03:40,320 Speaker 4: Completing our panel is Rama and Singla, director at Fitch 57 00:03:40,480 --> 00:03:46,000 Speaker 4: Ratings covering transportation. Lock you Raman, So let's dive right 58 00:03:46,120 --> 00:03:51,040 Speaker 4: in to give the audience a clear baseline. In one 59 00:03:51,160 --> 00:03:54,440 Speaker 4: or two sentences, could you summarize your twenty twenty six 60 00:03:54,520 --> 00:03:57,960 Speaker 4: outlook for container shipping Raman, what's your take? 61 00:03:59,000 --> 00:03:59,280 Speaker 5: Well? 62 00:03:59,440 --> 00:04:03,480 Speaker 2: Thanks, I probably would not be saying anything. No, very different. 63 00:04:04,200 --> 00:04:08,000 Speaker 2: We also have a deteriorating outlook with the expectation that 64 00:04:09,040 --> 00:04:12,520 Speaker 2: supply side will keep on exceeding the demand side, so 65 00:04:12,600 --> 00:04:15,920 Speaker 2: we'll have downward pressure on rates, And on top of that, 66 00:04:16,320 --> 00:04:19,520 Speaker 2: we have the risk of red seat transits normalizing. If 67 00:04:19,520 --> 00:04:22,839 Speaker 2: that would happen, we would have a significant increase in 68 00:04:22,839 --> 00:04:26,000 Speaker 2: effective capacity, which would further put pressure on rates. So 69 00:04:26,279 --> 00:04:27,280 Speaker 2: overall still negative. 70 00:04:28,240 --> 00:04:30,640 Speaker 5: Thank you. Remen Daniel, what's your take on outlook? 71 00:04:30,800 --> 00:04:32,440 Speaker 6: Be funny if I said that it's going to boom 72 00:04:32,480 --> 00:04:37,320 Speaker 6: next year, etstead No, I think. I mean we've been 73 00:04:37,400 --> 00:04:43,200 Speaker 6: saying since before the October seven attack that next year 74 00:04:43,279 --> 00:04:46,040 Speaker 6: is going to be weak because of over capacity, and 75 00:04:46,080 --> 00:04:49,200 Speaker 6: now we are sitting the second or third year in 76 00:04:49,240 --> 00:04:51,800 Speaker 6: a row saying it's going to be weak because of 77 00:04:51,839 --> 00:04:55,640 Speaker 6: persisting overcapacity. Now we do think that it's going to 78 00:04:55,720 --> 00:04:59,839 Speaker 6: be weak. The question is just one again. We know 79 00:05:00,040 --> 00:05:02,359 Speaker 6: about the overcapacity, We know that the fleet has grown 80 00:05:02,440 --> 00:05:04,480 Speaker 6: substantially more than the underlying demand. 81 00:05:04,800 --> 00:05:06,840 Speaker 5: And that we have a in. 82 00:05:06,920 --> 00:05:11,320 Speaker 6: Basically, if atri is being inflated by shortage of capacity, 83 00:05:11,320 --> 00:05:14,000 Speaker 6: that isn't really there because there is a structural overcapacity. 84 00:05:14,040 --> 00:05:16,039 Speaker 6: So if it's going to happen in twenty six or not, 85 00:05:16,200 --> 00:05:20,760 Speaker 6: I don't know. But as if we go back to 86 00:05:20,800 --> 00:05:25,799 Speaker 6: a normalized so S canal and other factors that are distorting, 87 00:05:25,839 --> 00:05:29,159 Speaker 6: then yes, twenty six would be a really really weak 88 00:05:29,240 --> 00:05:30,760 Speaker 6: year for the container shiping industry. 89 00:05:31,360 --> 00:05:36,480 Speaker 4: That's clear, Thank you, Daniel. Turning to the keyword tariffs. 90 00:05:37,000 --> 00:05:40,440 Speaker 4: How damaging our tariffs for container shipping and this is 91 00:05:40,480 --> 00:05:43,839 Speaker 4: the sector in a much weaker position today if we 92 00:05:43,920 --> 00:05:46,520 Speaker 4: compare to let's say a year ago on the back 93 00:05:46,560 --> 00:05:47,800 Speaker 4: of trade policy. 94 00:05:48,080 --> 00:05:50,840 Speaker 5: Raman, what is your perspective on tariffs. 95 00:05:51,480 --> 00:05:56,080 Speaker 2: Yeah, so, I think before the tariffs hit US in 96 00:05:56,120 --> 00:05:59,160 Speaker 2: April or the announcement came through, I think the expectation 97 00:05:59,320 --> 00:06:03,359 Speaker 2: for the global container volume growth for this year was 98 00:06:03,440 --> 00:06:05,960 Speaker 2: closed about four percent or so. I think Once the 99 00:06:05,960 --> 00:06:11,080 Speaker 2: announcement came out, the expectation from sort of bigger market participants, 100 00:06:11,640 --> 00:06:15,520 Speaker 2: some of which are here, was that we might see 101 00:06:15,680 --> 00:06:18,400 Speaker 2: slightly negative growth. And I'm talking about at global levels, 102 00:06:18,800 --> 00:06:23,160 Speaker 2: you know, so not only US, China, and since then 103 00:06:23,200 --> 00:06:26,800 Speaker 2: with some clarity happening in terms of great deals coming 104 00:06:26,839 --> 00:06:30,279 Speaker 2: through or some postponement, I think the current expectation is 105 00:06:30,279 --> 00:06:33,080 Speaker 2: we will probably be one to two percent below our 106 00:06:33,240 --> 00:06:37,200 Speaker 2: pre Tireft announcement expectations. So there is some impact. There 107 00:06:37,200 --> 00:06:39,120 Speaker 2: will probably be some impact next year also as we 108 00:06:39,160 --> 00:06:42,800 Speaker 2: analyze the impact this year into next year. But then 109 00:06:42,839 --> 00:06:45,200 Speaker 2: there is probably be a medium to longer term impact 110 00:06:45,279 --> 00:06:48,080 Speaker 2: if we see changes in supply chains in terms of 111 00:06:48,480 --> 00:06:54,240 Speaker 2: manufacturing capacity shifting and given in my view, given the 112 00:06:54,279 --> 00:06:58,040 Speaker 2: way the routes are right now, so one is the 113 00:06:58,120 --> 00:07:01,440 Speaker 2: volume impact, but in terms of the time mile uh demand, 114 00:07:02,920 --> 00:07:05,200 Speaker 2: I do not see a benefits probably been been negative. 115 00:07:05,200 --> 00:07:09,240 Speaker 2: We might just end up that that production capaccy shifting 116 00:07:09,240 --> 00:07:11,880 Speaker 2: closer to us or or the same distance, so we 117 00:07:11,960 --> 00:07:14,640 Speaker 2: be not really adding ten multimand in that sense. So 118 00:07:15,000 --> 00:07:17,360 Speaker 2: these are two negatives of you know, so overall sort 119 00:07:17,360 --> 00:07:20,640 Speaker 2: of volume demand going down and done miles not really 120 00:07:20,640 --> 00:07:25,559 Speaker 2: increasing or maybe maybe maybe likely decreasing. The third factor, 121 00:07:25,600 --> 00:07:28,520 Speaker 2: of course, is which can be sort of somewhat perversely positive, 122 00:07:28,600 --> 00:07:32,120 Speaker 2: is the supply chain situation or supply chain dislocations, which 123 00:07:32,120 --> 00:07:33,760 Speaker 2: is what we have seen in the last three years. 124 00:07:34,480 --> 00:07:37,360 Speaker 2: You know, with bort congestion and and and and the like. 125 00:07:38,880 --> 00:07:40,920 Speaker 2: Difficult to that. That is very difficult to predict. But 126 00:07:40,960 --> 00:07:42,560 Speaker 2: if that were to happen, you know, you could have 127 00:07:42,640 --> 00:07:45,480 Speaker 2: short term benefits, short term rates going up, which has 128 00:07:45,520 --> 00:07:48,040 Speaker 2: been positive for the industry for example last year. So 129 00:07:49,040 --> 00:07:51,400 Speaker 2: overall negative, but you could have short term blips. 130 00:07:52,080 --> 00:07:54,720 Speaker 4: Right, Thank you, Aramen Daniel. Let me bring you in 131 00:07:54,760 --> 00:07:58,240 Speaker 4: with the next question. How resilient is the sector's credit 132 00:07:58,320 --> 00:08:01,320 Speaker 4: profile heading into twenty two twenty six and do you 133 00:08:01,360 --> 00:08:05,040 Speaker 4: expect cash burn, higher leverage and worsening credit metrics for 134 00:08:05,160 --> 00:08:06,480 Speaker 4: the company that you cover. 135 00:08:06,760 --> 00:08:09,400 Speaker 6: That's a headline if I say yes to that, But 136 00:08:10,520 --> 00:08:13,280 Speaker 6: I would say if we take a step back, and 137 00:08:13,360 --> 00:08:16,680 Speaker 6: if we look at the ten largest container shipping companies, 138 00:08:16,680 --> 00:08:20,840 Speaker 6: but we exclude the ones without public balance, it's so 139 00:08:20,840 --> 00:08:23,840 Speaker 6: so they generate around sixty they have sixty percent of 140 00:08:23,840 --> 00:08:26,400 Speaker 6: the capacity in the market. When we went into COVID 141 00:08:27,080 --> 00:08:29,760 Speaker 6: Q one twenty twenty, so end of March ten, twenty twenty, 142 00:08:29,880 --> 00:08:33,400 Speaker 6: this guy, so it's eight nine companies. They had sixteen 143 00:08:33,440 --> 00:08:36,319 Speaker 6: billion in total of cash and short term investments on 144 00:08:36,360 --> 00:08:39,040 Speaker 6: their battleship. In Q two twenty five, they had ninety 145 00:08:39,080 --> 00:08:43,680 Speaker 6: six billion, So I think what we need to Yes, 146 00:08:43,720 --> 00:08:47,400 Speaker 6: there are a lot of challenges in the market, but credit, 147 00:08:48,080 --> 00:08:51,040 Speaker 6: the credit ratings and credit profile that we assess is 148 00:08:51,880 --> 00:08:55,000 Speaker 6: we do not fool ourselves saying we are very good 149 00:08:55,040 --> 00:08:57,199 Speaker 6: at predicting freight rates and how the market is going 150 00:08:57,240 --> 00:09:01,839 Speaker 6: to develop. We assess how these company is, how they 151 00:09:01,840 --> 00:09:04,480 Speaker 6: come to the market, they serve, so, what capital structure 152 00:09:04,480 --> 00:09:06,200 Speaker 6: they have, How does balances look like? 153 00:09:06,960 --> 00:09:08,800 Speaker 5: Do we expect weaker. 154 00:09:08,400 --> 00:09:11,960 Speaker 6: Metrics in twenty six cash burn and the other negatives 155 00:09:12,000 --> 00:09:16,560 Speaker 6: you said most likely? Yes, But I think the balance 156 00:09:16,600 --> 00:09:19,080 Speaker 6: its I mean they have with the exception of maybe 157 00:09:19,080 --> 00:09:21,839 Speaker 6: twenty three to twenty four. They've never entered and I've 158 00:09:21,840 --> 00:09:24,720 Speaker 6: written this line I think fifteen times, but they've never 159 00:09:24,960 --> 00:09:27,960 Speaker 6: entered the downturn with stronger balance sheds. And I think, 160 00:09:28,280 --> 00:09:30,599 Speaker 6: as people alluded to before, I think that goes to 161 00:09:30,679 --> 00:09:34,800 Speaker 6: many modes of shipping, but especially container shipping. We have 162 00:09:35,000 --> 00:09:36,600 Speaker 6: really strong balance shes right now. 163 00:09:37,360 --> 00:09:37,840 Speaker 5: That's true. 164 00:09:37,880 --> 00:09:41,040 Speaker 4: Indeed, Raman, let me turn to you with a supply 165 00:09:41,160 --> 00:09:45,800 Speaker 4: side question. I couldn't new ship deliveries or easing geopolitical 166 00:09:46,000 --> 00:09:50,360 Speaker 4: disruptions create excess capacity and put pressure on the industry 167 00:09:50,800 --> 00:09:53,960 Speaker 4: to counterbalance this more positive outlook we just heard. 168 00:09:54,880 --> 00:10:01,360 Speaker 2: Sure, well to throwut one metric. We have book currently 169 00:10:01,440 --> 00:10:05,760 Speaker 2: at about thirty percent of current fleet globally, which is 170 00:10:05,840 --> 00:10:09,320 Speaker 2: the highest level in more than a decade. You know, 171 00:10:09,320 --> 00:10:11,400 Speaker 2: two thousand and eight was a time when we had 172 00:10:11,440 --> 00:10:15,079 Speaker 2: like something like sixty percent, but different times, so thirty 173 00:10:15,120 --> 00:10:21,160 Speaker 2: percent that would indicate an annual gross capacity addition somewhen 174 00:10:21,320 --> 00:10:23,480 Speaker 2: mid two high single digics. For a few years to come. 175 00:10:24,080 --> 00:10:26,200 Speaker 2: You know, you will have that sort of that that's 176 00:10:26,200 --> 00:10:27,959 Speaker 2: at the gross level. So of course you could have 177 00:10:29,679 --> 00:10:35,440 Speaker 2: self help measures like scrapping, like slow steaming, but how 178 00:10:35,480 --> 00:10:38,600 Speaker 2: much would they help, Not sure? In terms of demand. 179 00:10:39,840 --> 00:10:45,400 Speaker 2: You know, historically container shipping volume growth used to be 180 00:10:45,440 --> 00:10:49,120 Speaker 2: about two terms of global GDP growth. That used to 181 00:10:49,160 --> 00:10:52,800 Speaker 2: be this long held rule of thumb. I think it 182 00:10:52,840 --> 00:10:54,679 Speaker 2: has come down to more like one and a half 183 00:10:54,840 --> 00:10:57,800 Speaker 2: times now on average the last few years. You know, 184 00:10:57,960 --> 00:11:02,240 Speaker 2: given that container shipping is fairly saturated in terms of 185 00:11:02,280 --> 00:11:07,720 Speaker 2: its share of global trade, global merchandise trade, it has 186 00:11:07,760 --> 00:11:10,120 Speaker 2: grown a lot over the last thirty years, but it's 187 00:11:12,080 --> 00:11:15,600 Speaker 2: in that share it's sort of big, I guess, so 188 00:11:16,640 --> 00:11:21,760 Speaker 2: in that sense, demand would probably still be less compared 189 00:11:21,840 --> 00:11:23,679 Speaker 2: even to the net capacity growth, so you would have 190 00:11:23,720 --> 00:11:27,960 Speaker 2: that pressure. You know, maybe they'll balance out or maybe 191 00:11:27,960 --> 00:11:30,440 Speaker 2: there'll be a bit more sort of net capacity grow 192 00:11:30,520 --> 00:11:32,120 Speaker 2: than demand for for the next few years. So I 193 00:11:32,120 --> 00:11:38,760 Speaker 2: think that structural aspect is with us for to stay 194 00:11:38,800 --> 00:11:40,000 Speaker 2: for for the next few years. 195 00:11:41,160 --> 00:11:43,920 Speaker 5: Thank you. Raman Daniel. What's your read on the supply 196 00:11:44,120 --> 00:11:45,040 Speaker 5: side of the equation? 197 00:11:46,400 --> 00:11:48,640 Speaker 6: I mean, if you look over the last ten years, 198 00:11:48,640 --> 00:11:53,760 Speaker 6: I think the nominal capacity has outgrown shipped volumes with 199 00:11:53,840 --> 00:11:56,440 Speaker 6: a factor of two over the last ten years. Yes, 200 00:11:56,480 --> 00:11:59,199 Speaker 6: and then you have slow steaming and all of these adjustments. 201 00:11:59,240 --> 00:12:02,120 Speaker 6: But really that's sort of where we are. 202 00:12:02,640 --> 00:12:02,920 Speaker 5: I think. 203 00:12:04,679 --> 00:12:07,439 Speaker 6: I'm not going to downplay tariffs and zuopilitories. I think 204 00:12:07,440 --> 00:12:12,400 Speaker 6: the biggest culprit or the biggest unknown and uncertainty is 205 00:12:12,559 --> 00:12:16,800 Speaker 6: why maybe let me rephrase that, is that it hasn't 206 00:12:16,840 --> 00:12:20,240 Speaker 6: been any scrappings. I mean, if you look at January 207 00:12:20,240 --> 00:12:23,520 Speaker 6: through August this year, and you compare the same period 208 00:12:23,559 --> 00:12:25,679 Speaker 6: every year in the last I think thirty years, you've 209 00:12:25,679 --> 00:12:27,920 Speaker 6: had two periods. So we had four thousand videos being 210 00:12:27,920 --> 00:12:29,360 Speaker 6: scrapped January to August. 211 00:12:29,400 --> 00:12:32,600 Speaker 5: You have two periods since ninety six where. 212 00:12:32,360 --> 00:12:35,320 Speaker 6: You've had as low or lower, which is twenty twenty two, 213 00:12:35,440 --> 00:12:38,040 Speaker 6: which is not really representable in two thousand and five 214 00:12:38,240 --> 00:12:41,280 Speaker 6: when the industry was in a growth mode. Now, as 215 00:12:41,360 --> 00:12:44,640 Speaker 6: long as we are adding more and more capacity every 216 00:12:44,720 --> 00:12:50,920 Speaker 6: year and we're not scrapping, it's going to just reinforce 217 00:12:51,640 --> 00:12:53,160 Speaker 6: when the negative effect. 218 00:12:52,920 --> 00:12:53,880 Speaker 5: Hits this market. 219 00:12:54,280 --> 00:12:58,000 Speaker 6: So the industry needs to start scrapping. I'm not a 220 00:12:58,040 --> 00:13:00,520 Speaker 6: scrapping strategist, so I don't know why there is not 221 00:13:00,600 --> 00:13:03,719 Speaker 6: being done, but that needs to be done on a 222 00:13:03,840 --> 00:13:07,640 Speaker 6: grand scale in order to mitigate the next couple of 223 00:13:07,720 --> 00:13:10,080 Speaker 6: years when it comes new capacity on the market. So 224 00:13:11,520 --> 00:13:13,720 Speaker 6: that is something that we've been writing about a lot. 225 00:13:14,880 --> 00:13:18,600 Speaker 6: Everybody knows about it, but yet scrapping remains limited. So 226 00:13:18,679 --> 00:13:21,040 Speaker 6: I think that's the problems that we are viewing here, 227 00:13:21,080 --> 00:13:21,680 Speaker 6: to be honest. 228 00:13:22,679 --> 00:13:24,520 Speaker 5: Great, thank you, Daniel. 229 00:13:24,559 --> 00:13:28,520 Speaker 4: Let's turn to freight rates now, which have been very 230 00:13:28,600 --> 00:13:31,480 Speaker 4: volatile to say the least since the pandemic. What's your 231 00:13:31,559 --> 00:13:34,720 Speaker 4: outlook for twenty twenty six in terms of container shipping 232 00:13:34,720 --> 00:13:38,280 Speaker 4: freight rates? Do you see signs of stabilization or maybe 233 00:13:38,480 --> 00:13:42,360 Speaker 4: further swings or downside risk here? Rama anything to add 234 00:13:42,400 --> 00:13:43,360 Speaker 4: on freight rates. 235 00:13:43,559 --> 00:13:45,480 Speaker 2: We do think the rates where they are, there is 236 00:13:45,640 --> 00:13:49,480 Speaker 2: maybe more downside through the year or into next year. 237 00:13:52,200 --> 00:13:55,000 Speaker 2: We have profitability levels at least currently for container shiping 238 00:13:55,040 --> 00:13:57,960 Speaker 2: companies which are still higher than their long term averages 239 00:13:58,280 --> 00:14:02,280 Speaker 2: at what twenty percent done margins, so there may be 240 00:14:02,320 --> 00:14:05,199 Speaker 2: a way for them to go down, and there is 241 00:14:05,320 --> 00:14:10,560 Speaker 2: usually a lag between rates and profitability. Having said that, yes, 242 00:14:11,520 --> 00:14:14,800 Speaker 2: we might read some sort of a floor, you know, 243 00:14:14,960 --> 00:14:16,800 Speaker 2: maybe not a lot to fall for the race from 244 00:14:16,800 --> 00:14:20,640 Speaker 2: where they are. One of course caveat is the Red 245 00:14:20,680 --> 00:14:23,520 Speaker 2: Sea again transit situation. If we have sudden, suddenly that 246 00:14:24,680 --> 00:14:28,080 Speaker 2: extra affective capacity coming on, I don't know how much 247 00:14:28,200 --> 00:14:30,560 Speaker 2: more they can fall because of that, but there is 248 00:14:30,600 --> 00:14:31,720 Speaker 2: a bit downside. 249 00:14:31,760 --> 00:14:34,800 Speaker 6: Yeah, we have a different view, by the way, but 250 00:14:34,880 --> 00:14:40,320 Speaker 6: we can well, I think we've clearly seen if we 251 00:14:40,520 --> 00:14:43,000 Speaker 6: if we'll go to take a step back to before 252 00:14:43,640 --> 00:14:48,280 Speaker 6: the red CEA situation we were predicting negat a little 253 00:14:48,280 --> 00:14:50,960 Speaker 6: bit more gern starting from Q four twenty three, which 254 00:14:51,000 --> 00:14:56,440 Speaker 6: also happens, and the capacity management that we are talking 255 00:14:56,480 --> 00:14:59,400 Speaker 6: about here, I think we believe that that was going 256 00:14:59,440 --> 00:15:02,240 Speaker 6: to happen well, but if we look at what happened 257 00:15:02,320 --> 00:15:06,800 Speaker 6: during just before October seven, there was that capacity management. 258 00:15:06,840 --> 00:15:10,800 Speaker 6: When rates were falling off the cliff, it didn't happen, 259 00:15:10,840 --> 00:15:15,160 Speaker 6: and we grew more skeptic to that that capacity management 260 00:15:15,200 --> 00:15:18,720 Speaker 6: in a market that is heavily oversupplied is going to stick, 261 00:15:19,080 --> 00:15:21,520 Speaker 6: because if we look at history, that has more or 262 00:15:21,600 --> 00:15:25,160 Speaker 6: less never happened before. And I do do not think 263 00:15:25,200 --> 00:15:28,120 Speaker 6: that all of the sudden, the industry will start just 264 00:15:28,240 --> 00:15:32,920 Speaker 6: parking ships or you know, going five knots traveling five 265 00:15:33,000 --> 00:15:35,400 Speaker 6: in a split of five knots to save for retreats, 266 00:15:35,440 --> 00:15:39,040 Speaker 6: because we know that they wanted to increase utilization. So 267 00:15:39,360 --> 00:15:40,960 Speaker 6: we have a little bit of a different view there. 268 00:15:42,120 --> 00:15:43,240 Speaker 5: Well, thank you all. 269 00:15:43,280 --> 00:15:45,480 Speaker 4: Before we wrap up, I just wanted to ask one 270 00:15:45,600 --> 00:15:50,640 Speaker 4: final question, maybe starting with you, Daniel, in thirty seconds 271 00:15:50,800 --> 00:15:54,200 Speaker 4: or less, could you please just share your biggest positive 272 00:15:54,640 --> 00:15:57,800 Speaker 4: catalyst and biggest risk you see on the container shipping 273 00:15:57,800 --> 00:15:59,600 Speaker 4: horizon for twenty twenty six. 274 00:16:00,360 --> 00:16:02,000 Speaker 6: Well, I mean, I hate to say it, but the 275 00:16:02,040 --> 00:16:05,600 Speaker 6: positive would be that we have increased in geopolitical tension 276 00:16:06,080 --> 00:16:08,680 Speaker 6: that would in some way distward supply chains, because that 277 00:16:08,840 --> 00:16:12,200 Speaker 6: is how the industry has been has been supporting the industry. 278 00:16:13,000 --> 00:16:17,560 Speaker 6: On the negatives, I'm a little bit afraid of what 279 00:16:17,720 --> 00:16:20,680 Speaker 6: is going to come out of the MPC meeting and 280 00:16:20,720 --> 00:16:22,920 Speaker 6: what's going to be the final vote, because if we 281 00:16:22,960 --> 00:16:25,920 Speaker 6: look at the curve that they have proposed, no one 282 00:16:25,960 --> 00:16:29,080 Speaker 6: can can adhere to that curve in terms of emissions. 283 00:16:29,120 --> 00:16:31,600 Speaker 6: If we look at twenty thirty twenty thirty four, even 284 00:16:31,640 --> 00:16:34,920 Speaker 6: with the most efficient challenged ships, it's not going to 285 00:16:34,920 --> 00:16:36,720 Speaker 6: be able to Everybody is going to have to pay 286 00:16:36,720 --> 00:16:39,280 Speaker 6: a penalty. So that is what we are focusing right now, 287 00:16:39,320 --> 00:16:41,880 Speaker 6: assessing what is going to come out from the IMO 288 00:16:42,480 --> 00:16:44,880 Speaker 6: over the coming months or so. 289 00:16:44,920 --> 00:16:47,239 Speaker 5: Thank you Daniel Raman. What's your perspective. 290 00:16:49,000 --> 00:16:54,640 Speaker 2: Yeah, I think key upside is of course one, as 291 00:16:54,720 --> 00:16:57,240 Speaker 2: An said, supply to dislocations, you know, which which could 292 00:16:57,880 --> 00:17:00,600 Speaker 2: lead to spike and rates. And also if we have 293 00:17:00,760 --> 00:17:03,240 Speaker 2: easying geopractical tention, that's a sort of more medium to 294 00:17:03,320 --> 00:17:06,960 Speaker 2: longer term. Positively, if there is more predictability in terms 295 00:17:07,000 --> 00:17:09,879 Speaker 2: of demand, it's it's you can have better planning for 296 00:17:09,960 --> 00:17:13,560 Speaker 2: CONTENTI shipping companies and hence overall positive. So that's that's 297 00:17:13,560 --> 00:17:16,359 Speaker 2: how we look at it. On the negative side, uh, 298 00:17:17,119 --> 00:17:22,040 Speaker 2: you know, listening trade conflicts you know, is a risk 299 00:17:22,080 --> 00:17:24,360 Speaker 2: that remains apart from the Red Sea situation. 300 00:17:25,040 --> 00:17:25,560 Speaker 5: Great well. 301 00:17:25,600 --> 00:17:28,880 Speaker 4: On this positive forward looking note. Our time is up. 302 00:17:28,960 --> 00:17:31,520 Speaker 4: A big thank you for our credit panel. 303 00:17:32,200 --> 00:17:35,080 Speaker 1: Thank you Stefan. That was an interesting conversation. Also, we'd 304 00:17:35,119 --> 00:17:39,640 Speaker 1: like to thank the panelists Moody's, Daniel Harlan and fetches 305 00:17:39,960 --> 00:17:43,440 Speaker 1: Raman Singla for their insights. I also want to thank 306 00:17:43,480 --> 00:17:45,680 Speaker 1: you for tuning in. If you like the episode, please 307 00:17:45,680 --> 00:17:48,399 Speaker 1: subscribe and leave a review. We have lined up a 308 00:17:48,440 --> 00:17:50,840 Speaker 1: number of great guests for the podcast, so please check 309 00:17:50,880 --> 00:17:55,000 Speaker 1: back to hear conversations with C suite executives, shippers, regulators, 310 00:17:55,000 --> 00:17:58,159 Speaker 1: and decision makers within the freight markets. Also, if you 311 00:17:58,200 --> 00:18:01,040 Speaker 1: want to learn more about the freight trend disputation markets, 312 00:18:01,240 --> 00:18:03,840 Speaker 1: check out our work on the Bloomberg terminal at big 313 00:18:04,200 --> 00:18:07,600 Speaker 1: and on social media. This is Lee Glasgow siding Off. 314 00:18:07,800 --> 00:18:10,400 Speaker 1: Thanks for talking transports with me. Talk to you soon.