WEEKLY MARKET UPDATE 03/07/2024

This newsletter's summary

Figure of the week

150%

Despite a 10% drop in container prices, it will still cost almost twice as much to get one compared to pre-Red-sea-crisis levels.

Quote of the week

"Logistics is not an expense, it's an investment."

?-Michael Allosso

?The Houthis sink a ship while supply chains adapt

Yemen’s Houthi Movement?attacked a ship in the Red Sea and sunk it, along with its over 20,000 cubic meters of fertilizer. In addition to the economic and environmental footprints, this incident should be the spark that blazes a destructive fire in an already-fragile logistics market. It should be, but it's not.

With retaliatory airstrikes coming from the West and transit's slow season?coming our way, it seems that the effect of Houthi's attacks are starting to dissolve in an ever-adapting supply-chain. On top of that, prices have already started to drop, 10% compared to what we saw in January. It seems that "the worst of the damage has already been done".

Airfreight rates remain down on 2023 levels in February

Airline companies have passed the Lunar New Year?bar and registered drops in their prices around 5%, but it seems the prices might continue to follow their dropping trend even further.

During 18 months, air cargo prices have been crumbling, coming closer and closer to marine transportation costs, with the famous Red Sea Crisis in the foreground. Some prices have increased during a short period of time at the end of January, picturing the choice of many companies to switch from sea to air to ship their cargo, avoiding the Houthi retaliations.

Weekly logistics trivia

Pierre-Georges Latécoère, referred to as the "Father of Commercial Aviation," was a French inventor and aviation specialist, at the very birth of planes as we know them, the beginning of the XXth Century. He created the "Aéropostale"?which was the first ever postal system carried out by plane, allowing the world to connect in a new way. His wish to connect cities and create?corridors?in the whole world is said to be the spark that started the fire of commercial airlines that are still up in the air nowadays, more than a hundred years later.

Mister Latécoère had his own strategy:

• Decreasing transit times:?Latécoère knew that the only way to connect France to Africa to South-America was through the seas. At that time, sailing?was considered dangerous (the First World War and the risk of a second one drastically increased the risk of sinking) and the air seemed like a?new corridor, full of opportunities. Latécoère saw that and decided to use it to transport passengers, packages and letters, all the way to the world's end, in less than a day or two (compared to weeks at sea).
• Using airplanes commercially:?He also understood that airplanes?were not just a military asset, and that they could be used to conquer the air commercially. Not only did he get that the next preferred mode of transportation would be planes, but he also found a way to industrialize this method of shipping by creating the first ever commercial routes up in the sky.
• Taking advantage of bimodal aircrafts: On top of that, Latécoère new very well that he had an edge compared to other companies. His company created air/sea aircrafts?that could land on water, a practical advancement in the field of aviation that could allow any plane to land anywhere on costal areas, delivering passengers and packages all accross South America. This was the first time a type of bimodal transport was implemented in international logistics.

To this day, Latécoère's museum is still being visited and his contribution to commercial aviation is revered. He is the father of commercial airlines.

An american train derails amid debate over rail safety

Pennsylvania has suffered a new derailment?in March 2024, following the worrying trend of train incidents leading to environmental and economical disasters. Spilling plastic pellets and diesel, the train could almost certainly have killed workers or citizens if the conditions had been different.

This derailment, like the previous ones, still sparks concern and outrage among american citizens with a broad?news coverage. Companies looking to trade in the region might think twice before using rail transport, risking to face derailment issues and?longer transit times?while the company fixes the railroad.

Customs & Regulations

Europe's Commissionners of Home Affairs and Justice?have attended a summit in Brussels at the beginning of the week (4-5 March). They decided to go over the current state of the Schengen Area, the free-trade area of the European Union. While the regional integration has already put forward some border control and customs control reinforcements?to avoid the smuggling of drugs, narcotics or even illegal immigrants, the two Commissionners decided to go even further by reasserting their position as a "team Europe" to protect its territory.

???Until Next Week

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Sources

The Houthis sink a ship while supply chains adapt

Airfreight rates remain down on 2023 levels in February

An american train derails amid debate over rail safety

EU Commissionners adress the state of the Schengen Area