How globalization is reshaping world trade

00:00:02: I would not be surprised that if we talk again in ten years or so from today, then the total volume being moved is probably a bit higher than what many people anticipate at this point.

00:00:21: So

00:00:24: Rolf welcome back to our second podcast and great talk too!

00:00:27: Have you been another busy month?

00:00:34: Things keep surprising us every now and then, but I mean at least not too many new things over the last month

00:00:46: or so.

00:01:03: Another record year.

00:01:05: So it's been an incredible seven decades since then, hasn't it?

00:01:08: It has.

00:01:09: I think if you think about it... ...I don't think that Malcolm McLean thought the impact would be so big of what he came up with because was a fairly simple idea.

00:01:18: but in the end is really transformed.

00:01:19: global trade.

00:01:21: Well totally transformed and i'm just thinking those few hundred boxes moved back there.

00:01:25: now You've got ships over twenty four thousand TE or twenty forty equivalent units.

00:01:30: i gather that last year was another record year with something like almost two hundred million maritime containers moved on something like six thousand ships of the growth has been absolutely phenomenal hasn't it?

00:01:41: but the problem now we've got international trade being disrupted by tariffs sanctions blockades attacks on shipping.

00:01:48: so the question is this era globalization over what do you think.

00:01:54: It's a good question and I think its something to keep some other people busy for long time, i think it's for sure not over.

00:02:01: i think we see globalization in.

00:02:13: I mean, global trade has continued to develop very well.

00:02:26: If i go back two and a half years look at where we are today then everybody would be really surprised about the amount of growth that was definitely not predicted.

00:02:36: so...I don't know how you see it but still quite optimistic

00:02:42: I mean, i've always thought container shipping was a fantastic way of spreading prosperity around the world.

00:02:48: but presumably you're seeing different trade patterns now.

00:02:50: Can he say something about how trade may be changing in response to all these other external impacts that your saying?

00:02:58: Yeah well... You just see that trade flows change and you still see new trade flows coming up.

00:03:04: If you're traveling around places like Africa or India, even some parts of Southeast Asia.

00:03:10: You still see a lot of goods that can be containerized.

00:03:13: and I mean just look at what happened over the last twenty five years in China?

00:03:17: Yeah i think there are other parts of world where we will see similar development maybe not at pace with China but certainly also growth potentials out there.

00:03:27: so I would not be surprised if we fast forward ten or twenty years that were still looking at the global market for containerized transport.

00:03:36: That's a lot bigger than what it is right now,

00:03:39: i see the ship soccer to get much because of everything in maximum size.

00:03:44: no i think there you know i don't think the ships are gonna get all that much bigger.

00:03:47: i think you know the incremental benefits of going much building much bigger ships are just not so high.

00:03:52: but I think that what you see when you look at global trade, there's a number of things people just don't always keep in mind.

00:04:02: Maybe to name two and maybe we can spend some time on it... One is trading balances.

00:04:08: Trading balances continue to grow which means the numbers people typically look at when they look at Global Trade Growth doesn't give them full picture.

00:04:18: The second one especially I would say not this decade, but in the last decade is that people have become a lot more efficient than they package goods.

00:04:29: And because of that maybe trade volume growth has not been so significant But we've actually still seen alot more cargo moving.

00:04:37: So for me those are two things People don't always look at with right perspective.

00:04:43: Just going back to little bit about situation United States Container shipping for many years and it's always the US consumer that was a driving force.

00:04:52: Americans just love shopping.

00:04:54: And so they were the ones of bringing in all the trade and said, The rest of the world sort of is driven by that.

00:04:59: So are we still shopping as much on this?

00:05:02: Still buying us much from what you're seeing in terms of cargo Inbound cargo an isn't still coming from China or I'm just saying diversification of sourcing.

00:05:12: i think when You look at the u.s.. It's only still very big consumer market.

00:05:17: I mean, the Americans will keep shopping as they have always done and a lot of that stuff would still need to come from abroad because they don't manufacture it at home.

00:05:28: so i think we'll continue to see a lot cargo being moved into US.

00:05:32: but when you look at growth across the globe then it will have different markets.

00:05:37: if you just looked like Africa Right you have eight hundred million people compared to the three hundred something in the u.s.. And the cargo that flows into africa is a fraction of what goes into united states india pretty much same story and i think we all underestimate it little bit.

00:05:55: how much these people will also consume if fast forward thirty or fifty years, So

00:06:07: as trade appears to be what you're saying, it's getting more fragmented or fracturing into some respects.

00:06:13: Are you still seeing the US dollar is a principal currency in which everything is charged?

00:06:19: Or are people using other... Particularly for freight rates not so much for other costs of charter rates.

00:06:24: but are freight rate still in dollars and are they another currencies as well?

00:06:29: I would say that in our industry U.S Dollar is still functional currency with everybody.

00:06:35: I also think that's not going to change anytime soon, at least not based on what we see.

00:06:42: Yeah no in the past have been attempts of charge freight rates say in euro but presumably never came to anything?

00:06:48: In some places there are occasional rate and a different currency But the vast majority is still being done in dollars both on fuel as in dollar charted rates or lot of terminal rates.

00:07:03: I don't think that's going to change fundamentally anytime soon.

00:07:07: Going back what you said a while ago about production, there has been lots of talk over the last few years as we know about nearshoring.

00:07:15: is it actually happening or just talk?

00:07:18: It

00:07:19: was probably both... You and i both know this whole discussion on changing sourcing patterns.

00:07:27: If I go fifteen years back, there were a lot of people already talking about diversification away from China.

00:07:34: We still hear talk about that today and for sure places like Vietnam in Indonesia have grown faster than china.

00:07:40: yeah i think thats very clear.

00:07:43: as far as say near shoring is concerned i mean mexico if you look at it from the US perspective Mexico certainly does a lot more these days then they did twenty years ago but manufacturing has moved back to the United States, for example or Germany.

00:08:00: For that matter there are probably some examples.

00:08:03: but in the overall scheme of things that's still not a lot

00:08:08: from point-of-view.

00:08:09: with container line like cappag Lloyd when you see things I mean In the past it was all traditionally just say The big trade US and rather Asia to us Asia to Europe and transatlantic Not quite so big is still quite important now It's getting much more complicated much more complex.

00:08:25: Presumably that's quite a good thing, isn't it?

00:08:27: from your point of view?

00:08:28: From the shipping lines' points-of-view... It might be more difficult!

00:08:30: Of

00:08:31: course there is a good for shipping line but yeah its bit more complex.

00:08:34: But the good things are we can send ships anywhere.

00:08:37: I mean whether ship needs to go to US or South America Or Africa.

00:08:42: in end does not make that much difference.

00:08:45: For some ships especially big ones There're limitations because they cant call everywhere.

00:08:51: But with infrastructure in places like India, Africa and South America continuing to develop I think that those challenges will become smaller In the next five or ten years.

00:09:03: You just mentioned about ships.

00:09:05: Obviously The really big ship is only designed for one big trade Asia Europe trades.

00:09:10: So are you having to think more specific ships For certain areas such as port facilities?

00:09:15: And like cranes Do you have to think in terms of the port facilities when trying to open up new markets?

00:09:23: I think many of our technical people would say yes, and i will probably saying no.

00:09:29: Because if we buy a ship today then we need to buy ships that were going use for twenty five years.

00:09:34: it'll be delivered three four or five year.

00:09:37: so you need to think several decades out... When look at developments that we see an infrastructure many places then a lot of markets will be able to take fifteen seventeen thousand two ships.

00:09:53: so as long if you don't go much beyond that.

00:09:56: I think your gonna be good.

00:09:59: and yes it may give some limitations in terms of deployment in the first couple years when u have the ship but over two and half looking at it for three decades i think thats pretty unproblematic, I mean if you go back just go back right.

00:10:14: i mean you've been in this industry also for a long time.

00:10:16: I'm gonna go back ten years or twelve years and look at what the biggest size was that we had out there.

00:10:23: nobody would think that twenty four case could be handled pretty much any porting, in european asia and i think that's too late to look at it.

00:10:31: when u have to take your decision now don't only look at whats already there today really look a little bit further up.

00:10:38: No, that's exactly what I was going to say just now.

00:11:07: Ultimate container carrier and everybody was convinced that it's going to be the biggest ship ever.

00:11:12: Yeah, It was five thousand six hundred two years with very nice ship.

00:11:15: You know it's a very nice shit yeah.

00:11:17: But so that how things change?

00:11:19: And whenever you take decisions on investing into new assets This is the way to look forward.

00:11:25: this is saying when you look at ports

00:11:28: now exactly and following up what your just saying about new markets whether its in Latin America or Africa other parts of the world, you feel confident that these markets are can be really developed and perhaps compensate for if we're seeing a slow down in growth.

00:11:43: In the US or in Europe?

00:11:45: Perhaps there's still scope there to further container growth.

00:11:49: absolutely weekend debate about how much that exactly will be.

00:11:52: but just look at the growth that we have seen into Africa over last couple years.

00:11:56: I mean it has been well into double digits every year yeah.

00:12:00: And i think when quite a lot of money into india i've been traveling around for fair bit i mean you see so many goods that can still be containerized and nobody knows at which pace this is going to happen.

00:12:14: I would agree today.

00:12:15: but if we take decisions with the twenty five or thirty year horizon, and this is all definitely going to come i mean just go twenty five years back look how much containers will move in an out-of-china.

00:12:27: i mean compare two today.

00:12:28: i mean that difference it's just gigantic.

00:12:30: I mean on China, obviously China after just years has been this huge export market but with a growing middle class.

00:12:37: Are you seeing imports?

00:12:38: Are they really hoping to drive the global markets as well?

00:12:42: Chinese consumers are ever going be as enthusiastic about shopping is their American equivalents.

00:12:48: I cannot judge how enthusiastic the Chinese will be.

00:12:52: But of course, we've seen a lot people moving into middle class and when you walk around in China it's not that they have no shops right?

00:12:58: There are lots of people out there buying all kinds of stuff That doesn't take away.

00:13:03: for China export is still super important.

00:13:06: In looking at last couple years The export outside Asia has grown at an unbelievable pace And i think also illustrates how difficult it is to predict in this market what's really going to happen.

00:13:19: I mean, i've always been very optimistic about the growth potential.

00:13:23: and coming back to two things that we talked earlier... Everybody talks about overall growths in container traffic but its all about- What are the growth on dominant legs?

00:13:34: Because if you look at the growth of the dominant leg that determines our capacity as required.

00:13:39: If your looking for last three years twenty four We saw ten percent growth from dominant legs.

00:13:44: In twenty five we saw eight percent and this year.

00:13:47: We are again at four point five.

00:13:49: if you look at that compounded, we aren't Twenty-four twenty-five percent in a three-year period which is way above what Anybody had expected?

00:13:59: And that's also why you see today That there's not a tremendous amount of overcapacity.

00:14:04: I'm not saying but they cannot be over capacity in this market because You know we've all been around for for long enough But right now there is actually not a lot, because of that strong growth.

00:14:14: And I think people have just underestimated it.

00:14:17: and now let's see what happens in the upcoming couple years.

00:14:20: but i'm not too pessimistic.

00:14:23: Are you seeing changes in what sort of commodities are being moved around the world?

00:14:27: I'm thinking, in terms of, say Europe.

00:14:29: we've probably got a more established mature market older population but you have much younger populations and other parts of the world.

00:14:36: So is there any real change in those sorts of commodities that your shipping around the World?

00:14:41: In fairness not too much!

00:14:43: The commodity mix is reasonably stable.

00:14:46: it's like... what we mentioned earlier about talking around nearshoring and bringing things back home.

00:14:53: And there are some changes that one sees, but it's really not all that much which in a way is also logical you know because In the end It's all driven by the difference in factor on production costs and then in many cases Also based only availability of raw materials.

00:15:16: When you're looking at new markets, where the potential is.

00:15:21: Is that driven by you?

00:15:23: Do you see your customers coming along to us saying we think a market here should open up and come into this portal or that port?

00:15:33: How does it all

00:15:33: happen?"?

00:15:35: I mean of course in the end people sometimes ask us whether we want to call certain markets.

00:15:40: they asked for sure other shipping lines as well.

00:15:42: but I mean, in the end it is where is manufacturing being done and whereas demand.

00:15:52: Take the chemical industry right?

00:15:55: You would always go to a place where feedstocks are relatively cheap.

00:15:59: that's why the Middle East traditionally so important on that market.

00:16:02: That also what you now see.

00:16:04: The US has been coming up.

00:16:08: And then port capacity typically created because it needs to be exported or imported for this matter And then we deploy the ships accordingly and so do many others.

00:16:21: Obviously right now it's pretty difficult times with sanctions, how do you respond or your customers cope?

00:16:29: Especially in US when they seem to fluctuate that often.

00:16:34: Who is actually responsible for sorting out who pays them?

00:16:39: That's a good question I think.

00:16:43: last year of course there were lot changes Teraf regimes and we still see some.

00:16:48: also this year i think people mean time by enlarge.

00:16:52: take a let's wait and c type of approach whenever there is change.

00:16:55: We react.

00:16:56: but it not a lot of people that try to be ahead of the curve or take very drastic decisions because, or to predict what politicians are going to do is just very, very difficult.

00:17:14: And I think last year we saw a lot of volatility and a lot spikes in demand.

00:17:19: that's actually been a little less at least not due to this in the last couple of quarters.

00:17:27: Now every so often when you hear about alternative ocean transport with rail transport there always in the past been your option of the Trans-Siberian railways.

00:17:36: And now we've got problems in the Middle East, so you're having to use trucks more and maybe some railways.

00:17:41: but do you see railroad?

00:17:43: In particular perhaps taking away some of the market from ocean transport?

00:17:49: Yeah I don't know.

00:17:50: i'm personally a bit skeptical about that for probably four couple reasons.

00:17:54: The first one is cost.

00:17:55: I mean costs.

00:17:56: it's just A lot higher if you want to move stuff over Rail then If You can Move It via the water.

00:18:04: Of course, rail capacity is important for inland destinations that can't be reached all that easy via ports but I think that's the main role that rail and also trucking will continue to play.

00:18:18: if look at crisis we see now in the Middle East Yes!

00:18:21: Now a lot of cargo has been moved into Oman or into Saudi and then being trucked onto some countries on the upper Gulf.

00:18:28: But the cost doing this three times used to be if you move it via the water.

00:18:35: So as soon that will possible again, I think efficiency... The fact is so much more efficient over-the-water means most of them go back how they were before.

00:18:49: I was struck by how optimistic you are about growth prospects.

00:18:53: And I hadn't really expected that, and thought he might be a little bit more gloomy in the future.

00:18:57: but it's good to hear things looking promising.

00:19:00: But growth has also been able to come through mergers and acquisitions.

00:19:04: obviously Hapagloid is being active over the past twenty years in buying or merging with other companies.

00:19:10: so does this still have the route?

00:19:11: I

00:19:13: mean, if anything i think we will still look for options to gain some scale and you know that was signed in a merger agreement with it would seem me up.

00:19:21: We think that's the company whether very similar strategy two hours very simple philosophy in terms of the way they work.

00:19:30: i mean they can add something toward what were doing taking probably on something from where are doing So together.

00:19:35: i believe that we could be better than what are each on our own and.

00:19:40: I think whenever you see those type of opportunities should look at it because in a market like this scale matters, We have a good track record.

00:19:59: when you look at what we did with the ships.

00:20:01: What would it be?

00:20:02: You are seeing also couple of smaller ones,

00:20:06: no you've grown a lot through merchants acquisitions and hopefully they can talk about that on other occasions.

00:20:10: I find that really interesting.

00:20:12: but so if you can't look say five ten years ahead your seem very optimistic that container shipping will continue to grow or continued to basically power the global economy.

00:20:23: I'm optimistic about that and i think you know, i've always been cautiously optimistic about this ever since i joined.

00:20:31: And i would also say if u now look back on the last ten or twelve years then at least until now we were definitely right.

00:20:38: yeah because when you look at growth of the cargo volume particularly out of asia particular on some of those dominant legs than volume is a lot higher these days.

00:20:50: And when you just look at some of those fundamentals, some markets that can still grow a lot more like the India, South America or South Africa in this world.

00:20:59: The fact there will be people who are lifted out from poverty so many people in these markets would gain wealth and I think they're still a lot to come!

00:21:21: probably a bit higher than what many people anticipate and at this point in time.

00:21:25: And let me still come back to that one point I made earlier, which is about efficiency.

00:21:31: If you go fifteen years back then lot of the containers were stuffed with an efficiency.

00:21:37: maybe seventy-five percent or so Today?

00:21:40: That's well above ninety.

00:21:42: So if we see that the cube utilization Is alot better today Than it was probably fifteen or twenty years ago That also hides some growth, if you want.

00:21:52: Because that means we just move more cargo in the same boxes.

00:21:56: and The same goes for packaging.

00:21:58: I mean If you look at televisions is always my favorite example... ...if you looked at television ten years ago You could maybe do six on a pallet.

00:22:07: Today you can probably put thirty or so on a pellet.. ..that's also growth In terms of volume Or value.

00:22:16: In terms of goods that are being moved, you don't see so much in the cubes.

00:22:21: We're starting to reach a little bit limit on what one can do there?

00:22:26: If we want to have very big TV screen You cannot package it smaller than today.

00:22:32: There's not too many to be gained anymore.

00:22:33: Same goes for mobile phones.

00:22:35: They were smaller then.

00:22:37: they were fifteen or twenty years ago.

00:22:40: I think this is another factor That has resulted in relatively low growth, in terms of volume over a certain period time.

00:22:50: But it's the fact that doesn't play that much for all anymore today.

00:22:52: so... ...that is another reason why I am probably cautiously optimistic when you look ahead into next three or four five but certainly ten to twenty years.

00:23:02: Yeah!

00:23:02: It was really interesting and had not thought about the packaging aspect.

00:23:05: What are about vehicles?

00:23:06: There have always been attempts at loading some maybe higher value vehicles cars into containers but i'm never quite sure whether the success can our cars being shipped by container.

00:23:19: It's only one of those commodities that three booming these days.

00:23:23: if you just look at how many evs are being transported these days via containers it's a lot yeah.

00:23:29: and, no it's also one of us where if u go back five years or ten years then there were two categories that will always moved in containers which was second hand cars And it was also very expensive cars, but everything which was mainstream typically would be done by our carriers.

00:23:45: Of course they will also have a somewhat limited capacity and especially if you see the transition from traditional vehicles to EVs I Would not be surprised If that's a commodity That Will Also Help To Boost Growth Rates Over The Years To Come?

00:24:01: If You Look At Companies Like BYD And Others And You Just See How Much They produce and how much they export that alone has is already in debt.

00:24:13: those companies along have a material impact on cargo flows around the globe.

00:24:18: No, it's really interesting.

00:24:20: I just want to ask you one particular question.

00:24:22: i've always thought the container shipping was a force for good help to spread prosperity around the world but countries couldn't afford trade before into global network because of affordable ocean transport.

00:24:36: Myself feel conflicted because we all have too much stuff.

00:24:41: We will buy to much stuff and it's partly because It's all being shipped around the world, And we're all buying things.

00:24:46: I'm throwing things away which is not good for the global for the environment.

00:24:50: Do you ever yourself feel Conflicted about that?

00:24:55: Not so much Because no first of all i don't.

00:24:59: um i'm probably not one Of the biggest buyers myself off of all That stuff.

00:25:03: That's okay.

00:25:04: On the other hand, these are also phases that one goes to.

00:25:07: I think you see in a place like Northern Europe where people aren't very aware of this type things and they already have lots of stuff.

00:25:16: Of course then it starts playing big role.

00:25:18: but if we go to Africa or India Or some places in South America or Southeast Asia Where people do not have washing machine And when there is no television.

00:25:31: You know their perspective on that is probably a little different than ours here in Hamburg or in London for the matter.

00:25:38: and i think when you look at our business which isn't truly global business then.

00:25:43: I still feel that no helping some of those people in those countries to get access do some of these things,

00:25:53: Yes, I totally agree with that.

00:25:55: I was thinking more.

00:25:56: the more mature markets we are you know whether it's North America or Europe We mostly have more than we need.

00:26:02: but your quite right obviously when they're lucky where the lucky ones and many don't have as much so Plenty of scope for you.

00:26:09: Yeah And even here You'll see that you know people.

00:26:12: he will also move to EVs and you still see a lot of things changing here as well.

00:26:18: So from that perspective?

00:26:20: If i don't think demand into Europe and North America will dry up.

00:26:26: But the real growth, we'll come from other markets where today or their level of containerization is just very low And also a lot of wealth can still be accumulated in many families over the next decades.

00:26:42: Well Rolf it's been great talking to you again.

00:26:43: thank-you very much indeed.

00:26:45: I really appreciate

00:26:46: that.

00:26:46: Thank You are welcome.

00:26:47: was nice talk with you again.

00:26:48: yeah

00:26:52: Straight

00:26:53: Talk with Rolf Habben-Jansen.