Freightwaves CEO Craig Fuller Talks State of Freight Industry

**Vonnie Quinn** (0:00)
Uncertainty over the Strait of Hormuz is keeping pressure on global shipping with vessel traffic still below pre-war levels. Let's ask Craig Fuller, CEO of Freightwaves, a company that provides real-time data on freight demand, pricing and capacity across the global logistics market. Craig, I wanna have a broader discussion with you, but first, any developments around the Strait of Hormuz, have we reached the cap beyond which, you know, hiring a ship just isn't doable because there is nowhere more for the price to go?

**Craig Fuller** (0:30)
No, I mean, ultimately, the logistics market is responding to this. Higher prices for containers, higher prices for shipping.
But that's the great thing about logistics companies, is they respond to these events, they price it accordingly. And we're seeing freight rerouted to account for this disruption, which is just one of many, many disruptions that we've had over the last, you know, inevitably over the last decade.

**Vonnie Quinn** (0:55)
What about insurance costs? Do they continue to rise? Do we have any kind of fall-off in insurance costs even when we got the Memorandum of Understanding?

**Craig Fuller** (1:03)
Well, I think ultimately a lot of the costs, the insurance costs is priced in to the current conditions. While there are some attacks on civilian vessels, I think largely the sort of kinetic conflict is, we'll call it simmering a little bit, but not explosive. So, ultimately, insurance companies and ship owners have understand the risks and that is priced in to the market currently.

**Vonnie Quinn** (1:32)
Craig, I want your thoughts as well on this new Arctic route that's being reported on today. So apparently a China shipping company is going through the Arctic because polar ice caps melting allow it to traverse from Asia to Europe in 20 days, as opposed to the regular 40 days it takes generally. Is this a route that could take off and help other shipping companies avoid these dangerous choke points?

**Craig Fuller** (1:55)
Yeah, I mean, this has been something that's been talked about for at least the last decade, the fact that the polar ice caps are melting, which will provide new sea lanes. Russia has some ice breakers to be able to clear the lanes.
This is one of the reasons that Donald Trump has wanted Greenland is because ultimately if you're coming across the Arctic, you're going to pass Greenland and it provides a much, from a strategic standpoint, provides a really interesting outcome. But this is really a continuation, something that shouldn't be a surprise to anybody, because it's something we've been watching and monitoring for the past at least decade. And it's certainly the dream of the Chinese, the dream of the Russians, to get access to the North Atlantic and the Arctic Ocean, because ultimately, this provides, you know, avoids the bottleneck that is in the Middle East and allows them to route more direct traffic to North America.

**Vonnie Quinn** (2:54)
Craig, just more broadly, port volumes are surging. Ocean carrier rates obviously have gone through the roof and they're passing on those costs. Energy surcharges have been very, very widespread and are getting more widespread. Truck manufacturing is tightening. All of this is a negative for the consumer and for those that are importing. But it's great news for the freight industry, right?
Is the freight recession definitively a thing of the past?

**Craig Fuller** (3:17)
Oh, the freight recession has been over since November, and everybody's celebrating because it's been a miserable existence. Ocean container lines, they were out of a recession pretty quickly. They had an eight-month recession, but trucking was in a recession really since 2022, and it ended in November of this past year of 25 And so everyone feels relief. I would dispute your comment about it bad for the consumer, because ultimately, when freight's moving, that is good for consumers. I mean, transportation cost is about 3% of finished goods prices that consumers pay. So even if we see a doubling of freight rates, it's still a marginal impact for consumers in terms of inflation. So ultimately, things are moving. The industry is feeling incredibly bullish, and we're seeing volumes pick up on the international container market, as well as in domestic trucking and rail.
It's up and to the right for the freight industry, and I think that tells us a lot about consumer activity, but more importantly, it tells us a lot about industrial activity.

**Vonnie Quinn** (4:19)
Well, just on that point, everything I just mentioned, do they only add up to incremental costs for the consumer? Is this not a significant inflation push at all, then?

**Craig Fuller** (4:28)
It's not a huge impact to inflation. Ultimately, retailers would absorb those prices. The biggest risk to retailers and really manufacturers is losing sales. So they will pay the higher freight rates and ultimately eat it in some of their margins. But look, we've seen in the past earnings, this past earnings cycle that corporate profits are at record highs. So there is some ability for retailers and manufacturers to absorb higher freight rates.