00:00John, maybe let's start off with what you're seeing from the developments surrounding the war in Iran,
00:06the energy price spike, as well as perhaps the disruption to traffic.
00:11How has that affected the business?
00:15Well, good morning and thank you for having me on your show at this important time.
00:20What I'd say right now, we have extreme levels of volatility,
00:24but DHL Express, which is the division I represent, and the DHL group performs very well during trade interruptions and
00:32during volatility.
00:33And what I would add to that is that we're getting material into the Middle East,
00:38we're getting material around the Middle East, and we're getting material out of the Middle East.
00:42And whilst we may not be using the typical gateways that we would normally bring material in and out,
00:48we're using Riyadh, we're using Muscat, we're using commercial airlines,
00:52we're using our own network fleet.
00:55So these sort of interruptions, whilst this is quite unprecedented in scale,
01:00this particular one are things that our people do best.
01:04And we are serving our customers in the Middle East quite well.
01:07We have normal pickup and delivery operations in every single country in the Middle East right now.
01:12And I sense things have eased from last week and we're able to perform good services to our customers.
01:20How ready to adjust accordingly and continue adjusting accordingly, as you suggest, if things escalate, though?
01:29Well, we're very flexible.
01:31We've got an airline of 350 aircraft, as you say.
01:36It's sort of a virtual airline and a physical airline.
01:38Some of that is partner network.
01:41Some of it is our own aircraft and some of it is commercial belly space.
01:44We can flex that up and down as the needs may be.
01:47We can use road.
01:48We are in perhaps the best possible position to continue to deliver service,
01:55given the aviation fleet that we've got.
01:59Were you also well positioned when it came to oil prices in terms of jet fuel and the surge that
02:05we've been seeing?
02:06Were you hedged prior to the war in Iran breaking out?
02:11Well, I think what I would say there is we have a very established fuel surcharge mechanism
02:16that aligns itself with oil prices that goes up and down.
02:22It's been a recognized standard within the industry for 20 or if not 30 years.
02:27It's very transparently communicated on our website to our customers.
02:31Our customers are very familiar with it.
02:33So we ride these sort of waves of oil prices every day somewhere in the world.
02:40So again, and I would just point out, and it's interesting to your listeners maybe and your viewers,
02:45is that we are the world's most international company.
02:48And as I say to my people, we're a global company and every day there will be a crisis somewhere.
02:53And that's exactly what's playing out now.
02:55And we are in the best possible position to handle those type of events.
03:01Can you tell us how much of that cost is being passed on to customers then?
03:06Well, we only talk to our customers once a year in terms of price.
03:09We have a general price increase of between 3% and 4% at the beginning of the year.
03:14There may be some elevated risk surcharges into specific countries for a short period of time.
03:20And as I said, the fuel is an established mechanism.
03:24So it's quite an accepted and traditional format in terms of these types of situation.
03:36You seem quite sanguine about the geopolitical situation.
03:39I do wonder in your experience in the industry and with the company,
03:43have you seen a sharp move higher in oil like this?
03:47And where is the pain threshold?
03:51Well, I'm relatively calm and cautious in these type of situations because we have a service to provide.
03:57And we know that whether it's the ash cloud crisis, you remember that in 2011,
04:01whether it's COVID or any type of other geopolitical thing,
04:05we're best operating when we have our normal network provided the levels of service
04:11that we would provide during calmer time.
04:13So we're set up for these type of interruptions.
04:17And oil is, you know, the last thing on my mind, getting stability in the Middle East for our people.
04:21Our people are doing a great job providing service every day and getting that calmed down.
04:26What I would say is that, because this is a backdrop to everything we're talking about here,
04:31I'm excited to be in Vietnam today releasing the Global Connectedness Report.
04:35And that report, once again, confirms through 9 million data points that trade continues to grow very well.
04:45In fact, trade this last year grew faster than any year since 2017.
04:49And as I said, even to your channel Bloomberg in South Africa in July,
04:55trade in the first half of last year grew faster than any year since 2010.
05:01So while the media headlines may say deglobalization, the facts say resilience.
05:08And I think we've really got to keep on going back to that point,
05:12that during all these crises of one sort or another, trade continues to be very resilient.
05:19Have we not been seeing impact on shipments to the U.S. then, John?
05:26Yeah, we have been seeing shipments.
05:28The lane from China to U.S. is the most depressed lane.
05:33That's sort of the Financial Times published.
05:35So that was minus 20 or minus 30 percent for most of last year.
05:39But to that, I would say that this is good further evidence that the world doesn't pivot on one particular
05:47trade lane.
05:47That one particular trade lane is 2 percent of global trade.
05:51We've seen a big drop from China to U.S.
05:53The percentage of U.S. imports from China used to be, from memory, 22 percent in 2017.
06:00It's now 9 percent.
06:02So there's no doubt about the fact that trade from China to U.S.,
06:06and you would expect that with the rather catastrophic tariff levels that we've seen,
06:10has absolutely dropped.
06:11This is a moment in time.
06:13I've seen that before.
06:14Maybe it picks up again.
06:16But what is happening, and this is particularly important,
06:18I see sort of people running around with I Love Global Trade t-shirts on, if you will,
06:23because people are out there doing commercial deals, mini trade deals, formal trade deals,
06:30and they're looking at partners that they haven't otherwise talked to before.
06:34And they're creating this sort of groundswell of activity in terms of finding new markets to sell to.
06:41And that is compensating for the trade that is no longer flowing between China and the U.S.
06:48and thereby trade has grown faster last year, post-Liberation Day, post-April 2nd, than in any year since 2017.
07:00I wanted to stick to the tariff and the trade issue.
07:03The Supreme Court's decision, how does that impact your business?
07:05Will you be seeking refunds in terms of the tariffs that have been paid and collected?
07:10Will that be passed on to customers that have paid them?
07:14Yeah, so there's a lot of ambiguity and opacity around this particular topic at the minute.
07:22The Supreme Court has made its judgment on the lawfulness of IEPA tariffs.
07:26We're busy watching these websites every day.
07:29Our primary concern there is to get our customs and our in-house teams staffed up to the level
07:36we can facilitate refunds back to our customers,
07:39should there be a mechanism to do that.
07:43And we're rather hoping for a simplified mechanism in order to do that.
07:47And we are making best efforts to talk to the CBP and the administration
07:52in terms of how we can help perhaps suggest the best ways of doing that
07:56to make the administrational process.
07:59You can understand that the administrational process is significant,
08:02given this is nearly a year long,
08:05and given how many entries come into the U.S. every day.
08:07But our job is to help our customers get their refund back
08:11and make DHL whole at the same time.
Comments