The Decisive | Season 5 Ep.2 - Taking Costs Out, Putting Value In: Shipping Strategies in Focus at TPM26

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Kristen Hallam:

You're listening to the Decisive Podcast. Insights and analysis to empower confident decision making. Hello, I'm Kristen Hallam, your host for this episode of the Decisive Podcast. As global trade dynamics shift and margin pressures intensify, shippers are facing unprecedented challenges from soaring tariffs to volatile demand and the constant need to find cost savings without exposing their supply chains to new risks. This year, the Journal of Commerce's annual TPM Conference, the Super bowl of the container shipping world, is tackling these issues head on with its timely theme, Taking Costs Out, Putting Value in. And to discuss TPM26, it's my absolute pleasure to introduce Peter Turchwell, our Vice President for maritime trade and supply chain at S&P Global Market Intelligence. Peter is responsible for all content appearing in the Journal of Commerce publications, websites, events and other products. He's the founder and chair of the TPM Conference, the world's largest container shipping conference, which is taking place in March in Long Beach, California.

In other words, Peter's an industry legend. Peter, welcome back to the Decisive Podcast. It is great to have you here.

Peter Tirschwell:

Thank you, Kristen. It's a pleasure to be with you.

Kristen Hallam:

So Peter, last year at this time on the eve of TPM 25, we were anticipating changes to US trade policy and the tariff environment with the incoming US administration. How has that played out for the container shipping industry?

Peter Tirschwell:

Well Kristen, I don't think it's really big news to say that very few people really anticipated how aggressively the second Trump administration was going to move on tariffs. And the impact has been pretty profound and is likely to extend into 2026 as well. There were sort of short-term gyrations that occurred. So when Trump reduced the tariffs on China from 145%, which he had imposed about 30 days earlier, down to 30%, that was in mid-May, that created a huge but temporary surge of cargo that resulted in cargo being left on the docks, resulted in freight rates temporarily going up, had impact on other trade lanes. So what

some carriers did was they dumped cargo headed to another region like Europe in an interim port and then turned the ship around and headed it back into the Trans Pacific to profit from this short-term surge. That was seen because a lot of merchandise, a lot of goods were held back by companies in anticipation of the possibility, if not the likelihood that the 145% tariffs would be reduced. When we look forward, I think that there is, because of the tariffs, there is still a great deal of caution. And when I say that, I mean that many companies have not fully implemented price increases in order to pass along the costs of tariffs to consumers.

Those were relatively muted in 2025, but many price increases to become more significant in 2026. And that's the reason why the very weak US import container volumes that we saw towards the end of the year, down 12% year over year in September, down 10% year over year in October, that those are very likely to continue to be weak going into the first part of the new year, simply because companies are not going to want to pay the additional tariffs on goods that they may not need or which they may have to discount because they improperly forecasted or over forecasted consumer spending. So anyway, I'm sorry, that's a very long-winded answer to the question that, that it looks like things are going to be pretty subdued at least in the first part of 2026. And that would be directly due to the lasting effects of the care of the tariff policy carrying over into 2026.

Kristen Hallam:

So speaking of the outlook for this year, the theme of this year's TPM conference is, as I said in the intro, taking costs out, putting value in. Can you elaborate on why this theme is so timely for shippers attending TPM26?

Peter Tirschwell:

Well, the, the theme really emerged from the concept that importing companies into the US pay the tariffs, the tariffs come directly out of their pocket and they have to then somehow mitigate the impact of those tariffs, whether by driving down the cost of their own inputs, the cost of goods that they are buying to then resell, or passing along the tariff costs to customers in the form of higher prices. And as I was mentioning earlier, that was relatively muted in 2025. And so as a result, you see many, many US importers who are stuck with cost increases that they have not been able to mitigate. And so therefore they are going to be and are already and actually are very deep into the process of trying to identify incremental cost saving opportunities within their own organizations in order to mitigate the impact of the higher tariff costs. So that's really where the taking costs out comes in.

Because if to the extent that they can't take costs out, that is going to impact margins. And we see that occurring across the importing world where margins really took a hit in 2025. And that's going to be the case in 2026 unless cost savings can be found. Now, some of those cost savings will be found through lower freight rates potentially because there is a view among many in the market that the container shipping market, at least in the trans-Pacific trade will be a little bit weaker in ‘26 versus ‘25, which may offer some degree of cost savings, but even that is likely not to be enough.

And so, so companies are looking for cost savings. However, when we say putting value in, really a lot of that value comes down to risk management, where, you know, the basic concept is, if you try to lower your costs too much in terms of your container freight rates that you're paying, then you are putting your supply chain in a vulnerable position. Because when ocean carriers fill their ships, particularly when demand is tight and space tightens up in container shipping without any warning whatsoever, you never know when space might become suddenly constrained from, you know, two weeks later from a very loose, fluid situation, you could have a very tight situation emerge very quickly. And the question is, is your cargo going to get loaded, or is it going to get left behind? So partly what we're, what we're saying is that in order to put value into your supply chain, in part, you need to mitigate risk. And that's going to be a big theme of the TPM conference this year.

Kristen Hallam:

Lots to unpack there. Your journalists at the Journal of Commerce are going to be very busy indeed in 2026. So with the prospect of higher US tariffs as a long-term reality, what role do you see trade policy and recent deals playing in shaping shipper strategies for cost containment?

Peter Tirschwell:

Well, I think that in the near term, and again, Kristen, when we release this podcast, it may be the case that the Supreme Court has already ruled on the IEEPA tariff. So Trump used the International Emergency Economic Powers Act in order to implement the tariffs that he imposed in 2025. During oral arguments at the Supreme Court, there was some skepticism about his ability to utilize that, that power, even from some conservative justices. And so the possibility is that those tariffs may be overruled. And we're sitting here now on January 8th, and it could be just even within a couple days that a ruling occurs. And if, if it occurs that invalidates the use of this law to impose tariffs, well, then a couple things are going to happen. First of all, there's going to be a rush to, to obtain refunds on anywhere between

$90 billion and $100 billion of tariffs that were, that were collected on the basis of the use of that law. But secondly, I think Trump has already signaled that he will try other laws and other authorities in order to increase tariffs, which he views as a positive economic move to make.

But if you were to take step back and say that one way or another tariffs are likely to be higher going forward, that we're probably not going to go back to the 2% average tariff rates, it actually puts the entire global supply chains that companies are operating into a completely different perspective. You know, it used to be, Kristen, that there was a golden age of trade, of global consensus on the value of trade, when manufacturing costs were low, transportation reliability was high, and geopolitical relationships were stable to the point that companies didn't even have to think about it as a factor. And obviously that has completely changed. And literally with every day that we read the news, we come to understand that actually the world seems to becoming less stable versus more stable. And that means that long haul supply chains that are where goods are sourced and moved over lengthy distances around the world fundamentally become more vulnerable. And so, you know, that's one of the reasons why, you know, you've seen a surge in relocation of manufacturing to Mexico, for example. Mexico has been a huge beneficiary of all of this geopolitical turmoil and shippers are having to make bets on the basis of a geopolitical analysis. And so they have to make a judgment call on what this looks like long term.

Is it more likely that the US will somehow forge a stable relationship with Mexico versus China, for example? If so, that has enormous implications. That very judgment call right there has huge implications for major investments that the companies are making in terms of where manufacturing, where assembly is going to be and how goods are going to flow. And these, these discussions within companies running global supply chains are very, very actively underway with big long-term decisions and implications being on the table.

Kristen Hallam:

Now you were talking about freight rates earlier, so I wanted to ask you how shippers are balancing the need to drive down core freight rates with the risk of overreaching and potentially exposing their supply chains to disruptions, especially in an environment where we have overcapacity.

Peter Tirschwell:

Well, yeah, Kristen, I mean this is what we were talking about earlier and it's, it's really tempting. When you read investment bank reports about container shipping that says that there is a great excess of supply over demand and that, you know, hundreds of millions of dollars of losses are being predicted for the container lines because freight rates are going to, are going to collapse. And it's easy to reach for what you might think is low hanging fruit in grabbing low freight rates, thinking that that is going to enable you to drive down your costs and for example, mitigate the impact of tariff related cost increases. But the reality is not that at all, at least in our reporting. How this comes out when we are talking to shippers, when we're talking to carriers and forwarders, the reality is, is that risk management in containers, which means positioning your cargo so that it gets loaded on the ship, especially at times of capacity tightness, is really where the top priority needs to be. Because disruptions occur without warning. They can be very severe.

The fact of the matter is that capacity crises—in other words, when a shock occurs that, that suddenly withdraws capacity from the market. It's what happened during COVID It's what happened when the Suez Canal was effectively shut down for east west container traffic. It happened to a certain degree when, when the Panama Canal in 2023 experienced the most severe drought in, in a long time. All of that removed capacity from, from the market and the freight rates shot up and capacity became, became scarce. How do you position your cargo so that you're not going to be negatively impacted by that? Well, this is one of the reasons why you have a lot of shippers talking to carriers about index-linked contracts, meaning that your price fluctuates on the basis of an index. So therefore if the spot rate goes up, well, then your rate's going to go up. Well, if your rate goes up, it means that the carrier is going to look at your cargo and say okay, it meets the threshold where I'm going to load it on the ship versus leaving it on the dock and using that, that slot on the vessel to load higher paying cargo. And this is the way the business works.

It happens all the time, irrespective of contractual relationships that may exist. There are new ideas that are, that are service surfacing in order to address this very problem, such as tradable reservations where your rate is what it is, your contract is what it is, but you can obtain a reservation for a price that gives you guaranteed access to the ship certified by the ocean carrier. That is a new concept and we will have a case study at TPM with the sponsor of this concept, a guy who formerly worked at the U.S. department of Transportation. He's going to be talking about it with the head of logistics for ACE Hardware as well as possibly some other shipper companies. So you know, there's a lot of need to reduce cost, a lot of motivation to reduce cost.

But there is the reality that these companies are not in the shipping market as, as traders. They're retail companies, consumer products companies. If they can't get their goods to

market, then what happens is that they lose customers, they lose revenue, they lose reputation. And so preserving the integrity of the supply chain within an extremely volatile environment such as the one we're in right now, is, is paramount.

Kristen Hallam:

Yeah, well, that panel you mentioned with ACE Hardware, that, that sounds like a really good one and I'm sure there are many, many others at TPM as I remember from my time there last year. What do you think will be some of the tactical and long-term actions that shippers are taking that you expect to be discussed at TPM 26. I mean, you mentioned reshoring earlier, you know, shrinking those kind of longer supply chains. Are there other ways that shippers are kind of trying to manage their costs that you think will be some of the hotter topics at TPM?

Peter Tirschwell:

Yeah, I mean, you're going to find a lot of focus on areas like detention and demurrage. You know, that is, in other words, the costs of keeping containers longer than is allowed under the terms of carriage. The cost of keeping containers on marine terminal grounds for longer than is allowed because that whole area of cost and operations is one that's extremely difficult to manage. But there's new technology that has been rolled out to the market that we will also be discussing that allows carriers to mitigate those expenses. Also, their software providers and other vendors have gotten much more sophisticated in enabling shippers to hold carriers to a higher standard of accuracy on billing. In other words, you can more easily than in the past obtain refunds for inaccurate billing. Now as that happens, of course, the carriers are getting better themselves at, at creating accurate invoices. And so as time goes on, hopefully this will become less of a problem in the industry.

But certainly, you know, the smart shippers are really not leaving a lot of stones unturned in trying to identify, you know, many of these sort of granular areas of cost savings that in the big picture can add up.

Kristen Hallam:

Yeah, well, like I said, I'm sure the agenda for TPM is chock full of great content as always. But if you had to pick out just a few highlights for our listeners, keeping in mind that our listeners are both followers of your industry, but also maybe more of a broader audience

that could include, you know, shippers and insurers, maybe other companies, what would you highlight?

Peter Tirschwell:

Well, there's, there's a lot, I mean there's going to be four days of jam-packed programming. One of the biggest Areas of focus for us this year is macroeconomics because the macro picture really drives trade. If there is a recession in the US that's going to negatively impact trade volumes and container volumes. And so in the past couple years we have really focused on geopolitics because the fracturing of the global order as it used to be was by itself a great area of unfamiliarity to the international trade community. And so that's why we invited General David Petraeus; Robert Gates, the former Defense Secretary; John Bolton, former National Security Advisor. Those were the keynote speakers the last three years. This year we pivoted from that to talk about the economic fallout of geopolitics and of the shocks that global supply chains are now regularly experiencing. So our keynote speaker will be Janet Yellen, the former Federal Reserve Chair as well as the former Treasury Secretary.

And we're going to be asking her about what all this means for the economy in the U.S., North America and globally. And then when we drill back down, I mean, we've got some of the big CEOs of the industry. I will be doing a one-on-one interview with Jeremy Nixon.

We're going to be talking about what really is a very altered, new, unfamiliar landscape in regard to container shipping because the industry has consolidated, there are now regular capacity shocks, Kristen, as we talked about in this conversation, and, and what does all that mean for the future? Where is all this headed so that shippers can begin to look to the future and, and try to get a handle on how this industry is evolving and how they need to respond. So, so it's going to be a great event. We're really looking forward to it. And for those who are listening, it'll be a real pleasure to see you there if you're able to make it.

Kristen Hallam:

All right. And we will include a link to the registration page in the description of this episode. So if you are interested, please do check it out now. Peter, we started off in 2025 and talking about how that led us to the beginning of 2026, where we are now. What would you say, looking forward, are the major trends to keep an eye on for 2026?

Peter Tirschwell:

Well, the truth of the matter is that for those who are interacting with the container market, there are half the number of global carriers that are out there due to consolidation. Those carriers are locked into long-term stable alliances. Those carriers have become very sophisticated and experienced and successful in withdrawing capacity when they see that market supply and demand is, is getting out of whack. And for, for shippers, this is generally speaking, a more difficult environment to operate in than it used to be. When, when schedules were relatively stable, when freight rates were relatively low. It's, it's night and day compared to what it was. And, and this is a theme, Kristen, of all of our coverage, or a lot of our coverage, certainly at the Journal of Commerce. And it's going to be a theme that, that is going to sort of cascade throughout the whole TPM program because as much as shippers might find this unpleasant or difficult or costly or inconvenient, which they do, or unfair even, the fact is that the reality of the market has changed dramatically.

And if we can educate the market to the reality of how this industry is playing out right now and what it means for supply chains, then hopefully we're providing some real value at this conference.

Kristen Hallam:

Right. Well, Peter, I could keep talking to you all day, but it's time for us to wrap up our conversation. Any final thoughts for our listeners?

Peter Tirschwell:

No, other than if you come to TPM, I look forward to seeing you there and please come up and say hello to me. It would be my pleasure to meet you and to, and to help you if I can, to make it a successful event for you. So if you're able to join us on March 1st through 4th, nobody will be more delighted than me, and I will look forward to greeting you personally at some point during the event.

Kristen Hallam:

Who can resist that invitation? All right, so all that's left for me to do is to thank you, Peter, for taking the time to share your insights with us and thanks to our listeners for tuning in again. Please click on the link in the description of this episode if you'd like to learn more about TPM or register for the conference. Until next time.

Peter Tirschwell:

Great. Thank you, Kristen. A pleasure being with you.

Kristen Hallam:

Thank you for listening to the Decisive Podcast from S&P Global. Please subscribe and join us for next week's episode. Until then, stay curious and stay informed.