1 00:00:07,760 --> 00:00:10,400 Speaker 1: Hi, everyone, This is Lee Klasgaw when We're Talking Transports. 2 00:00:10,480 --> 00:00:13,560 Speaker 1: Welcome to Bloomberg Intelligence Talking Transports podcast. I'm your host, 3 00:00:13,640 --> 00:00:17,200 Speaker 1: Lee Clascow, senior freight transportation logistics analysts at Bloomberg Intelligence, 4 00:00:17,400 --> 00:00:20,320 Speaker 1: Bloomberg's in house research arm of almost firefight for analysts 5 00:00:20,320 --> 00:00:23,759 Speaker 1: and strategies around the world. Today's episode, we're bringing together 6 00:00:24,000 --> 00:00:26,920 Speaker 1: some of those analysts to discuss the implications of the 7 00:00:27,400 --> 00:00:32,000 Speaker 1: US Iran War, which could have on the region, energy 8 00:00:32,040 --> 00:00:35,960 Speaker 1: markets and the freight economy. One of Bloomberg Intelligence research 9 00:00:36,000 --> 00:00:40,760 Speaker 1: platforms benefits is our deep bench in global reach. Today 10 00:00:40,760 --> 00:00:44,640 Speaker 1: you'll be hearing from analysts based in Singapore, Dubai, Washington, DC, 11 00:00:44,920 --> 00:00:49,160 Speaker 1: and me in New Jersey. With me today is Kenneth Lowe, 12 00:00:49,280 --> 00:00:54,080 Speaker 1: Bloomberg Intelligence Asia Pacific Shipping and Logistics Analysts, Sally Yelma 13 00:00:54,880 --> 00:00:59,680 Speaker 1: bi's senior energy equity research analysts, and Wayne Sanders, bi's 14 00:01:00,080 --> 00:01:04,080 Speaker 1: defence analyst. Welcome to the podcast, Ken, Wayne, and Sally. 15 00:01:04,480 --> 00:01:05,319 Speaker 2: Thanks for having us. 16 00:01:05,680 --> 00:01:08,600 Speaker 1: Yeah, so, I'm glad you guys could all be here 17 00:01:08,880 --> 00:01:12,240 Speaker 1: and really appreciate your time and insights. You know, I'm 18 00:01:12,240 --> 00:01:14,360 Speaker 1: going to start with you Wayne, because you know you 19 00:01:14,600 --> 00:01:18,399 Speaker 1: are our defense analysts and you actually come from the military, 20 00:01:18,480 --> 00:01:21,200 Speaker 1: so thank you for your service for that, you know. 21 00:01:21,680 --> 00:01:23,800 Speaker 1: So could you just give us some background about how 22 00:01:23,840 --> 00:01:25,920 Speaker 1: we got here and how do you see this playing 23 00:01:26,440 --> 00:01:27,600 Speaker 1: out in Iran? 24 00:01:27,760 --> 00:01:27,920 Speaker 3: Yeah? 25 00:01:27,959 --> 00:01:31,480 Speaker 2: Absolutely so. President Trump obviously had multiple attempts over the 26 00:01:31,560 --> 00:01:34,280 Speaker 2: last few weeks to try and bring Iran back to 27 00:01:34,319 --> 00:01:38,440 Speaker 2: the table, specifically to address nuclear proliferation as well as 28 00:01:38,680 --> 00:01:40,360 Speaker 2: the US wanting to make sure that we were also 29 00:01:40,400 --> 00:01:45,320 Speaker 2: talking about Iran's missile stockpiles. He had provided multiple warnings. 30 00:01:45,360 --> 00:01:47,280 Speaker 2: He had started to then do a build up of 31 00:01:47,560 --> 00:01:51,279 Speaker 2: military capacity and capability within the region to include sending 32 00:01:51,320 --> 00:01:56,680 Speaker 2: over several aircraft carriers, nine destroyers, additional litoral combat chips, 33 00:01:56,680 --> 00:01:59,160 Speaker 2: and others, along with stationing about one hundred and twenty 34 00:01:59,200 --> 00:02:03,040 Speaker 2: plus US aircraft into the region, and then over the 35 00:02:03,080 --> 00:02:07,120 Speaker 2: weekend when the timeline had expired and started with his 36 00:02:07,240 --> 00:02:10,560 Speaker 2: strikes at that point in time, really focusing on the 37 00:02:10,639 --> 00:02:14,480 Speaker 2: F twenty two suppression enemy air defense capabilities, the F 38 00:02:14,520 --> 00:02:17,360 Speaker 2: thirty five. There were over two hundred Israeli aircraft as well, 39 00:02:17,919 --> 00:02:20,200 Speaker 2: and over the weekend we've seen over a thousand military 40 00:02:20,240 --> 00:02:24,480 Speaker 2: targets be struck. Specific focus on that really was on leadership, 41 00:02:24,639 --> 00:02:28,960 Speaker 2: air defense launchers, missiles, in military command and control, and 42 00:02:29,080 --> 00:02:31,400 Speaker 2: what we've seen killed so far from a leadership perspective, 43 00:02:31,440 --> 00:02:35,720 Speaker 2: obviously as Supreme Leader Iotola Commanee, the IERGC commander, as 44 00:02:35,760 --> 00:02:37,519 Speaker 2: well as the Chief of the Armed Forces, and over 45 00:02:37,600 --> 00:02:41,679 Speaker 2: forty eight additional senior Iranian officials were killed as well 46 00:02:41,760 --> 00:02:45,800 Speaker 2: during these strikes, as well as a focus on the IRGC, 47 00:02:45,919 --> 00:02:51,040 Speaker 2: which is the Iranian Revolutionary Guard course naval capacity trying 48 00:02:51,080 --> 00:02:52,760 Speaker 2: to do what they can to be able to avoid 49 00:02:52,800 --> 00:02:57,440 Speaker 2: any interdiction in disruption in the Straits of Horn Moves. 50 00:02:57,760 --> 00:03:00,440 Speaker 2: So that's kind of where we've gotten to now. I 51 00:03:00,480 --> 00:03:02,360 Speaker 2: think really a lot of the questions that are coming 52 00:03:02,360 --> 00:03:04,720 Speaker 2: back obviously back in the United States is dealing with 53 00:03:04,760 --> 00:03:07,679 Speaker 2: a lot of the policies tied to war powers acts. 54 00:03:07,760 --> 00:03:11,280 Speaker 2: You'll see that locally overseas, though you still have a 55 00:03:11,320 --> 00:03:16,240 Speaker 2: potential to see surges in proxies as plausible deniability HESBLA 56 00:03:16,280 --> 00:03:20,400 Speaker 2: and militia attacks and things of that nature. Continued focus 57 00:03:20,840 --> 00:03:24,240 Speaker 2: to interdict shipping lanes inside of the straits at Horror Moves, 58 00:03:24,560 --> 00:03:27,640 Speaker 2: so I think watching for the IRGC's naval posture there 59 00:03:28,360 --> 00:03:31,040 Speaker 2: as well as potential for additional cyber and drone attacks. 60 00:03:31,400 --> 00:03:35,040 Speaker 2: Iranians responses for them somewhat has been limited, but they 61 00:03:35,200 --> 00:03:37,760 Speaker 2: still obviously have gone after not only US bases but 62 00:03:37,800 --> 00:03:43,160 Speaker 2: also gone after airports. They've gone after civilian infrastructure for 63 00:03:43,200 --> 00:03:46,800 Speaker 2: a lot of the Gulf States and allies in the region. 64 00:03:46,920 --> 00:03:49,160 Speaker 2: So at that point in time, I think it's more 65 00:03:49,200 --> 00:03:53,640 Speaker 2: of a distributed response in retaliation from Iran. But they 66 00:03:53,680 --> 00:03:56,280 Speaker 2: are limited in their capability right now based off of 67 00:03:56,320 --> 00:03:59,280 Speaker 2: their missile numbers as well as their launchers. And I 68 00:03:59,320 --> 00:04:03,640 Speaker 2: know everyone's crystal ball is extremely cloudy, but do you 69 00:04:03,640 --> 00:04:06,560 Speaker 2: have any thoughts on how long this could last? Yeah, 70 00:04:06,600 --> 00:04:08,680 Speaker 2: you know, I think one of the biggest pieces here, 71 00:04:08,720 --> 00:04:11,840 Speaker 2: I think is going to be the sustainability of strikes 72 00:04:11,840 --> 00:04:14,240 Speaker 2: from Israel in the US if they continue to go 73 00:04:14,320 --> 00:04:16,880 Speaker 2: after and hit these valid military targets, if they continue 74 00:04:16,880 --> 00:04:18,839 Speaker 2: to go after the launchers. The launchers is one of 75 00:04:18,839 --> 00:04:22,039 Speaker 2: the main things that Iran has to be able to show, yes, 76 00:04:22,080 --> 00:04:25,200 Speaker 2: we can still defend ourselves and we can actually push 77 00:04:25,279 --> 00:04:28,480 Speaker 2: offense back onto you. The problem is that US Central 78 00:04:28,480 --> 00:04:31,760 Speaker 2: Command Sentcom they put the numbers right now at about 79 00:04:32,320 --> 00:04:35,560 Speaker 2: fifteen hundred or less missiles remaining, and they only have 80 00:04:35,600 --> 00:04:38,520 Speaker 2: about one hundred and one hundred and fifty launchers. Why 81 00:04:38,600 --> 00:04:40,080 Speaker 2: is that important? If you go back and look at 82 00:04:40,080 --> 00:04:43,880 Speaker 2: the twelve day Iran Israel conflict, the problem that you 83 00:04:43,960 --> 00:04:46,480 Speaker 2: have there is you would see volleys of over three hundred, 84 00:04:46,520 --> 00:04:49,680 Speaker 2: three hundred and fifty at a time against one specific target. 85 00:04:50,000 --> 00:04:52,599 Speaker 2: When you only have one hundred launchers left. Then you 86 00:04:52,680 --> 00:04:54,720 Speaker 2: have to be very very surgical about what you do, 87 00:04:54,920 --> 00:04:57,120 Speaker 2: or you spread it out. And you're really hoping that 88 00:04:57,520 --> 00:04:59,920 Speaker 2: the news media will carry the fact that oh, they're 89 00:05:00,120 --> 00:05:03,039 Speaker 2: doing X, Y and z, but in terms of their impact, 90 00:05:03,760 --> 00:05:06,200 Speaker 2: in terms of where they've actually been able to strike 91 00:05:06,640 --> 00:05:09,880 Speaker 2: and that weren't interdicted by some type of air defense. 92 00:05:09,920 --> 00:05:13,239 Speaker 2: From an ally, you're not seeing it it being as 93 00:05:13,400 --> 00:05:15,360 Speaker 2: as heavy as I was expecting originally. 94 00:05:16,000 --> 00:05:20,400 Speaker 1: And you know, you mentioned the Iranians naval capabilities. Can 95 00:05:20,440 --> 00:05:23,680 Speaker 1: you talk about you know, what they've been doing, you know, 96 00:05:23,720 --> 00:05:27,239 Speaker 1: whether it's in the Red Sea or the Persian Golf. 97 00:05:27,320 --> 00:05:29,720 Speaker 2: Yeah, I mainly if you look inside the Persian Persian Golf, 98 00:05:29,720 --> 00:05:31,680 Speaker 2: you're looking at a lot of fast craft naval vessels 99 00:05:31,720 --> 00:05:35,080 Speaker 2: excuse me, and there there's really trying to focus on interdiction, right, 100 00:05:35,120 --> 00:05:36,840 Speaker 2: They're trying to do what they can. I think it's 101 00:05:36,839 --> 00:05:39,120 Speaker 2: one of the reasons you've seen a lot of tankers 102 00:05:39,160 --> 00:05:41,640 Speaker 2: actually go to Anchor right now to avoid some of 103 00:05:41,680 --> 00:05:45,240 Speaker 2: those areas. Obviously, Red c you got to play in 104 00:05:45,760 --> 00:05:48,479 Speaker 2: some of the Hoothy Land, if you will. But we 105 00:05:48,560 --> 00:05:51,919 Speaker 2: haven't seen as much from them in terms of a 106 00:05:51,960 --> 00:05:55,600 Speaker 2: counter attack, strike, or any type of proxy message is 107 00:05:55,640 --> 00:05:56,800 Speaker 2: coming from them up until now. 108 00:05:57,160 --> 00:05:59,599 Speaker 1: Hoothy Land sounds like a horrible place in the Disney world. 109 00:06:01,960 --> 00:06:04,720 Speaker 1: So I'm going to transition a little bit to Sally 110 00:06:04,800 --> 00:06:08,920 Speaker 1: here or energy analysts or senior analogy energy analysts at BI. 111 00:06:09,560 --> 00:06:11,839 Speaker 1: So you know we're talking about the Red Sea. Can 112 00:06:11,880 --> 00:06:15,320 Speaker 1: you talk Sally about how this has impacted the oil markets? 113 00:06:15,520 --> 00:06:19,599 Speaker 4: Absolutely, And to be honest, just until the open earlier 114 00:06:19,600 --> 00:06:23,919 Speaker 4: today on Monday, it really wasn't very clear how the 115 00:06:23,960 --> 00:06:27,240 Speaker 4: market would open given the uncertainty with the conflict. And 116 00:06:28,000 --> 00:06:30,360 Speaker 4: I just want to start with how just in the 117 00:06:30,440 --> 00:06:34,000 Speaker 4: last couple of weeks we already saw brand and WTI 118 00:06:34,120 --> 00:06:38,560 Speaker 4: prices in higher given this build up of US military 119 00:06:38,560 --> 00:06:42,080 Speaker 4: in the region and kind of in this anticipation of 120 00:06:42,120 --> 00:06:46,640 Speaker 4: a potential strike and escalation of the conflict, and we 121 00:06:46,640 --> 00:06:51,040 Speaker 4: were already around seventy two dollars a barrel for brand, 122 00:06:50,120 --> 00:06:53,839 Speaker 4: which was about ten dollars a barrel higher than our 123 00:06:54,360 --> 00:06:58,160 Speaker 4: fair value that we use our own proprietary model for. 124 00:07:00,920 --> 00:07:05,600 Speaker 4: Since the attack, over the weekend, the brand price opened 125 00:07:05,640 --> 00:07:07,880 Speaker 4: closer to eighty dollars a barrel, which was actually our 126 00:07:07,920 --> 00:07:11,240 Speaker 4: initial reaction, which is what we were expecting, but we 127 00:07:11,360 --> 00:07:15,200 Speaker 4: really weren't sure because things were moving so fast. So 128 00:07:15,280 --> 00:07:19,360 Speaker 4: as things stand, we would estimate we have probably fifteen 129 00:07:19,400 --> 00:07:23,880 Speaker 4: to twenty dollars a barrel of geopolitical risk premium on prices. 130 00:07:24,600 --> 00:07:30,400 Speaker 4: And once again I would call this mainly risk premium 131 00:07:30,440 --> 00:07:33,200 Speaker 4: war premium on prices, because even though there's a lot 132 00:07:33,200 --> 00:07:37,600 Speaker 4: of uncertainty, there's risk of further escalation, we haven't really 133 00:07:37,640 --> 00:07:42,120 Speaker 4: seen any direct major supply disruption, and I think that's 134 00:07:42,160 --> 00:07:45,680 Speaker 4: perhaps the most important thing to watch from here onwards, 135 00:07:45,720 --> 00:07:48,880 Speaker 4: because what happens next to oil prices is in this 136 00:07:49,000 --> 00:07:55,120 Speaker 4: kind of retaliation cycle, whether one energy infrastructure is targeted, 137 00:07:55,680 --> 00:07:59,760 Speaker 4: and two, perhaps more importantly, the Strait of Hormus, which 138 00:07:59,800 --> 00:08:05,760 Speaker 4: is responsible for about twenty percent of global oil supply, 139 00:08:06,520 --> 00:08:09,960 Speaker 4: going through this passage every day. So these are the 140 00:08:10,000 --> 00:08:12,080 Speaker 4: two main things that we would be watching but I 141 00:08:12,120 --> 00:08:15,480 Speaker 4: would say currently brand sitting around seventy eight to eighty 142 00:08:15,560 --> 00:08:19,520 Speaker 4: dollars a barrel is mostly kind of the market trying 143 00:08:19,560 --> 00:08:25,000 Speaker 4: to price the increased probability of actual physical disruption. But 144 00:08:25,360 --> 00:08:28,760 Speaker 4: that being said, things are moving very fast. Just today, 145 00:08:29,320 --> 00:08:32,880 Speaker 4: a couple of hours ago, we saw I mean we 146 00:08:33,160 --> 00:08:35,160 Speaker 4: still weren't sure what it was, but it seems like 147 00:08:35,240 --> 00:08:38,439 Speaker 4: it was part of debris from interception of a missile 148 00:08:38,800 --> 00:08:43,079 Speaker 4: falling on the RUSTANUA refinery in Saudi Arabia, which is 149 00:08:43,360 --> 00:08:46,640 Speaker 4: an energy of course an important energy infrastructure. It is 150 00:08:46,679 --> 00:08:49,680 Speaker 4: a refinery, so it is not a kind of oil 151 00:08:49,720 --> 00:08:52,640 Speaker 4: production facility, so that would be more relevant for products 152 00:08:53,000 --> 00:08:57,520 Speaker 4: rather than crude oil. But nonetheless, I think that could 153 00:08:57,559 --> 00:09:01,800 Speaker 4: be at first indication that you know, by either side, 154 00:09:01,880 --> 00:09:06,160 Speaker 4: perhaps energy infrastructure and targeting energy infrastructure could be on 155 00:09:06,200 --> 00:09:09,600 Speaker 4: the table, which would take us from this kind of 156 00:09:10,480 --> 00:09:14,680 Speaker 4: pricing of geopolitical risk premium, kind of the psychological what 157 00:09:14,920 --> 00:09:18,640 Speaker 4: if type of scenarios to actually seeing actual disruption, which 158 00:09:18,679 --> 00:09:24,120 Speaker 4: I think would structurally push prices higher. And then, as 159 00:09:24,160 --> 00:09:27,760 Speaker 4: briefly mentioned, straight of hormas very important for oil, also 160 00:09:27,840 --> 00:09:30,960 Speaker 4: very important for LNG, but focus on oil for now, 161 00:09:33,080 --> 00:09:36,480 Speaker 4: So I mean, Iran has actually threatened to shut down 162 00:09:36,520 --> 00:09:40,480 Speaker 4: Straight of Hormos previously, but historically it never has. I think, 163 00:09:40,800 --> 00:09:43,880 Speaker 4: both logistically and practically, this would be a difficult thing 164 00:09:43,960 --> 00:09:47,199 Speaker 4: to do. But then I think what's important to note 165 00:09:47,240 --> 00:09:50,480 Speaker 4: there is that it doesn't need to be an official closure, 166 00:09:50,679 --> 00:09:53,840 Speaker 4: if you will, by Iran. What we're seeing right now 167 00:09:53,880 --> 00:09:56,920 Speaker 4: is already slowing down of the traffic just because of 168 00:09:56,960 --> 00:10:00,720 Speaker 4: the heightened risk for some of these vessels, so the 169 00:10:00,840 --> 00:10:04,720 Speaker 4: increased cost of things like insurance, and in some cases 170 00:10:04,760 --> 00:10:10,000 Speaker 4: insurance companies straight out saying that they would not be 171 00:10:10,160 --> 00:10:15,679 Speaker 4: ensuring some of these vessels, which would indirectly kind of 172 00:10:15,679 --> 00:10:18,400 Speaker 4: slow down the traffic in the Strait of Hormos, which 173 00:10:18,440 --> 00:10:24,400 Speaker 4: again would be very consequential for oil and gas prices. 174 00:10:24,960 --> 00:10:28,120 Speaker 1: Yeah, so, just for those listening that aren't really aware 175 00:10:28,160 --> 00:10:31,040 Speaker 1: of the region, you know, Saudi Arabia exports a lot 176 00:10:31,080 --> 00:10:33,480 Speaker 1: of oil through the Persian Gulf and through the Strait 177 00:10:33,520 --> 00:10:36,680 Speaker 1: of Humours. Also, are there some major oil exporters that 178 00:10:36,720 --> 00:10:41,840 Speaker 1: are in the region, including Iran, Kuwait, Iraq, UAE. So 179 00:10:42,200 --> 00:10:46,200 Speaker 1: you know, it is a huge area where oil leads 180 00:10:46,280 --> 00:10:51,360 Speaker 1: through tankers and sally. So you know, do Saudi's have 181 00:10:51,440 --> 00:10:54,680 Speaker 1: alternatives to ship oil out of its country export oil 182 00:10:54,720 --> 00:10:59,240 Speaker 1: out of its country. Does it have other alternatives besides 183 00:10:59,280 --> 00:11:02,120 Speaker 1: going through the Persian Gulf into the Strait of Hermus. 184 00:11:02,360 --> 00:11:04,800 Speaker 4: They do, and it's Saudi Arabia and the UAE that 185 00:11:04,880 --> 00:11:08,680 Speaker 4: have alternative pipelines. In Saudi Arabia has a bigger one 186 00:11:08,720 --> 00:11:11,600 Speaker 4: that's the East to West pipeline, so they could use 187 00:11:11,679 --> 00:11:15,520 Speaker 4: that to kind of redirect some of the crude from 188 00:11:15,559 --> 00:11:18,120 Speaker 4: the Persian Gulf to the Red Sea and then lift 189 00:11:18,160 --> 00:11:22,079 Speaker 4: it from there. But then this would not cover all 190 00:11:22,120 --> 00:11:25,520 Speaker 4: of their exports, but it would help. And in the 191 00:11:25,559 --> 00:11:29,120 Speaker 4: case of UAE, they also have a pipeline from Abu 192 00:11:29,200 --> 00:11:31,760 Speaker 4: Dhabi near Abu Dhabi to Fujaira, which is on the 193 00:11:31,760 --> 00:11:36,319 Speaker 4: Indian side, Indian Ocean side of the country, so they 194 00:11:36,320 --> 00:11:39,320 Speaker 4: could do these and it would help. But for other 195 00:11:39,360 --> 00:11:42,440 Speaker 4: countries like Qatar trying to move with LNG, they don't 196 00:11:42,480 --> 00:11:46,320 Speaker 4: really have an alternative. Iraq trying to move its crude, 197 00:11:46,640 --> 00:11:48,880 Speaker 4: it doesn't really from the southern part of the country, 198 00:11:49,280 --> 00:11:55,640 Speaker 4: it doesn't really have an alternative, but it kind of 199 00:11:55,640 --> 00:11:58,800 Speaker 4: really just shows the importance, as you said, of the 200 00:11:58,800 --> 00:12:02,280 Speaker 4: Strait of Hormos for these countries. 201 00:12:02,240 --> 00:12:04,920 Speaker 1: And so just from your vantage point obviously, you know 202 00:12:05,040 --> 00:12:07,839 Speaker 1: you mentioned that the risk premium right now is the 203 00:12:07,920 --> 00:12:12,320 Speaker 1: war risk premium. The longer this goes, it could become 204 00:12:12,360 --> 00:12:15,280 Speaker 1: a supply premium. When do you think supply will really 205 00:12:15,280 --> 00:12:18,040 Speaker 1: start getting impacted? Are we talking like it's just a 206 00:12:18,080 --> 00:12:21,200 Speaker 1: couple more days, weeks, months, you know, until you know, 207 00:12:21,400 --> 00:12:23,800 Speaker 1: if oil can't leave that region, how is it going 208 00:12:23,840 --> 00:12:25,800 Speaker 1: to impact the supply And obviously that's going to have 209 00:12:26,120 --> 00:12:30,480 Speaker 1: a huge impact on pricing I would gather for oil. 210 00:12:30,679 --> 00:12:32,760 Speaker 4: Yeah, I mean, it really just depends, I think, on 211 00:12:33,480 --> 00:12:36,240 Speaker 4: what happens next in the conflicts. I mean, like I said, 212 00:12:36,280 --> 00:12:40,320 Speaker 4: if some of the production facilities start getting impacted, then 213 00:12:40,360 --> 00:12:45,520 Speaker 4: we would pretty quickly get a significant impact on oil 214 00:12:45,559 --> 00:12:49,400 Speaker 4: production and hence oil exports. I mean, perhaps one precedent 215 00:12:49,800 --> 00:12:54,440 Speaker 4: to look at is the attacks drawn attacks on the 216 00:12:54,559 --> 00:12:59,640 Speaker 4: Upcake oil processing facilities in Saudi Arabia back in two 217 00:12:59,640 --> 00:13:02,920 Speaker 4: thousand nineteen, and this actually took about five million ballos 218 00:13:02,920 --> 00:13:06,800 Speaker 4: per day offline for about a week, and it was 219 00:13:07,080 --> 00:13:11,400 Speaker 4: very significant. And this would I mean, it only took 220 00:13:11,480 --> 00:13:14,400 Speaker 4: days for this of course, given the scale for that 221 00:13:14,559 --> 00:13:19,200 Speaker 4: to be kind of impacted and kind of reflected in 222 00:13:19,280 --> 00:13:23,800 Speaker 4: the balances. In the case of transit, again, probably a 223 00:13:23,840 --> 00:13:28,720 Speaker 4: full closure is unlikely. It would probably be just a 224 00:13:28,760 --> 00:13:35,720 Speaker 4: smaller disruption within the passage, which perhaps would become more 225 00:13:35,760 --> 00:13:42,319 Speaker 4: apparent in weeks perhaps rather than days. But yeah, I 226 00:13:42,320 --> 00:13:45,760 Speaker 4: would say those are the two main things to watch. 227 00:13:45,760 --> 00:13:49,440 Speaker 4: What happens with straight up formos and what happens with 228 00:13:49,960 --> 00:13:53,720 Speaker 4: the energy infrastructure, especially the oil and gas production facilities. 229 00:13:54,240 --> 00:13:59,000 Speaker 1: And since the oil and gas exports will be limited 230 00:13:59,000 --> 00:14:01,840 Speaker 1: from that region until this this you know, comes to 231 00:14:01,880 --> 00:14:04,160 Speaker 1: a conclusion, we don't know how long that is. Are 232 00:14:04,160 --> 00:14:08,760 Speaker 1: there other exporters that can you know, increase supply to 233 00:14:08,880 --> 00:14:10,800 Speaker 1: help mitigate the impact the price. 234 00:14:10,960 --> 00:14:13,920 Speaker 4: I mean, that's a very interesting point. And generally the 235 00:14:13,920 --> 00:14:16,320 Speaker 4: spare capacity that we talk about in the global oil 236 00:14:16,360 --> 00:14:22,240 Speaker 4: markets is within OPEK, the OPEK group, which is dominated 237 00:14:22,280 --> 00:14:25,240 Speaker 4: by the golf producers. So I mean, in the case 238 00:14:25,320 --> 00:14:30,520 Speaker 4: of the current situation, OPEK does have some spare capacity, 239 00:14:30,520 --> 00:14:34,960 Speaker 4: but it's concentrated in Saudi Arabia and the UA, to 240 00:14:35,000 --> 00:14:38,160 Speaker 4: be honest, mostly Saudi Arabia, so you know, they have 241 00:14:38,200 --> 00:14:41,040 Speaker 4: the spare capacity, but once again they are based in 242 00:14:41,120 --> 00:14:44,600 Speaker 4: the Gulf and they are constrained with uh, to a 243 00:14:44,680 --> 00:14:48,040 Speaker 4: most to a big extent with the strait of hormus. 244 00:14:48,160 --> 00:14:52,280 Speaker 4: So other than that, I mean, if if prices are 245 00:14:52,360 --> 00:14:54,640 Speaker 4: high enough, you know, I think US shale has proven 246 00:14:54,680 --> 00:14:59,600 Speaker 4: to be rather flexible and kind of fast responding. But 247 00:14:59,720 --> 00:15:02,120 Speaker 4: how fast could it really respond? I mean, if oil 248 00:15:02,160 --> 00:15:04,360 Speaker 4: prices go high enough, of course, I think it would 249 00:15:04,400 --> 00:15:07,280 Speaker 4: be quite rapid to get a response from there, but 250 00:15:07,360 --> 00:15:11,000 Speaker 4: it would not be as fast as what opek could 251 00:15:11,000 --> 00:15:14,400 Speaker 4: normally do with its peer capacity, which is literally capacity 252 00:15:14,440 --> 00:15:17,600 Speaker 4: that they artificially keep offline that they can just bring 253 00:15:17,680 --> 00:15:20,560 Speaker 4: back when and if they wanted to. 254 00:15:21,320 --> 00:15:25,000 Speaker 1: You know, and you you know, early earlier this weekend 255 00:15:25,040 --> 00:15:26,720 Speaker 1: or during the weekend. You know, we were all busy 256 00:15:26,760 --> 00:15:30,600 Speaker 1: having fun writing research on this. You know, you mentioned that, 257 00:15:30,640 --> 00:15:33,680 Speaker 1: you know you expected the eighty dollars brand as you 258 00:15:33,720 --> 00:15:38,200 Speaker 1: mentioned were there. Do you think we can get significantly higher? 259 00:15:38,360 --> 00:15:42,200 Speaker 1: And kind of if there's like one thing that would 260 00:15:42,200 --> 00:15:45,920 Speaker 1: really drive it higher, would it be the you know, 261 00:15:46,640 --> 00:15:50,760 Speaker 1: the US or our radians taking out oil infrastructure? Is 262 00:15:51,000 --> 00:15:51,920 Speaker 1: that the number one thing? 263 00:15:52,840 --> 00:15:53,040 Speaker 3: Yeah? 264 00:15:53,080 --> 00:15:55,600 Speaker 4: I mean, we have a kind of scenario tree that 265 00:15:55,640 --> 00:15:59,320 Speaker 4: we worked on with Boomberg Economics, and the two scenarios 266 00:15:59,360 --> 00:16:02,680 Speaker 4: where we get above one hundred dollars a barrel is 267 00:16:02,800 --> 00:16:07,320 Speaker 4: kind of the escalation scenarios where in one again I 268 00:16:07,360 --> 00:16:11,040 Speaker 4: mean already mentioned but straight up Homos is significantly disrupted, 269 00:16:11,680 --> 00:16:14,120 Speaker 4: and this can be very meaningful because, like I said, 270 00:16:14,160 --> 00:16:16,680 Speaker 4: twenty million barals per day, about twenty percent of global 271 00:16:16,680 --> 00:16:20,800 Speaker 4: supply goes through there. It's very unlikely that it's fully shot, 272 00:16:20,880 --> 00:16:22,920 Speaker 4: so all of that is unavailable to the world, and 273 00:16:22,960 --> 00:16:25,840 Speaker 4: of course there is that kind of pipe, there's those pipelines, 274 00:16:26,120 --> 00:16:30,040 Speaker 4: but very significant, it's unlin And the second one is 275 00:16:32,120 --> 00:16:35,560 Speaker 4: you know, either side, but more likely Iran attacking other 276 00:16:35,600 --> 00:16:39,880 Speaker 4: production facilities in the Gulf or in Iraq. And this 277 00:16:40,040 --> 00:16:43,520 Speaker 4: is the other scenario where that can take us to 278 00:16:43,600 --> 00:16:47,080 Speaker 4: triple digit oil prices. And these are not mutually exclusive, 279 00:16:47,160 --> 00:16:50,400 Speaker 4: so I mean we look at these scenarios separately, and 280 00:16:50,480 --> 00:16:54,400 Speaker 4: in either one it could get to a point where 281 00:16:54,880 --> 00:16:57,480 Speaker 4: prices are pushed above one hundred dollars a barrel. But 282 00:16:57,600 --> 00:16:59,760 Speaker 4: these two things could happen at the same time that 283 00:17:00,280 --> 00:17:06,280 Speaker 4: could take oil to unprecedented levels. Again, we've argued that 284 00:17:06,359 --> 00:17:08,320 Speaker 4: this is at tail risk for a long time, but 285 00:17:08,400 --> 00:17:12,359 Speaker 4: given developments over the weekend, and given how things could 286 00:17:12,520 --> 00:17:18,480 Speaker 4: escalate from here. It is not at zero percent probability scenario, 287 00:17:18,840 --> 00:17:19,159 Speaker 4: all right. 288 00:17:19,160 --> 00:17:23,080 Speaker 1: And I always recommend anyone that Bloomberg terminal subscriber to 289 00:17:23,160 --> 00:17:27,000 Speaker 1: check out the Sally's work when he's talking about the 290 00:17:28,640 --> 00:17:30,639 Speaker 1: look the price of oil, and you can find that 291 00:17:30,720 --> 00:17:35,040 Speaker 1: at BI space OPECG on your Bloomberg terminal. So I 292 00:17:35,040 --> 00:17:36,480 Speaker 1: would definitely take a look at that. 293 00:17:37,080 --> 00:17:37,399 Speaker 3: Ken. 294 00:17:37,560 --> 00:17:39,680 Speaker 1: I want to bring you in. You know, you've done 295 00:17:39,720 --> 00:17:43,120 Speaker 1: some great work on the tanker market, and the impact 296 00:17:43,160 --> 00:17:48,520 Speaker 1: from the Iran war is you know, hitting time charter rates. 297 00:17:48,720 --> 00:17:50,720 Speaker 1: I'd love to hear your thoughts about, you know, where 298 00:17:50,720 --> 00:17:53,440 Speaker 1: you think time charter rates could go for tankers and 299 00:17:53,680 --> 00:17:56,480 Speaker 1: how the conflict in the Middle East is impacting the 300 00:17:56,520 --> 00:17:57,919 Speaker 1: flow of oil. 301 00:17:58,760 --> 00:18:01,919 Speaker 3: Thanks for having me, glad to be sure. So I 302 00:18:02,000 --> 00:18:04,040 Speaker 3: have a little story to tell today. What I'd like 303 00:18:04,040 --> 00:18:07,600 Speaker 3: to highlight to our listeners is this really impressive spike 304 00:18:07,800 --> 00:18:12,919 Speaker 3: in very large crude carrier of DLCC for short sport rates, 305 00:18:13,119 --> 00:18:16,800 Speaker 3: so for context VLCC rates for shipping fruit or from 306 00:18:16,880 --> 00:18:21,000 Speaker 3: the Arab Gulf to China. That's already spiked seven hundred 307 00:18:21,040 --> 00:18:25,000 Speaker 3: and sixty seven percent since January sixth, and that came, 308 00:18:25,080 --> 00:18:28,840 Speaker 3: you know, amid the growing likelihood of military conflict and 309 00:18:28,920 --> 00:18:33,399 Speaker 3: intensifying geopolitical teenisions in the Middle East. Now we think 310 00:18:33,760 --> 00:18:37,480 Speaker 3: that's a good chance VLCC rates might breach three hundred 311 00:18:37,560 --> 00:18:41,639 Speaker 3: thousand dollars and leave from twenty nineteenth record high of 312 00:18:41,720 --> 00:18:45,680 Speaker 3: three hundred and seventeen thousand dollars. And that, in turn 313 00:18:45,720 --> 00:18:49,440 Speaker 3: back in twenty nineteen was driven by US sanctions imposed 314 00:18:49,440 --> 00:18:55,160 Speaker 3: on Chinese energy shipping companies, including Tosco, for allegedly transporting 315 00:18:55,280 --> 00:19:00,080 Speaker 3: sanctioned Iranian crude. Now, the sanction that then effective, they 316 00:19:00,160 --> 00:19:04,240 Speaker 3: removed a significant portion of the global VOCZ fleet from 317 00:19:04,240 --> 00:19:06,600 Speaker 3: the market. You know, it took capacity on the market, 318 00:19:07,160 --> 00:19:11,440 Speaker 3: and that created a sudden shortage of available tankers, much 319 00:19:11,520 --> 00:19:15,080 Speaker 3: like what we are seeing now with the selector of 320 00:19:15,320 --> 00:19:18,879 Speaker 3: tankers being trapped or cornered around the Strait of Hormones 321 00:19:18,920 --> 00:19:23,240 Speaker 3: on the horizon. The number of energy tanker vessels that 322 00:19:23,320 --> 00:19:26,720 Speaker 3: are diverting from the Strait of Hormoes, we think that's 323 00:19:26,720 --> 00:19:31,120 Speaker 3: set to climb in the coming days. Following confirmed reports 324 00:19:31,119 --> 00:19:34,480 Speaker 3: of attacks on at least three ships near the mouth 325 00:19:34,520 --> 00:19:38,199 Speaker 3: of the Persian Gulf actually just yesterday, you know, we 326 00:19:38,240 --> 00:19:41,359 Speaker 3: think this were likely further pressure tanker spot rates that 327 00:19:41,440 --> 00:19:45,119 Speaker 3: are already searching and in fact, you know, given the 328 00:19:45,200 --> 00:19:49,199 Speaker 3: three contorb reports of ship attacks on nearly all all 329 00:19:49,280 --> 00:19:52,600 Speaker 3: Turge transits have now grown to a halt. And you 330 00:19:52,600 --> 00:19:55,040 Speaker 3: know you can actually see that using the map function 331 00:19:55,240 --> 00:19:58,840 Speaker 3: on the Bloomerg terminal. We literally just publish a fresh 332 00:19:58,880 --> 00:20:01,160 Speaker 3: note on this. You know, we into the met one 333 00:20:01,200 --> 00:20:04,360 Speaker 3: deck and the map shows that tanker vessels are now 334 00:20:04,440 --> 00:20:07,760 Speaker 3: staying clear of the Hormone Street and you know, vessels 335 00:20:07,760 --> 00:20:10,439 Speaker 3: are stopping just before the area. So right now, what 336 00:20:10,480 --> 00:20:14,040 Speaker 3: they're doing is just horboring and waiting in relatively safe water, 337 00:20:14,280 --> 00:20:18,080 Speaker 3: so to speak. But what's speaking things even worse is 338 00:20:18,119 --> 00:20:21,960 Speaker 3: that seven out of the twelve largest maritime insurance clubs 339 00:20:22,480 --> 00:20:24,840 Speaker 3: have just decided we've in the past twenty four hours 340 00:20:24,960 --> 00:20:29,639 Speaker 3: or so to see more risk coverage for ships entering 341 00:20:29,680 --> 00:20:35,320 Speaker 3: the Persian Gulf specific adjacent waters or Iranian waters starting 342 00:20:35,359 --> 00:20:38,840 Speaker 3: from Thursday. And that's according to a report put out 343 00:20:38,840 --> 00:20:41,640 Speaker 3: by our colleagues at Bloombook News. You know, this will 344 00:20:41,720 --> 00:20:45,119 Speaker 3: almost certainly compel even more vessels to avoid the region 345 00:20:45,560 --> 00:20:49,320 Speaker 3: as risks mount, you know, with military action still intensifying 346 00:20:50,000 --> 00:20:54,080 Speaker 3: now that again should drive energy shipping costs, especially for 347 00:20:54,200 --> 00:20:58,720 Speaker 3: allergy tankers even higher in the coming weeks. And you know, 348 00:20:58,760 --> 00:21:00,119 Speaker 3: I want to go back a little bit too, what 349 00:21:00,200 --> 00:21:03,320 Speaker 3: certainly mentioned earlier, the Strait of Hormos. Why is it 350 00:21:03,359 --> 00:21:07,160 Speaker 3: so important? Because it is a vital waterway and maritime 351 00:21:07,240 --> 00:21:10,720 Speaker 3: chalk point, responsible for twenty percent of global crue or 352 00:21:10,800 --> 00:21:14,439 Speaker 3: flows and about twenty five percent of LERG. You know, 353 00:21:14,480 --> 00:21:18,080 Speaker 3: and based on data from the US Energy Information Administration, 354 00:21:18,760 --> 00:21:22,159 Speaker 3: about two thirds of the region's cannot be diverted to 355 00:21:22,200 --> 00:21:25,440 Speaker 3: the pipelines in Saudi Arabia and the UAE in order 356 00:21:25,480 --> 00:21:28,359 Speaker 3: to avoid the Strait of Hormos and the Strait of 357 00:21:28,359 --> 00:21:31,359 Speaker 3: Hormost in turn, you know, given that it's responsible for 358 00:21:31,359 --> 00:21:34,880 Speaker 3: about a quarter of the world's energy flows, these pipelines, 359 00:21:35,400 --> 00:21:37,679 Speaker 3: you know, statistics show that they can only let that 360 00:21:37,720 --> 00:21:40,440 Speaker 3: additional two twenty six million barrels a day or so 361 00:21:40,600 --> 00:21:44,240 Speaker 3: bypass the straight and that accounts for just an estimated 362 00:21:44,359 --> 00:21:47,760 Speaker 3: thirteen percent of the region's throughput. Now why I mentioned 363 00:21:47,760 --> 00:21:50,720 Speaker 3: this is basically you know, a matther highly the fact 364 00:21:50,760 --> 00:21:55,119 Speaker 3: that energy that cannot be bypassed, that cannot be used, 365 00:21:55,359 --> 00:21:59,879 Speaker 3: cannot bypass the strait sorry using the pipelines that basic 366 00:22:00,320 --> 00:22:03,679 Speaker 3: has to go through it has to leave the region 367 00:22:03,720 --> 00:22:06,280 Speaker 3: and enter the region via all time coasts. So what 368 00:22:06,400 --> 00:22:10,240 Speaker 3: this means is basically all time curreads in particular VLCC 369 00:22:10,480 --> 00:22:14,560 Speaker 3: or super time creads that's continue, that's set to continue spiking. 370 00:22:15,119 --> 00:22:16,879 Speaker 3: And I believe we will soon find out in the 371 00:22:16,960 --> 00:22:20,399 Speaker 3: coming days a hit is this materializes and how long 372 00:22:20,520 --> 00:22:21,560 Speaker 3: this trend could continue. 373 00:22:21,720 --> 00:22:23,199 Speaker 1: Yeah, you know I would have mentioned Ken, you know, 374 00:22:23,240 --> 00:22:26,720 Speaker 1: you mentioned the insurance, the insurance carriers not wanting to 375 00:22:27,680 --> 00:22:30,320 Speaker 1: you know, cover ships in the region. You know, it's 376 00:22:30,359 --> 00:22:34,600 Speaker 1: worth noting these VLCC ships. You know, they can cost 377 00:22:34,680 --> 00:22:36,840 Speaker 1: one hundred and twenty hundred and thirty million dollars a piece, 378 00:22:36,920 --> 00:22:39,919 Speaker 1: so you know, these are you know, asset, you know, 379 00:22:40,080 --> 00:22:43,159 Speaker 1: very capital intensive assets that are on the water, and 380 00:22:43,280 --> 00:22:47,119 Speaker 1: obviously you know you're concerned about the crew as well, 381 00:22:47,240 --> 00:22:50,159 Speaker 1: more so than than maybe the assets itself. And you know, 382 00:22:50,440 --> 00:22:53,840 Speaker 1: it is something that ship owners have to consider if 383 00:22:53,840 --> 00:22:55,840 Speaker 1: they're willing to take that risk. And I would imagine 384 00:22:55,880 --> 00:22:59,000 Speaker 1: that many many or not, you know, kind of just quickly, 385 00:22:59,040 --> 00:23:00,240 Speaker 1: you know, can you just talk about some of the 386 00:23:00,240 --> 00:23:03,600 Speaker 1: major players in the tanker market that are like publicly traded. 387 00:23:04,520 --> 00:23:08,360 Speaker 3: So within like coverag in Asia, I would particularly highlight 388 00:23:08,800 --> 00:23:13,960 Speaker 3: the three Japanese giants, that's nap on Usen or NYK MID, 389 00:23:14,000 --> 00:23:18,399 Speaker 3: threet OSK or m L, and Kawasaki k SEN or 390 00:23:18,520 --> 00:23:23,159 Speaker 3: K Line. So these three are the largest tanker shipping 391 00:23:23,200 --> 00:23:27,240 Speaker 3: companies in operating in the Middle East that have come 392 00:23:27,320 --> 00:23:30,360 Speaker 3: up to say, you know, we're going to suspend voyagers 393 00:23:31,240 --> 00:23:33,640 Speaker 3: or you know, just do what they necessary to keep 394 00:23:33,640 --> 00:23:36,919 Speaker 3: our ships safe by you know, suspending transits to the 395 00:23:37,040 --> 00:23:39,800 Speaker 3: Strait of Hormos. Of course, you know you do have 396 00:23:39,840 --> 00:23:42,920 Speaker 3: the other large players like DHD in Frontline as well. 397 00:23:44,560 --> 00:23:48,800 Speaker 3: Most of these companies have you know, suspended transits to 398 00:23:49,000 --> 00:23:52,119 Speaker 3: the Tree of Hormos at the moment, and you know, 399 00:23:52,200 --> 00:23:55,280 Speaker 3: as you mentioned earlier, to keep the crew and cargo safe. 400 00:23:56,240 --> 00:23:59,040 Speaker 3: Right now, it is really anyone's guess how long this 401 00:23:59,119 --> 00:24:03,440 Speaker 3: situation might last. I think if you ask me, as 402 00:24:03,440 --> 00:24:06,639 Speaker 3: long as missos A buying ships are not seeing all right. 403 00:24:06,520 --> 00:24:08,560 Speaker 1: And I would have mentioned that. You know that the 404 00:24:08,640 --> 00:24:11,760 Speaker 1: two other names that you mentioned, d h T and 405 00:24:11,840 --> 00:24:15,480 Speaker 1: Frontline are uh I listed on the US Exchange, d 406 00:24:15,720 --> 00:24:18,520 Speaker 1: h T Space US on the Bloomberg terminal, and then 407 00:24:18,840 --> 00:24:23,919 Speaker 1: FRO Space US Equity. Go for Frontline if you're interested 408 00:24:23,960 --> 00:24:28,560 Speaker 1: to learn more about those companies, you know, in addition 409 00:24:28,640 --> 00:24:30,600 Speaker 1: to the tanker market, you know, I'm going to talk 410 00:24:30,600 --> 00:24:32,320 Speaker 1: a little bit about, you know, how it's going to 411 00:24:32,359 --> 00:24:35,919 Speaker 1: impact some some other markets that that we cover here. 412 00:24:36,600 --> 00:24:40,359 Speaker 1: You know, the the the fact that the region is 413 00:24:40,400 --> 00:24:44,520 Speaker 1: becoming you know, more unsafe, and the Red Sea obviously, 414 00:24:45,000 --> 00:24:47,360 Speaker 1: and the sus Canal is not really going to become 415 00:24:47,359 --> 00:24:49,679 Speaker 1: an alternative. A couple of months ago, you know, we 416 00:24:49,760 --> 00:24:52,880 Speaker 1: thought that some ships would slowly return. You did hear 417 00:24:53,040 --> 00:24:56,879 Speaker 1: that some carriers were returning, uh recently because of the 418 00:24:57,560 --> 00:25:01,760 Speaker 1: conflict in Iran, co companies like Marisk have said that 419 00:25:01,840 --> 00:25:05,119 Speaker 1: they're no longer going to go through the Suez Canal 420 00:25:05,160 --> 00:25:08,119 Speaker 1: and that's going to take up more capacity because instead 421 00:25:08,119 --> 00:25:09,840 Speaker 1: of going through the sust they have to go through 422 00:25:09,840 --> 00:25:12,800 Speaker 1: the Cape of Good Hope around Africa, and that takes 423 00:25:13,119 --> 00:25:16,560 Speaker 1: you know anywhere between ten to fifteen extra days. You know, 424 00:25:16,720 --> 00:25:19,960 Speaker 1: container rates have been in a free fall. There's really 425 00:25:20,119 --> 00:25:23,080 Speaker 1: a huge supply and demand and balance and we thought 426 00:25:23,119 --> 00:25:26,280 Speaker 1: that you know, going back to the Suez would exasperate that. 427 00:25:26,520 --> 00:25:29,600 Speaker 1: So you know, while we're not calling for as rosie 428 00:25:29,600 --> 00:25:31,960 Speaker 1: as a picture is probably the tanker market in terms 429 00:25:31,960 --> 00:25:34,320 Speaker 1: of rates you know, we do think that what's going 430 00:25:34,359 --> 00:25:39,640 Speaker 1: on in Iran could provide some support for the liners 431 00:25:39,680 --> 00:25:43,760 Speaker 1: and maybe you know, make earnings not as bad. They're 432 00:25:43,800 --> 00:25:45,960 Speaker 1: still not going to be good, but not as bad 433 00:25:46,040 --> 00:25:49,280 Speaker 1: for a lot of the container liners out there. You know, 434 00:25:50,320 --> 00:25:52,760 Speaker 1: one of the companies I cover for within my Bloomberg 435 00:25:52,760 --> 00:25:57,359 Speaker 1: Intelligence list is marisk Ken, which which liners do you cover? 436 00:25:57,720 --> 00:26:00,600 Speaker 3: So the same street Japanese joints I mentioned, they also 437 00:26:00,720 --> 00:26:04,679 Speaker 3: have container shipping operations, So the three of them actually 438 00:26:04,800 --> 00:26:09,120 Speaker 3: operate in container shipping under the joint venture known as 439 00:26:09,200 --> 00:26:13,159 Speaker 3: Ocean Network Alliance or o n E for short. Now, 440 00:26:13,480 --> 00:26:16,239 Speaker 3: I think it's also worth mentioning to our readers our 441 00:26:16,520 --> 00:26:20,240 Speaker 3: listeners at this point something interesting that I realized too 442 00:26:20,320 --> 00:26:23,159 Speaker 3: my interactions with many clients that most people were not 443 00:26:23,280 --> 00:26:26,520 Speaker 3: aware of. That is, actually the number of container liners 444 00:26:26,680 --> 00:26:31,200 Speaker 3: currently traversing the sewerst Channel and VTC remains almost eighty 445 00:26:31,320 --> 00:26:35,760 Speaker 3: percent lower than pre ch C crisis levels. That is 446 00:26:35,840 --> 00:26:40,240 Speaker 3: to say, before the hoose began attacking, you know, container 447 00:26:40,280 --> 00:26:43,840 Speaker 3: ships using the Sue West Channel VDC in December twenty 448 00:26:44,280 --> 00:26:47,240 Speaker 3: twenty three. Compared to that level, we are still seeing 449 00:26:47,320 --> 00:26:50,840 Speaker 3: only two in ten ships using the Sue West Channel 450 00:26:50,920 --> 00:26:54,959 Speaker 3: NVTC today And I think this really serves to highlight 451 00:26:55,040 --> 00:26:58,879 Speaker 3: the fact that you know, ships are still sailing away 452 00:26:58,960 --> 00:27:02,920 Speaker 3: diverting from this area. And as you rightfully pointed out, 453 00:27:02,960 --> 00:27:05,879 Speaker 3: I do not believe there are going to consider a 454 00:27:05,960 --> 00:27:09,879 Speaker 3: return anytime soon, which means to say, a normalization of 455 00:27:10,000 --> 00:27:13,720 Speaker 3: the RITZ and suberst Canal shipping traffic that is not 456 00:27:13,960 --> 00:27:17,480 Speaker 3: likely to be on the horizon anytime. This you ATLI 457 00:27:17,640 --> 00:27:19,960 Speaker 3: is not in the first half or third quarter. 458 00:27:20,359 --> 00:27:23,520 Speaker 1: Yeah, and container ships were specifically a target for the 459 00:27:23,600 --> 00:27:27,119 Speaker 1: hoodies because a you know, a lot of the ships 460 00:27:27,160 --> 00:27:30,680 Speaker 1: had a high value of cargo on board, more so 461 00:27:30,840 --> 00:27:33,399 Speaker 1: than a dry book or a tanker. And also a 462 00:27:33,480 --> 00:27:37,240 Speaker 1: lot of that cargo was heading to either Europe or US, 463 00:27:37,359 --> 00:27:39,360 Speaker 1: so that they were they had a big bulls eye 464 00:27:40,320 --> 00:27:44,080 Speaker 1: on their decks and that's kind of why the industry 465 00:27:44,160 --> 00:27:47,160 Speaker 1: has stepped away from that. You could read all our 466 00:27:47,240 --> 00:27:50,320 Speaker 1: research Ken and our am I research about the global 467 00:27:50,400 --> 00:27:55,040 Speaker 1: marine shipping industry at BI Space ship Isn't Peter and 468 00:27:55,119 --> 00:27:57,200 Speaker 1: then hit the return or go button and that will 469 00:27:57,240 --> 00:28:00,680 Speaker 1: take you to our marine shipping dashboard. Well you'll find 470 00:28:00,720 --> 00:28:02,600 Speaker 1: our research in our data. 471 00:28:03,880 --> 00:28:04,400 Speaker 3: As well. 472 00:28:06,480 --> 00:28:09,040 Speaker 1: And you know, Wayne, so you know, I know you 473 00:28:09,640 --> 00:28:11,440 Speaker 1: kind of have some more to say about some of 474 00:28:11,480 --> 00:28:14,000 Speaker 1: the research that you've been putting out on you know, 475 00:28:14,080 --> 00:28:16,480 Speaker 1: what's been going on Iran. So we're going to pivot 476 00:28:16,560 --> 00:28:17,520 Speaker 1: back to you, all. 477 00:28:17,480 --> 00:28:20,520 Speaker 2: Right, Thanks Lushley. So I would be remiss if I 478 00:28:20,560 --> 00:28:23,000 Speaker 2: didn't actually talk about the companies and what the ramifications 479 00:28:23,040 --> 00:28:26,800 Speaker 2: are to some of where we are in the defense base. 480 00:28:26,840 --> 00:28:28,240 Speaker 2: So one of the first ones I want to talk 481 00:28:28,240 --> 00:28:32,800 Speaker 2: about is the US defense primes, especially Lockheed RTX in Northrope, 482 00:28:32,840 --> 00:28:35,879 Speaker 2: all sit atop the center of this air missile defense 483 00:28:35,960 --> 00:28:40,520 Speaker 2: and strikecase capability that's underscored by the US Israel campaign 484 00:28:40,560 --> 00:28:43,680 Speaker 2: and Iran. The operation reinforced the primacy of air and 485 00:28:43,760 --> 00:28:47,440 Speaker 2: see assets with crude platforms becomes one of the key pieces. 486 00:28:47,920 --> 00:28:50,800 Speaker 2: It retains clear relevance, especially in the world where we're 487 00:28:50,840 --> 00:28:54,840 Speaker 2: looking a lot across uncrewed systems, uncrewed aerial systems as 488 00:28:54,880 --> 00:28:56,680 Speaker 2: well as others. Right, drones play a lot in the 489 00:28:56,760 --> 00:28:59,520 Speaker 2: Iranian side, but if you look at how the US 490 00:29:00,000 --> 00:29:03,240 Speaker 2: handle this, it was a lot of crude assets we have. 491 00:29:03,720 --> 00:29:05,840 Speaker 2: We do have something called Lucas, which is the low 492 00:29:05,960 --> 00:29:10,400 Speaker 2: cost unmanned combat air system that was used as well 493 00:29:10,480 --> 00:29:13,240 Speaker 2: but most of the successful ones still really support the 494 00:29:13,280 --> 00:29:16,760 Speaker 2: relevance back to the defense primes. Further, we also want 495 00:29:16,760 --> 00:29:19,520 Speaker 2: to talk about stealth fighters. Stealth fighters remain a decisive 496 00:29:19,520 --> 00:29:22,560 Speaker 2: advantage for the militaries, while air defense is critical to 497 00:29:22,680 --> 00:29:26,160 Speaker 2: protecting the key assets, and missile production capacity is vital 498 00:29:26,240 --> 00:29:28,240 Speaker 2: to both defense and attack. So that's where I think 499 00:29:28,240 --> 00:29:31,080 Speaker 2: you're going to see a lot of continued sustained growth 500 00:29:31,880 --> 00:29:34,479 Speaker 2: on where a lot of the defense spend has been. Right, 501 00:29:34,520 --> 00:29:36,600 Speaker 2: You've seen everybody, not only in the US, looking to 502 00:29:36,640 --> 00:29:39,040 Speaker 2: try and reach one and a half trillion dollars in 503 00:29:39,120 --> 00:29:41,520 Speaker 2: defense spend. You've seen a lot in Europe trying to 504 00:29:41,560 --> 00:29:45,200 Speaker 2: reach up to five percent GDP being focused on defense spend. 505 00:29:45,640 --> 00:29:48,160 Speaker 2: So obviously we think those pieces are important. If this 506 00:29:48,320 --> 00:29:50,480 Speaker 2: remains a short I RAN engagement, we think that it 507 00:29:50,560 --> 00:29:54,320 Speaker 2: does favor the Navy and Air Force spending specifically because 508 00:29:54,440 --> 00:29:58,280 Speaker 2: the heavy reliance on those air and naval power supports 509 00:29:58,320 --> 00:30:01,520 Speaker 2: our outlook towards continued strong defense spending in US investment 510 00:30:01,600 --> 00:30:03,960 Speaker 2: in the Navy and Air force and space force systems 511 00:30:04,240 --> 00:30:06,360 Speaker 2: which keeps army and marine programs kind of on the 512 00:30:06,400 --> 00:30:09,800 Speaker 2: back burner. So if as we expect, the campaign lasts 513 00:30:09,800 --> 00:30:12,760 Speaker 2: for a few weeks, not months, then the prime contractors 514 00:30:12,960 --> 00:30:16,760 Speaker 2: such as Lockheed RTX, northro Boeing, General Dynamics should be 515 00:30:16,840 --> 00:30:19,760 Speaker 2: best positioned for future programs to continue based off of 516 00:30:19,800 --> 00:30:23,000 Speaker 2: this demand. We do think that Europe's going to remain 517 00:30:23,120 --> 00:30:24,640 Speaker 2: a little They're going to lay low a little bit 518 00:30:24,720 --> 00:30:28,600 Speaker 2: here in the conflict, which will limit near term implications 519 00:30:28,640 --> 00:30:31,560 Speaker 2: for the defense contractors across Europe. But for like, if 520 00:30:31,560 --> 00:30:33,680 Speaker 2: you look at BAE and the F thirty five, right, 521 00:30:33,760 --> 00:30:35,800 Speaker 2: they're a key supplier to the F thirty five, which 522 00:30:35,840 --> 00:30:40,680 Speaker 2: reinforces them also reinforces stealth. But Lockheed is a sole 523 00:30:40,760 --> 00:30:44,440 Speaker 2: manufacturer of fifth generation fighters and so US and global 524 00:30:44,480 --> 00:30:46,920 Speaker 2: demand should support the production rate of one hundred and 525 00:30:46,960 --> 00:30:49,680 Speaker 2: fifty six per year in Europe's six gen efforts right 526 00:30:49,720 --> 00:30:51,600 Speaker 2: now or at least a decade away. In the high 527 00:30:51,640 --> 00:30:55,520 Speaker 2: costs will likely drive a hybrid fleet of those, which 528 00:30:55,600 --> 00:30:58,640 Speaker 2: means key F thirty five suppliers will still be in 529 00:30:58,720 --> 00:31:01,960 Speaker 2: this and that includes Northrop b and Alfree Harris. Missile 530 00:31:01,960 --> 00:31:04,440 Speaker 2: production obviously becomes a big question. A lot of people 531 00:31:04,480 --> 00:31:06,600 Speaker 2: ask about rainy inside, but also you got to look 532 00:31:06,600 --> 00:31:09,800 Speaker 2: at ours as well. So the missile production for rtx's 533 00:31:09,880 --> 00:31:12,920 Speaker 2: AIM one twenty AM rams and AIM nine X missiles, 534 00:31:12,960 --> 00:31:16,240 Speaker 2: as well as the Lockheeds Joint Attack Surface to Surface 535 00:31:16,320 --> 00:31:20,720 Speaker 2: missile JASM in Boeing's JADAM or key because these high 536 00:31:20,800 --> 00:31:23,080 Speaker 2: end operations, the more that we use right now becomes 537 00:31:23,160 --> 00:31:24,920 Speaker 2: more important in terms of whether or not we can 538 00:31:24,960 --> 00:31:28,840 Speaker 2: actually replenish these in need, especially for some type of 539 00:31:28,880 --> 00:31:33,520 Speaker 2: operational contingency, especially twenty twenty seven. You know, think about 540 00:31:33,600 --> 00:31:36,080 Speaker 2: areas where around the world, especially in the Pacific where 541 00:31:36,120 --> 00:31:38,800 Speaker 2: twenty twenty seven may be a htbed for more activity 542 00:31:38,840 --> 00:31:41,840 Speaker 2: as well. And then last, the short of the fight, 543 00:31:41,960 --> 00:31:43,920 Speaker 2: the better it's going to be for us based off 544 00:31:43,960 --> 00:31:47,280 Speaker 2: of that, because the high expenditure of those missiles can 545 00:31:47,360 --> 00:31:50,240 Speaker 2: eat into that readiness for those other global contingencies. So 546 00:31:50,960 --> 00:31:55,080 Speaker 2: general dynamics, electric boat and Huntington angles becomes a key one. Obviously, 547 00:31:55,320 --> 00:31:57,800 Speaker 2: you see a lot of especially in the Trump administration 548 00:31:57,920 --> 00:31:59,840 Speaker 2: right now, they use the Navy a lot. Venezuela is 549 00:31:59,880 --> 00:32:02,640 Speaker 2: a key piece of this as well as what's gone 550 00:32:02,640 --> 00:32:05,200 Speaker 2: on with the build up in the Middle East as well, 551 00:32:05,280 --> 00:32:08,280 Speaker 2: so you're seeing a lot of capability there. It shows 552 00:32:08,320 --> 00:32:10,760 Speaker 2: the demand for shipbuilding. You've seen that in the reconciliation 553 00:32:10,880 --> 00:32:13,240 Speaker 2: build with an additional twenty nine billion dollars going towards 554 00:32:13,240 --> 00:32:17,080 Speaker 2: shipbuilding on top of everything else, the call for additional 555 00:32:17,200 --> 00:32:21,000 Speaker 2: Virginia class submarines as well as Arlei Burt class destroyers 556 00:32:21,080 --> 00:32:24,239 Speaker 2: becomes a key piece of this as well. And then 557 00:32:24,320 --> 00:32:27,040 Speaker 2: even looking at potential low cost frigates in the future 558 00:32:27,080 --> 00:32:30,160 Speaker 2: and all that which supports you know, fink Kinterry and 559 00:32:30,240 --> 00:32:32,440 Speaker 2: some of these others as well in the Constellation class 560 00:32:33,000 --> 00:32:36,080 Speaker 2: development as well. So we do have that research out 561 00:32:36,080 --> 00:32:40,240 Speaker 2: on the terminal as well. But definitely, you know, everybody 562 00:32:40,280 --> 00:32:41,960 Speaker 2: loves to ask me about the geopolitical side, and I 563 00:32:42,080 --> 00:32:44,320 Speaker 2: always want to make sure that they know that I 564 00:32:44,760 --> 00:32:46,600 Speaker 2: do spend some time along with our defense team on 565 00:32:46,840 --> 00:32:47,840 Speaker 2: some of the companies as well. 566 00:32:48,840 --> 00:32:52,360 Speaker 1: No, absolutely, and thanks so much for that way. And 567 00:32:52,840 --> 00:32:57,600 Speaker 1: you know, this podcast is talking transport, so I'd be remissive, 568 00:32:57,600 --> 00:33:00,040 Speaker 1: but did I mentioned some other modes of transport and 569 00:33:00,120 --> 00:33:02,320 Speaker 1: kind of the ramifications what's going on in Iran? 570 00:33:02,800 --> 00:33:02,920 Speaker 2: Uh? 571 00:33:03,120 --> 00:33:05,880 Speaker 1: Since the airspace is closed around most of the Middle East, 572 00:33:06,120 --> 00:33:08,840 Speaker 1: this is going to impact air freight and air freight rates. 573 00:33:09,320 --> 00:33:11,560 Speaker 1: We think it's going to be an incremental positive for rates. 574 00:33:11,920 --> 00:33:12,040 Speaker 3: Uh. 575 00:33:12,160 --> 00:33:13,760 Speaker 1: You know, while we don't think it's going they're going 576 00:33:13,840 --> 00:33:15,920 Speaker 1: to go sky high, get it a little pun there, 577 00:33:16,600 --> 00:33:19,080 Speaker 1: like they are with the tanker industry, but you know, 578 00:33:19,160 --> 00:33:21,880 Speaker 1: we do think it will provide some upward pressure. And 579 00:33:21,960 --> 00:33:24,960 Speaker 1: then you know that you know is going to be 580 00:33:25,080 --> 00:33:27,840 Speaker 1: good and bad for the parcel carriers like fed X, 581 00:33:27,920 --> 00:33:32,080 Speaker 1: UPS and U and DHL. The good is that they 582 00:33:32,120 --> 00:33:34,360 Speaker 1: might have some you know, ability to increase rates a 583 00:33:34,400 --> 00:33:37,680 Speaker 1: little bit on the bed. It could impact in terms 584 00:33:37,720 --> 00:33:41,360 Speaker 1: of their volumes and the way they optimize their network, 585 00:33:41,360 --> 00:33:46,200 Speaker 1: which could increase costs. Also, you know, in addition to 586 00:33:46,280 --> 00:33:49,680 Speaker 1: covering those names, I cover the railroads and trucking names 587 00:33:49,720 --> 00:33:52,800 Speaker 1: here at Bloomberg Intelligence that dashboards B I Space R 588 00:33:52,880 --> 00:33:55,880 Speaker 1: A I L go or B I Space t R 589 00:33:56,040 --> 00:33:56,640 Speaker 1: C K go. 590 00:33:57,560 --> 00:34:00,400 Speaker 2: And you know what, you know, what we're. 591 00:34:00,280 --> 00:34:02,680 Speaker 1: Saying there is that you know, the impact is obviously 592 00:34:03,000 --> 00:34:05,720 Speaker 1: not from the region, but kind of like the derivative play. 593 00:34:06,080 --> 00:34:10,080 Speaker 1: Higher oil prices will mean higher diesel prices. The rail 594 00:34:10,160 --> 00:34:13,400 Speaker 1: industry has fuel search charges in place, so it can 595 00:34:13,440 --> 00:34:15,800 Speaker 1: be anywhere from a week to sixty days, but you 596 00:34:15,880 --> 00:34:18,920 Speaker 1: know it's really longer for the commodity car loads, and 597 00:34:19,040 --> 00:34:24,160 Speaker 1: when when prices for fuel increases significantly, that becomes a 598 00:34:24,880 --> 00:34:28,800 Speaker 1: drag on margin. So you know, the lag impact is 599 00:34:29,160 --> 00:34:32,040 Speaker 1: a negative. You know, it's not as bad for the 600 00:34:32,080 --> 00:34:34,560 Speaker 1: truckload or the LTIL space, but you know it could 601 00:34:34,680 --> 00:34:38,560 Speaker 1: be somewhat of ahead when you know, what we're concerned about. 602 00:34:38,600 --> 00:34:41,840 Speaker 1: If that oil prices do remain high for longer, that 603 00:34:41,920 --> 00:34:45,640 Speaker 1: could impact consumer spending, which you're here in the US. 604 00:34:45,719 --> 00:34:48,640 Speaker 1: It's been really good at the higher income levels and okay, 605 00:34:48,840 --> 00:34:51,759 Speaker 1: not great for the lower income levels, and it would 606 00:34:51,840 --> 00:34:56,400 Speaker 1: impact you know, the lower the mid to lower income 607 00:34:56,560 --> 00:34:59,400 Speaker 1: levels more so just because if it's a part of 608 00:34:59,480 --> 00:35:02,840 Speaker 1: their just christionary spending. So you know, people might have 609 00:35:02,960 --> 00:35:07,600 Speaker 1: to rethink you know, volume expectations for at least the 610 00:35:07,719 --> 00:35:13,239 Speaker 1: first quarter or second quarter if this war is prolonged 611 00:35:13,280 --> 00:35:17,200 Speaker 1: and in oil prices remain higher. So that's kind of 612 00:35:17,320 --> 00:35:21,040 Speaker 1: our take on what's going on in Iran and the 613 00:35:21,160 --> 00:35:25,120 Speaker 1: impact to transportation. So thank you, Ken, Wayne and Sally 614 00:35:25,200 --> 00:35:27,480 Speaker 1: for your time and insights today. I know you've all 615 00:35:27,600 --> 00:35:29,600 Speaker 1: been very busy over the last couple of days putting 616 00:35:29,640 --> 00:35:32,800 Speaker 1: out great research and insights onto the terminal. This was 617 00:35:32,880 --> 00:35:34,560 Speaker 1: really great and we should do it more often. I 618 00:35:34,640 --> 00:35:36,480 Speaker 1: also want to Thank you for tuning in. Maybe you 619 00:35:36,560 --> 00:35:39,520 Speaker 1: like the episode, please subscribe and leave review. We've lined 620 00:35:39,600 --> 00:35:41,239 Speaker 1: up a number of great guests for the podcast, so 621 00:35:41,280 --> 00:35:45,840 Speaker 1: please check back to your conversations with C suite executives, shippers, regulators, 622 00:35:45,880 --> 00:35:48,960 Speaker 1: and decision makers within the freight markets. Tread more BI 623 00:35:49,080 --> 00:35:51,759 Speaker 1: research on the impacts of the US Iran conflict. Please 624 00:35:51,840 --> 00:35:55,799 Speaker 1: go to b Iran go on your terminal. I'd also 625 00:35:55,960 --> 00:35:59,360 Speaker 1: like to thank our podcast editing team, Miriam Troor and 626 00:35:59,480 --> 00:36:03,400 Speaker 1: Aditia so Mani for their help pulling this podcast together. 627 00:36:03,760 --> 00:36:05,879 Speaker 1: This is Lee Glasgale signing off and thanks for talking 628 00:36:05,960 --> 00:36:07,480 Speaker 1: transports with me. Talk to you soon.