Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: Joe, did you know you can buy a container gantry
Speaker 2: crane on Ali Baba?
Speaker 3: Oh?
Speaker 4: I think I saw that. How much is it?
Speaker 2: They have different price points as you might imagine, but
Speaker 2: I'm looking at one right now that's thirty seven thousand
Speaker 2: to twenty eight thousand. Ooh, and it's customizable. You can
Speaker 2: change the color.
Speaker 4: Some of those prices for like industrial equipment on Olive
Speaker 4: Bob are so cheap that like, I cannot believe they're real.
Speaker 2: I think they are.
Speaker 4: Real, which is sort of the scary part, or at
Speaker 4: least in terms of from the perspective of an American
Speaker 4: industrial perspective. I think in many cases they are actually real,
Speaker 4: but I still can't believe what's theoretically available. I did
Speaker 4: a dead list.
Speaker 2: I'm both the most popular trader and most successful trader
Speaker 2: at Citadel that is going viral, uh barges.
Speaker 4: This isn't after School Special, except.
Speaker 2: I've decided I'm going to base my entire personality going
Speaker 2: forward on campaigning for a strategic pork reserve in the US.
Speaker 1: Black goals.
Speaker 2: These are the important questions that robots taking over the world.
Speaker 4: No, I think that like in a couple of years,
Speaker 4: the AI will do a really good job of making
Speaker 4: the Odd Lots podcast. One day that person will have
Speaker 4: the mandate of Heaven.
Speaker 2: How do I get more popular and successful?
Speaker 1: We do have.
Speaker 2: You're listening to lots More, where we catch up with
Speaker 2: friends about what's going on right now, because.
Speaker 4: Even when the Odd Lots is over, there's always lots More.
Speaker 2: And we really do have the perfect guest. I'm very curious,
Speaker 2: why would you need a gantry crane in a specific color?
Speaker 2: Like is branding very important for these things?
Speaker 4: I don't know, you know who might know?
Speaker 1: Oh?
Speaker 2: Yes, So we have with us Jean Soroka, the executive
Speaker 2: director of the Port of la which is the busiest
Speaker 2: port in the US. Welcome back to the show.
Speaker 3: Gene, Tracy, Joe.
Speaker 1: Good to be here.
Speaker 2: So one of the reasons we wanted to talk to
Speaker 2: you is, obviously there's a lot of confusion about what's
Speaker 2: going on with trade policy right now. And you know,
Speaker 2: we talked on the show about the potential for empty
Speaker 2: shelves in America if goods aren't coming in any longer,
Speaker 2: and so I really wanted to go kind of directly
Speaker 2: to the source and figure out exactly what is going
Speaker 2: on in terms of imports right now, so we thought
Speaker 2: you are the perfect person to catch up with.
Speaker 3: Your timing is impeccable because over the last seven days
Speaker 3: here at the largest port in the Western Hemisphere, we've
Speaker 3: averaged five container ships a day. Normally at this time
Speaker 3: of year, it would be about ten to twelve ships
Speaker 3: in port every single day. Right Subsequently, job openings for
Speaker 3: our dock workers are down almost fifty percent over the
Speaker 3: last several weeks.
Speaker 2: So this is really interesting because you know, on the
Speaker 2: one hand, we've had the delay in tariffs, the ninety
Speaker 2: day delay, and who knows what's going to happen after that,
Speaker 2: So you expected to see a drop in traffic in
Speaker 2: April and early May. But on the other hand, you
Speaker 2: could see some front loading of traffic going into the
Speaker 2: port as people try to get ahead of the new deadline.
Speaker 2: But that's not what you're seeing right now.
Speaker 3: No, not at all. And the thing of this is
Speaker 3: tracy that thirty percent tariffs is simply an average, and
Speaker 3: that's still really high. A lot of American importers simply
Speaker 3: slammed on the brakes when they saw the one hundred
Speaker 3: and forty five percent and after the Geneva meetings it
Speaker 3: was said that they dropped down to thirty percent. That
Speaker 3: wasn't met with a lot of enthusiasm in the import community.
Speaker 3: So you've still got some cargo coming in. Folks went
Speaker 3: back and scooped up what had been manufactured. Others let
Speaker 3: orders complete that cycle before shipping out. But what I'm
Speaker 3: not saying are a lot of new orders because ninety
Speaker 3: days is a short period of time in our business.
Speaker 3: That's traditionally how long it takes for an importer to
Speaker 3: put that paperwork into a factory in Asia, make the product,
Speaker 3: and simp we get it ready to ship to the
Speaker 3: United States. We're a long way from there.
Speaker 4: That's really interesting because in a lot of the conversations
Speaker 4: that we've had, you know, they're long cycle orders, right.
Speaker 4: So you know, you talk about retailers and they're thinking
Speaker 4: about October, or they're thinking about Halloween, or maybe they're
Speaker 4: thinking about Thanksgiving, or maybe they're thinking pretty soon they're
Speaker 4: going to be thinking about Christmas. I guess from that perspective,
Speaker 4: a ninety day window for some retailers, it must be
Speaker 4: a pretty big risk. If you're a big retailer, maybe
Speaker 4: you can like take the risk that like, yeah, you know,
Speaker 4: they'll probably extend it again, et cetera. But I guess,
Speaker 4: you know, for smaller ones, like that's probably not enough
Speaker 4: certainty that they're not going to end up with a
Speaker 4: bunch of goods that they have to pay a huge
Speaker 4: bill on at the end.
Speaker 3: That's right, Joe. And the majority of the companies that
Speaker 3: import through the Port of Los Angeles are small to
Speaker 3: middle sized business.
Speaker 4: Well wait, I didn't know that. Explain that form.
Speaker 3: Yeah, yeah, we got one hundred and twenty five thousand
Speaker 3: companies that call LA's Port home for all their imports.
Speaker 3: And we know the big box retailers, the whole home
Speaker 3: improvement stores. An equal amount of cargo comes in as
Speaker 3: parts for American factories. But of those one hundred and
Speaker 3: twenty five thousand importing companies, the great majority are those
Speaker 3: smaller to mid size, even family businesses. They didn't have
Speaker 3: the wherewithal in some cases to be able to frontload inventory,
Speaker 3: push carrying costs out, or get extra warehousing. So they're
Speaker 3: still having to make the choice right now to buy
Speaker 3: at these extraordinarily high levels. And I call thirty percent extraordinarily.
Speaker 1: High, because if they do.
Speaker 3: Bring those products in they're likely not going to be
Speaker 3: able to pass on those costs to their customers because
Speaker 3: they become uncompetitive with the big guys.
Speaker 2: This is something that we hear over and over again
Speaker 2: in the tariff discussions, which is, you know, for the
Speaker 2: big guys, they have certain levers to pull, as you
Speaker 2: point out, they can frontload some of their orders because
Speaker 2: they have to capital the cash to get through that,
Speaker 2: or they could try to negotiate prices with their suppliers
Speaker 2: things like that. But the smaller guys seem to really
Speaker 2: struggle here.
Speaker 3: That's exactly right, and what we're hearing on the ground.
Speaker 3: There's a part supplier for the big three automotive companies
Speaker 3: in Detroit that's right up the freeway from us here
Speaker 3: at the port, and they're telling me that their effective
Speaker 3: terrif rate is fifty seven and a half percent on
Speaker 3: these auto parts that go to the plants. Now here's
Speaker 3: the dilemma. If they slow down too much or stop
Speaker 3: buying because fifty seven and a half percent is too much,
Speaker 3: they run the risk of shutting a factory line down
Speaker 3: back in Detroit. If that happens, it costs the auto
Speaker 3: manufacturer between two and four million dollars an hour in
Speaker 3: lost sales, wages and cost structure.
Speaker 1: It's unbelievable.
Speaker 4: Actually, we sort of curious about Port of Los Angeles
Speaker 4: corporate structure. You mention the dock worker job listings are
Speaker 4: current lead down, what is the structure, who employs them,
Speaker 4: who's putting up those listings. If someone is a dock worker,
Speaker 4: what company are they working for? And what company is
Speaker 4: and what are those companies' relationship to your entity? The
Speaker 4: Port of Los Angeles.
Speaker 3: Jo the dock workers the International Longshore and Warehouse Union
Speaker 3: fifteen thousand strong members here at the twin ports of
Speaker 3: Los Angeles and Long Beach are hired by the Pacific
Speaker 3: Maritime Association. Okay, that's a representative group covering seventy five
Speaker 3: companies in our industry. Think of the shipping lines, the
Speaker 3: marine terminal operators, and the maintenance and repair companies. So
Speaker 3: each one of these terminals, every morning and every evening
Speaker 3: wants to bring on the dock workers to work at
Speaker 3: their facility. Here at the Port of Los Angeles, we're
Speaker 3: a city entity, the Port Authority, if you will. Our
Speaker 3: job is that of a real estate company to lease
Speaker 3: out property to these international and national trading interests to
Speaker 3: promote trade through this eight way.
Speaker 2: So on this note, I mean, one of the things
Speaker 2: I wanted to ask you about is how you personally
Speaker 2: at the Port of la are actually dealing with forecasting
Speaker 2: and coming up with your business plans for the rest
Speaker 2: of the year, because it just seems, I mean, it
Speaker 2: seems almost impossible at this point. You don't know what's
Speaker 2: going to happen with the deadline, and then on top
Speaker 2: of that, you're not really sure what's going to happen
Speaker 2: with shipping because maybe people front load and traffic goes up,
Speaker 2: although it doesn't sound like that's happening, or maybe traffic
Speaker 2: goes down because people are just nervous. It seems really,
Speaker 2: really difficult to make any sort of plan right now.
Speaker 3: To your point, Tracy's, traditional forecasting is super difficult right now.
Speaker 3: But because we have a great information system, deep relationships
Speaker 3: in Asia, and contacts that span nearly four decades in
Speaker 3: this industry, we're able to predict quite a bit. For example,
Speaker 3: last month in May, seventeen vessels were canceled that eliminated
Speaker 3: two hundred and twenty five thousand container units coming our
Speaker 3: wayp off was so great that the first time in memory,
Speaker 3: I can remember that the month of May had lower
Speaker 3: cargo volume than did the month of April, down sixteen percent,
Speaker 3: when we otherwise should be going up toward peak season.
Speaker 3: The month of June, we'll have an additional ten vessel
Speaker 3: sailings canceled, so I can work from that kind of
Speaker 3: parameter right now. But we're in the midst of our
Speaker 3: budgeting season here in the City of Los Angeles. We're
Speaker 3: trying to make sure that we have everything lined up,
Speaker 3: from proper staffing and training of the workforce all the
Speaker 3: way to how we're going to carry out these infrastructure projects, digitalization, cybersecurity,
Speaker 3: as well as our investment and the sustainability programs that
Speaker 3: we have. Fortunately, we've got a very strong financial policy
Speaker 3: for the last ten years, so we'll be able to
Speaker 3: continue our investment through cycle. But the forecasting end of
Speaker 3: this is really sketchy.
Speaker 4: So obviously, the first of our time we talked to
Speaker 4: was in twenty twenty one, I think, you know, during
Speaker 4: the peak of when everyone was focused on the log
Speaker 4: jam at the so there was so much stuff coming
Speaker 4: in and there was all of this talk about, oh,
Speaker 4: there's this big traffic jam and backup et cetera. When
Speaker 4: the Turffs first got announced and then there was some
Speaker 4: talk of rolling back, some people were worried that we
Speaker 4: get a similar sort of phenomenon where maybe because of
Speaker 4: the pull ahead, et cetera, that we get another pile
Speaker 4: up that hasn't happened. But let's just say it did.
Speaker 4: Let's say something happened and there were a surge of
Speaker 4: orders tomorrow, et cetera. Based on the experience of twenty
Speaker 4: twenty one and the stress of the twenty twenty one
Speaker 4: has anything changed fundamentally at the port such that a
Speaker 4: sudden spike of imports that were sustained. There are best
Speaker 4: practices that would be able to be put in place
Speaker 4: today to avoid that sort of bottleneck the same way, like,
Speaker 4: has anything changed or learned that could ameliorate an event
Speaker 4: like that in the future, Absolutely, Joe, And the first
Speaker 4: thing we did was an inward look. What could we
Speaker 4: learn do better replicate from best practices elsewhere? And what
Speaker 4: we found was that we all started working closer together.
Speaker 4: We looked at what the root causes were. And again
Speaker 4: it's not this simple, but it's about the velocity. It's
Speaker 4: about how fast we can unload a ship and get
Speaker 4: the cargo on and off the port property quickly. That's
Speaker 4: what we didn't have in twenty twenty one when those
Speaker 4: one hundred and nine ships were lined up. So what's
Speaker 4: changed in terms of your potential velocity today? Why should
Speaker 4: people think that it could be higher?
Speaker 3: Well, it's much better. And I'll give you this example.
Speaker 3: During twenty twenty one, the average container that was to
Speaker 3: leave the port by truck sat for eleven days. Today
Speaker 3: that average container is sitting for three days. And that's
Speaker 3: been a trend for some time now, and I'm not
Speaker 3: just talking months. The average box that was going out
Speaker 3: by rail during that time period was thirteen and a
Speaker 3: half days. Right now it's just shy of four and
Speaker 3: a half days. So we made a concerted effort to
Speaker 3: work with rail and trucking firms, importers and exporters to
Speaker 3: show them the value of speed when it comes to
Speaker 3: containers resting at any one time at our port. And
Speaker 3: it's been just a piece of work to continue to
Speaker 3: move forward with meaning that we can work the next
Speaker 3: ship faster, we can put more cargo through here, hire
Speaker 3: more dock workers and truckers to handle that volume, and
Speaker 3: it's grown exponentially. The last point here is that because
Speaker 3: we started seeing front loading of cargo last summertime, we
Speaker 3: went ten consecutive peak season like months from July through
Speaker 3: April and not one ship was backed up. We moved
Speaker 3: more cargo during that time than we did at the
Speaker 3: height of twenty one or twenty two.
Speaker 2: How many cranes for containers did you purchase off Ali
Speaker 2: Baba at that time.
Speaker 3: Unfortunately, based on the opening back and forth between you
Speaker 3: and Joe Tracy, I have never seen a gantry crane
Speaker 3: in twenty five to thirty five thousand dollars sale.
Speaker 2: Prece It is a little suspicious, isn't it.
Speaker 3: They do come in different colors because companies have logos,
Speaker 3: they've got color schemes. Branding is really important in this business.
Speaker 3: But the average gantry crane on the ground right now,
Speaker 3: and we have eighty six of them twelve million bucks
Speaker 3: a fee.
Speaker 4: These are must be little toy versions, Bowie. Why is
Speaker 4: branding important? I'm looking at every picture I have of
Speaker 4: the port of Los Angeles. They all look like the
Speaker 4: sort of very satisfying aquamarine or like a blue or
Speaker 4: something like that. Why is branding important in the logistics
Speaker 4: shipping business.
Speaker 3: Well, just like it would be in clothing or footwear
Speaker 3: or for your favorite sports team, it really identifies the
Speaker 3: company APMT, headquartered in the Hague with their parent company
Speaker 3: Mursky and Copenhagen is a light we would call it
Speaker 3: a Carolina blue phoenix owned by CMACGM and Marseille France
Speaker 3: is red, white and blue, mirroring that French flag. And
Speaker 3: then we go over to Evergreen based in Taiwan and
Speaker 3: as you could imagine, green gantry cranes, green containers. So
Speaker 3: that branding across an industry of maybe ten major players
Speaker 3: really identifies. As you see a box moving on a
Speaker 3: train off a ship of the truck through your city,
Speaker 3: you know who they are.
Speaker 2: Yeah, I have to say I have a little miniature
Speaker 2: Evergreen container on it's actually it's a clean xbox.
Speaker 3: I guess the green.
Speaker 2: Yeah, and it's a very bright green ever Green's colors. Okay.
Speaker 2: So one of the things we've been talking about on
Speaker 2: the show is this idea that if imports into the
Speaker 2: US are slowing down, eventually you might see some shortages
Speaker 2: or at least lack of options at stores. Let's put
Speaker 2: it that way. When would you expect the slow down
Speaker 2: in containers shipping to actually hit the shelves and affect
Speaker 2: the American consumer.
Speaker 3: Later this summer tracy. And this is why when we've
Speaker 3: seen sixty different announcements on trade policy and tariff since January,
Speaker 3: even the most seasoned professional is having a difficult time
Speaker 3: keeping up with this. But I think one thing is
Speaker 3: consistent that with high tariff levels and increasing prices to
Speaker 3: the buyer, folks just slammed on the brakes, hit the
Speaker 3: pause button on business and hiring capital investments and said,
Speaker 3: let's see how this thing shakes out, because there could
Speaker 3: be new information that out in two hours, two days,
Speaker 3: or maybe even two weeks. Not sure how this is
Speaker 3: all going to end, So I'm going to buy the
Speaker 3: bare necessities. And we're seeing that now with these single
Speaker 3: digit container ship volumes at the Port of Los Angeles
Speaker 3: on a daily basis, So likely we'll see fewer selections
Speaker 3: on store shelves and online buying platforms and higher prices.
Speaker 3: Fulfillment rates will also look different. If a blue, red,
Speaker 3: and white shirt option are not moving at high levels,
Speaker 3: you're not going to see them replenished, just a top
Speaker 3: off inventory, but you likely will see the item that's
Speaker 3: selling get a backfill, and that just looks different from
Speaker 3: a supply chain perspective right now. The month of May
Speaker 3: that just closed would normally see a flurry of purchase
Speaker 3: orders over to Asia factories getting ready for the year
Speaker 3: end and Christmas holiday seasons. We're not seeing that at
Speaker 3: this point.
Speaker 2: All right, Well, Gene, thank you so much for coming
Speaker 2: back on and giving us an update on what you're seeing.
Speaker 2: It was really good to get your perspective.
Speaker 3: Tracy Joe great bey with you again. Thank you face
Speaker 3: Gene Joe.
Speaker 2: What color should my crane be?
Speaker 4: Some nice yellow or something?
Speaker 2: No, not yellow, bright red, pink.
Speaker 1: Pink, pink.
Speaker 4: I wonder pink crane.
Speaker 1: That would be deciding.
Speaker 4: I think that'd color and logistics very much.
Speaker 3: Yeah, I agree to you.
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