WEBVTT - Why Tracy Can't Ship a Teddy Bear from Hong Kong to the U.S. Right Now 0:00:10.840 --> 0:00:14.160 Hello, and welcome to another episode of the Odd Lots Podcast. 0:00:14.240 --> 0:00:18.840 I'm Tracy Allaway and I'm Joe. Isn't Joe? Do you 0:00:18.840 --> 0:00:23.440 remember that time I bought an actual barrel of oil? 0:00:23.920 --> 0:00:26.639 I tried to. Yeah, I thought about that, and you know, 0:00:26.680 --> 0:00:28.120 it's cool. I we used to sit right next to 0:00:28.160 --> 0:00:29.760 each other. I mean, now we're on the opposite side 0:00:29.760 --> 0:00:32.040 of the world. That was fun. We didn't appreciate that 0:00:32.080 --> 0:00:34.120 was great. We actually I got to work next to 0:00:34.159 --> 0:00:36.120 each other. And I remember you bought some oil and 0:00:36.159 --> 0:00:38.360 you kept it on your desk for what Yeah, well, 0:00:38.400 --> 0:00:41.680 I didn't really want to leave it in my apartment 0:00:41.720 --> 0:00:45.280 because I'd heard and learned that crude oil evaporates into 0:00:45.280 --> 0:00:47.559 the air and it's not very safe. So obviously I 0:00:47.560 --> 0:00:49.159 took it to the office and I put it um 0:00:49.479 --> 0:00:52.120 on the desk that was right next to you. But 0:00:52.760 --> 0:00:56.720 the whole point of the whole point of that, actually, 0:00:56.760 --> 0:00:58.920 you know I heard that that um, the little thing 0:00:58.920 --> 0:01:01.520 of oil fully of operated. After a few years, it's 0:01:01.560 --> 0:01:04.080 totally gone. Now it's kind of crazy. Oh man, wait 0:01:04.080 --> 0:01:07.120 where did it go into the air? Oh someone else 0:01:07.120 --> 0:01:09.960 at Bloomberg took it and then it evaporated, So I'm 0:01:10.000 --> 0:01:12.800 sure it's in the trash now anyway. Okay, that was 0:01:12.959 --> 0:01:16.800 a very um strange tangent. Okay, the point of doing 0:01:16.840 --> 0:01:20.200 that story, to actually try to buy a barrel of 0:01:20.200 --> 0:01:24.280 oil was to show exactly what was going on in 0:01:24.640 --> 0:01:28.440 a key commodities market in crude oil. Of course, at 0:01:28.440 --> 0:01:31.440 a really interesting time. This is when we had um 0:01:31.480 --> 0:01:36.440 some interesting patterns in the market, the contango structure where 0:01:36.480 --> 0:01:39.399 in theory you could buy oil and sit on it 0:01:39.480 --> 0:01:41.800 and forward sell it to someone else and you could 0:01:41.840 --> 0:01:45.160 pocket the difference and make some money just by buying 0:01:45.200 --> 0:01:47.400 oil and then storing it for a while. Do you 0:01:47.440 --> 0:01:50.200 remember that, I do? That was right, That was like 0:01:50.240 --> 0:01:52.760 the whole point. It wasn't just that you wanted to 0:01:52.880 --> 0:01:55.320 learn how to transfer oil, but there was like a 0:01:55.400 --> 0:01:58.840 carry trade or a contango traders. So, you know, I've 0:01:58.840 --> 0:02:02.560 taken an interest this year in logistics and transport and 0:02:02.800 --> 0:02:05.240 the shipping chaos that we've seen. We've done a number 0:02:05.280 --> 0:02:12.080 of episodes at this point on the gridlock in global shipping. Yeah, 0:02:12.120 --> 0:02:15.160 this is uh the topic de jour. I mean, I 0:02:15.200 --> 0:02:17.880 think there are many topics, but you know, it's all 0:02:17.919 --> 0:02:20.880 the interesting stories this year have not been really in 0:02:20.960 --> 0:02:24.959 anything related to uh, liquid markets or anything classically macro. 0:02:25.400 --> 0:02:28.480 But in micro, how does shipping work, how does home 0:02:28.520 --> 0:02:31.480 building work, how does saw mills work? Anything is sort 0:02:31.520 --> 0:02:35.240 of like real on the ground economy is where it's 0:02:36.360 --> 0:02:38.800 that's right. I'm so glad you said micro because we 0:02:38.840 --> 0:02:41.840 are going to be going very very micro in this episode. 0:02:41.919 --> 0:02:45.200 So in the spirit of actually buying a barrel of 0:02:45.240 --> 0:02:49.240 oil or some oil, earlier this year, around January, I 0:02:49.400 --> 0:02:54.239 set out to actually ship something via container from Hong 0:02:54.320 --> 0:02:58.400 Kong to the west coast of the US. Did I 0:02:58.400 --> 0:03:01.200 tell you about that. You brought it up on our 0:03:01.560 --> 0:03:04.480 interview with the Flexi Port and that was sort of 0:03:04.639 --> 0:03:06.880 but we didn't really get into what happened. I don't 0:03:06.880 --> 0:03:08.519 even know. Did you ship it? I don't even know what? 0:03:09.200 --> 0:03:11.960 Uh yeah, okay, so spoiler alert, we didn't ship it. 0:03:11.960 --> 0:03:14.560 In the end, it turns out that the gridlock in 0:03:14.600 --> 0:03:18.240 global shipping is so extreme that I couldn't make this work. 0:03:18.280 --> 0:03:20.680 And we tried for about four or five months, and 0:03:20.720 --> 0:03:23.800 I just kept getting bumped from ship to ship to ship. 0:03:23.919 --> 0:03:26.640 So I gave up eventually. I'm sorry, but I know 0:03:26.800 --> 0:03:29.880 that like all these ships are packed. However, I refused 0:03:29.880 --> 0:03:32.079 to believe that there wasn't space for a Teddy Bear 0:03:32.120 --> 0:03:36.400 on one ship. I mean, come on, come on, Okay, 0:03:36.480 --> 0:03:39.080 we're going to get into exactly what happened. We're going 0:03:39.120 --> 0:03:42.720 to go super micro, very granular and talk about what 0:03:42.840 --> 0:03:46.280 it is actually like to try to ship something via 0:03:46.400 --> 0:03:50.560 container from the east to the west at the moment um, 0:03:50.600 --> 0:03:52.280 and I think it's going to be a really enjoyable 0:03:52.360 --> 0:03:57.280 conversation in the spirit of you know, gonzo financial journalism. Great, 0:03:57.360 --> 0:04:00.160 let's do it all right. So our guests on this 0:04:00.240 --> 0:04:04.040 episode are two people that were very, very helpful to 0:04:04.080 --> 0:04:06.800 me in trying to arrange this experiment, and I spent 0:04:06.800 --> 0:04:09.320 an enormous amount of their time on this, and I 0:04:09.360 --> 0:04:11.160 feel really bad that we couldn't make it work. But 0:04:11.760 --> 0:04:15.080 we're gonna be speaking with Anton Posner, he's the chief 0:04:15.080 --> 0:04:19.000 executive officer at the Mercury Group, and Margot Brock, she's 0:04:19.000 --> 0:04:22.760 a president at Mercury Group as well. So Anton and Margot, 0:04:22.800 --> 0:04:25.400 thank you so much for coming on, Thank you for 0:04:25.440 --> 0:04:28.680 having us. Happy to be here, great, great to be on. 0:04:29.320 --> 0:04:32.320 So uh, Anton, I sort of I set it up 0:04:32.320 --> 0:04:34.520 a little bit there, but I'm trying to remember now 0:04:34.560 --> 0:04:39.240 how we actually met and embarked on this whole experiment, 0:04:39.520 --> 0:04:44.440 but shipping a single container that is mostly empty, and 0:04:44.480 --> 0:04:46.839 you know, we settled on putting a teddy Bear in 0:04:46.880 --> 0:04:50.400 it because it was easy to procure and kind of fun. 0:04:50.839 --> 0:04:53.520 But that is not what you do day in and 0:04:53.640 --> 0:04:56.919 day out at Mercury Group, is that, right? Right? We 0:04:57.240 --> 0:05:01.080 very very rarely are putting one teddy Bear and the container. 0:05:01.160 --> 0:05:05.600 It's almost almost never happens. Right. So you specialize in 0:05:05.800 --> 0:05:09.160 bulk freight, right, correct, right, So I'll give you a 0:05:09.160 --> 0:05:12.880 little back background. So Mercury Group are vast majority of 0:05:12.920 --> 0:05:17.280 our business is bulk and break bulk freight and supply 0:05:17.360 --> 0:05:22.720 chain management. We're commodity people, industrial commodity people. So so 0:05:22.800 --> 0:05:26.080 our cargo that we're typically dealing with is aluminium and 0:05:26.160 --> 0:05:31.120 steel and copper and copper concentrates and alumina which is 0:05:31.160 --> 0:05:36.359 a material for aluminium aluminum production. Organic soybean meal in 0:05:36.480 --> 0:05:40.520 bulk coming in from moving in UH containers transferred to 0:05:40.560 --> 0:05:44.039 bulk moving up the Mississippi River system for example. So 0:05:44.760 --> 0:05:47.240 so vast majority of what we do is on the 0:05:47.279 --> 0:05:51.400 bulk side, which is just as and that that it 0:05:51.480 --> 0:05:53.760 will get into it further, but that industry and that 0:05:53.880 --> 0:05:56.400 part of the supply chain sector is just as crazy 0:05:56.640 --> 0:06:00.480 these days as what the container world has seen. So 0:06:00.520 --> 0:06:02.360 what why do you walk us through a little bit 0:06:02.400 --> 0:06:05.279 of the differences. I mean, we uh recently talked to 0:06:05.640 --> 0:06:09.200 Ryan Peterson, CEO Flexport, and you know, we sort of 0:06:09.240 --> 0:06:11.760 have this idea of like, you know, I guess I'm 0:06:11.800 --> 0:06:13.480 kind of feel like I can wrap my head around 0:06:13.839 --> 0:06:18.360 how consumer goods moving from Asia to the US got 0:06:18.400 --> 0:06:21.360 all kinds of messed up for many reasons during the crisis. 0:06:21.680 --> 0:06:26.440 What are the similarities and differences like that we see 0:06:26.520 --> 0:06:29.919 or that just in general between sort of consumer goods 0:06:29.960 --> 0:06:35.400 movements versus uh bulk Shipman's sure both bulkshipman's for for 0:06:35.440 --> 0:06:40.160 those that may not may not understand the actual practical 0:06:40.320 --> 0:06:45.560 difference of it is that includes me about got yeah, 0:06:45.800 --> 0:06:49.760 so think about bulk in break bulk. It'll explain the 0:06:49.760 --> 0:06:52.000 difference between two of them. Are the is the old 0:06:52.040 --> 0:06:54.760 fashioned way of shipping where it's not in a nothing 0:06:54.839 --> 0:06:59.240 moves in a container, So dry bulk or bulk is 0:06:59.640 --> 0:07:03.040 thinking think about it as commodities that are measured in 0:07:03.279 --> 0:07:09.479 tons or volume, right, like soybeans, corn, iron, ore, coal, 0:07:09.640 --> 0:07:12.280 things like that that are just that are basically poured 0:07:12.320 --> 0:07:14.880 into a ship's hole. That's bulk, or what we call 0:07:15.040 --> 0:07:17.760 or bulk or dry bulk as we call it. Break 0:07:17.840 --> 0:07:23.080 bulk is is items that you can actually count, so 0:07:23.320 --> 0:07:29.520 steel coils, bundles of aluminum sows, crates of windows. We 0:07:29.640 --> 0:07:32.160 just looked at recently, which is an interesting story, looking 0:07:32.160 --> 0:07:35.160 to shift from containers to break bulk because of the 0:07:35.160 --> 0:07:38.640 misery in China at the moment. So so if you're looting, 0:07:39.080 --> 0:07:41.560 I think you think about the the old movies right 0:07:41.600 --> 0:07:45.720 on the waterfront of the the longshoreman on the west 0:07:45.760 --> 0:07:49.880 side of Manhattan loading crates, uh and and nets full 0:07:49.920 --> 0:07:54.280 of cargo bags of cocoa. That's break bulk. If you 0:07:54.280 --> 0:07:57.280 can count it, and you can count the number of pieces, 0:07:57.360 --> 0:08:00.000 then it's break bulk. If if you have to measure 0:08:00.040 --> 0:08:03.760 it in tons, that it's dribal essentially. And that's so 0:08:04.160 --> 0:08:07.200 these are goods that where it's just not practical or 0:08:07.240 --> 0:08:10.720 cost effective to work with container with containers. And so 0:08:11.480 --> 0:08:15.480 Margaret and I both come from diverse background uh. Margaret 0:08:15.480 --> 0:08:18.320 I both graduated from New York Maritime College in the 0:08:18.320 --> 0:08:21.720 Bronx came out as ship's officers. Neither one of us 0:08:21.720 --> 0:08:25.680 decided to go to sea as as a ship's officers. 0:08:25.680 --> 0:08:29.000 We did our see time as cadets and uh and 0:08:29.000 --> 0:08:31.600 and I always say, I decided I have no salt 0:08:31.600 --> 0:08:33.600 in my veins. I'm ready to gready to stay short 0:08:33.679 --> 0:08:36.720 side and I'm better navigating a cocktail party in London 0:08:36.800 --> 0:08:39.560 during London Medal Exchange week that I am navigating a 0:08:39.600 --> 0:08:43.680 ship to get to London. So so we went into both. 0:08:43.760 --> 0:08:47.640 Both of us went into shore side business of of shipping. 0:08:47.800 --> 0:08:51.400 Worked a few jobs together, but we both started in 0:08:51.440 --> 0:08:56.840 the container side of the business, working in various retainer lines, Margot, 0:08:56.920 --> 0:08:59.440 and they'll pass it over to you to like background on, 0:09:00.000 --> 0:09:03.320 but you did that at school, very much on the 0:09:03.360 --> 0:09:08.040 container side of the business, working for a container steamship line. 0:09:08.240 --> 0:09:11.400 From there, I went to a trading company where we 0:09:11.480 --> 0:09:16.520 moved containerized freight, but we also handled brake bulk UM 0:09:16.600 --> 0:09:19.760 and that was cocoa beans UM and I have eventually 0:09:19.760 --> 0:09:22.520 evolved into what we do now, which is much more 0:09:22.600 --> 0:09:27.880 rooted in industrial products of raw materials or semi finished product. 0:09:28.120 --> 0:09:31.839 So we do have a decent background of looking at 0:09:31.880 --> 0:09:36.280 both sides of the shipping industry. And you know, to 0:09:36.400 --> 0:09:41.840 Anton's point, it is all quite a mess, right now. Yeah, 0:09:42.040 --> 0:09:44.679 there's a phrase I've been using. It's probably not podcast 0:09:44.720 --> 0:09:47.080 friendly as to what's going on, so I'll leave that out. 0:09:47.160 --> 0:09:49.280 But but Joe, I want to get to that that 0:09:49.360 --> 0:09:51.240 heart of the question that different you're looking at the 0:09:51.800 --> 0:09:55.080 difference between the two. So very often when we're looking 0:09:55.160 --> 0:10:00.520 at moving, moving freight, moving these industrial commodities, where we're 0:10:00.520 --> 0:10:03.520 evaluating do containers make sense or is this going to 0:10:03.720 --> 0:10:06.640 make sense in bulk? For breakball, Let's say that we 0:10:06.679 --> 0:10:10.480 had a trading company that was looking to move copper 0:10:10.559 --> 0:10:14.360 cathodes from one of the copper producers like Freeport mcmaran 0:10:14.679 --> 0:10:19.480 or Rio tinto Kennicott Copper right uh in the southwest US, 0:10:19.760 --> 0:10:22.280 and they wanted to move those copper cathodes to Korea. 0:10:22.880 --> 0:10:26.480 So we would evaluate whether or not it makes sense 0:10:26.520 --> 0:10:30.280 to stuff those copper cathodes into containers and ship them 0:10:30.280 --> 0:10:33.959 to Korea, or if the volume was significant enough, does 0:10:34.000 --> 0:10:37.199 it make sense to rail those copper cathodes to l 0:10:37.240 --> 0:10:40.760 a long beach and load them onto a breakbook vessel 0:10:40.800 --> 0:10:44.520 bulk vessel to go to Korea. So that cost analysis 0:10:45.760 --> 0:10:47.880 is a big part of it. But in this day 0:10:47.880 --> 0:10:50.000 and age, it's not just the cost. It's also the 0:10:50.040 --> 0:10:54.920 ability to actually get equipment to make something happen, which 0:10:55.000 --> 0:10:58.040 leads leads me to that that that common I made 0:10:58.360 --> 0:11:02.080 about the windows. We recently one of our commercial people 0:11:02.559 --> 0:11:06.760 had a dialogue with a company that that imports some 0:11:07.000 --> 0:11:12.520 windows for consumer windows from China, and they're these windows 0:11:12.559 --> 0:11:16.080 are sitting in crates in northern China right now, just 0:11:16.200 --> 0:11:18.800 waiting the same as the Teddy Bear. They're the same 0:11:18.800 --> 0:11:21.760 fate as the Teddy Bear, missing ship after ship after ship, 0:11:22.240 --> 0:11:25.520 massive delays. Right this is the reason why everything is 0:11:25.559 --> 0:11:29.360 there's a shortage. So they had us look at taking 0:11:29.400 --> 0:11:32.040 those crates and loading them onto a break bulk vessel 0:11:32.520 --> 0:11:35.480 out of the port of tan gin Uh in China 0:11:35.559 --> 0:11:38.360 to shift into east coast of the US, and then 0:11:38.360 --> 0:11:41.400 we could truck them from there. They right now, on 0:11:41.440 --> 0:11:43.560 that particular one, they did end up going for it. 0:11:43.600 --> 0:11:48.520 The cost was fairly expensive in the transit time was 0:11:48.600 --> 0:11:52.760 not not fantastic in that particular case. But curious to 0:11:52.800 --> 0:11:54.880 see if they circle back to us after a few 0:11:54.920 --> 0:11:58.920 more weeks of waiting for waiting for a container availability, 0:11:59.080 --> 0:12:03.240 so we shall see. It's um. We're certainly getting phone 0:12:03.240 --> 0:12:07.680 calls from people that we've never gotten phone calls from before. Well, 0:12:07.880 --> 0:12:10.680 so that's a pretty good segue into the Teddy Bear 0:12:10.960 --> 0:12:16.120 project or experiment. But we started talking back in January 0:12:16.280 --> 0:12:22.000 when things were already pretty rough, but it seemed doable. 0:12:22.120 --> 0:12:25.440 The idea of sending a container from Hong Kong to 0:12:26.640 --> 0:12:29.120 I think were we aiming for l A. Yeah, I 0:12:29.160 --> 0:12:31.840 think that's right. Yeah, we're looking for l A long beach. 0:12:31.880 --> 0:12:34.200 We wanted, we chose, We chose the port that we 0:12:34.240 --> 0:12:37.480 knew was going to be potentially the most miserable. Well, 0:12:37.679 --> 0:12:39.680 we wanted that. We wanted that Teddy Bear to have 0:12:39.760 --> 0:12:43.760 some good anchor at anchor time off off the California coast, 0:12:44.280 --> 0:12:49.000 to have the real experience. That's right. So remind me 0:12:49.080 --> 0:12:52.240 what was the cost quote around that time in January 0:12:52.280 --> 0:12:56.520 when we first started talking. The all in cost for 0:12:56.960 --> 0:13:01.000 the local truck include the local local handling in Hong 0:13:01.080 --> 0:13:06.520 Kong and through to a warehouse to crack open the 0:13:06.559 --> 0:13:09.160 container take Teddy Bear out long But you think it 0:13:09.160 --> 0:13:13.000 was around seven thousand dollars at that point for that, 0:13:13.040 --> 0:13:16.040 and we knew that that was starting the skyrocket, right, 0:13:16.080 --> 0:13:18.960 it was heating heading upward, and we dealt with one 0:13:19.280 --> 0:13:23.000 cost increase while we were waiting for the Teddy Better 0:13:23.040 --> 0:13:26.920 Gets it is the space Book. Yeah, I think it 0:13:26.960 --> 0:13:30.319 went up by five hundred Is that right? Yeah, I 0:13:30.320 --> 0:13:34.240 think it went But even at that starting point, that 0:13:34.440 --> 0:13:37.480 freight rate was much too high for what the lane is, 0:13:37.800 --> 0:13:41.559 which is a common lane when you're talking Asia to 0:13:42.360 --> 0:13:45.880 the United States West coast, and it was that starting 0:13:45.920 --> 0:13:50.400 point was already so indicative of a skyrocketing market. It 0:13:50.520 --> 0:13:52.920 was already too high for where it should have been, 0:13:53.360 --> 0:13:57.559 say a year earlier, pre pandemic. And to your point, 0:13:57.679 --> 0:14:00.400 it did just continue to go from there and it moved, 0:14:01.000 --> 0:14:03.880 the rate moved north, and you still couldn't get your 0:14:03.920 --> 0:14:06.640 slot on a ship. We still couldn't get your container moving. 0:14:07.280 --> 0:14:12.000 So explain why you can't just buy your way onto it. 0:14:12.000 --> 0:14:14.439 I mean, you know it's you mentioned the windows, and 0:14:14.520 --> 0:14:16.160 I be you know, this is again a big thing 0:14:16.160 --> 0:14:19.640 that we've been covering obviously homebuilders in the United States. 0:14:19.960 --> 0:14:22.480 Lumber is a problem, like you can't have a home 0:14:22.480 --> 0:14:25.120 without windows, and so the windows are sitting in a 0:14:25.160 --> 0:14:28.400 factory in China and can't get here, Like is this 0:14:29.200 --> 0:14:32.760 is there? Essentially like there is no price too high? 0:14:33.120 --> 0:14:36.000 Um for what? When what people need that those just 0:14:36.120 --> 0:14:38.440 essentially paying anything, and that there's no way to like 0:14:38.880 --> 0:14:43.080 bid yourself onto these ships. Like explain, maybe walk us 0:14:43.080 --> 0:14:45.760 through a little bit the process, because the theory, it 0:14:45.800 --> 0:14:47.840 seems like there should be some price where it's worth 0:14:47.840 --> 0:14:50.000 it to ship a teddy bear. Actually why not, But 0:14:50.040 --> 0:14:52.240 there really should be a some price where it's worth 0:14:52.240 --> 0:14:55.080 it to ship windows at least because windows are crucial 0:14:55.120 --> 0:14:57.520 for the entire home. So can you walk us through 0:14:57.520 --> 0:14:59.720 the math and the calculations a little bit, whether it's 0:14:59.720 --> 0:15:02.080 on the builders side or the factory side of why 0:15:02.120 --> 0:15:06.440 they just can't move the windows. There's certainly becomes a 0:15:06.600 --> 0:15:10.320 point where it just doesn't make economic sense to ship, 0:15:11.120 --> 0:15:14.120 and that's why a lot of the cargo will sit. 0:15:15.480 --> 0:15:17.480 What happens when you end up with so much port 0:15:17.520 --> 0:15:20.920 congestion for loading, which is exactly what we're suffering now, 0:15:21.200 --> 0:15:24.600 is often the highest bidder will get, you know, the 0:15:24.640 --> 0:15:27.840 spot on the vessel when you're looking at it. Obviously, 0:15:27.920 --> 0:15:30.840 everything boils down to a cost per metric ton for 0:15:30.880 --> 0:15:35.440 any trader or any business, and or cost per unit. 0:15:36.040 --> 0:15:40.480 And where's that break even where does it become too 0:15:40.520 --> 0:15:44.560 expensive where it becomes a money losing proposition to pay 0:15:44.600 --> 0:15:47.480 the number you have to pay to guarantee yourself a 0:15:47.520 --> 0:15:51.840 slot on the ship. So it's much like, you know, 0:15:51.920 --> 0:15:55.000 to compare it to the trucking industry in the United States. 0:15:55.480 --> 0:15:59.520 Anyone can quote you a freight rate trucking or a 0:15:59.520 --> 0:16:02.720 container freight and sat and the number looks great on paper, 0:16:03.360 --> 0:16:05.680 but when it boils down to it and they're looking 0:16:05.760 --> 0:16:08.280 at a steamship line is looking to load their ship, 0:16:08.400 --> 0:16:10.880 and they have those ten containers over there willing to 0:16:10.920 --> 0:16:15.520 pay ten thous dollars per container. Your five thousand dollars, 0:16:15.520 --> 0:16:19.920 your seven thousand dollar freight rate container is not going 0:16:19.960 --> 0:16:21.720 to get the slop? Can I just ask a quick 0:16:21.760 --> 0:16:26.360 follow up? Then? What types of goods are crowding out 0:16:26.400 --> 0:16:29.120 the others such that Okay, let's say ten thousand dollars, 0:16:29.440 --> 0:16:31.400 What does it make sense to ship for ten thousand 0:16:31.440 --> 0:16:33.760 dollars that it doesn't make sense? I guess I does 0:16:33.800 --> 0:16:36.080 that question make sense? What are these high value goods 0:16:36.120 --> 0:16:38.520 that are dominating the space on the ships? Right? And 0:16:38.560 --> 0:16:41.600 it's not it's not so much high value as much 0:16:41.640 --> 0:16:44.520 as you need high margin. You have to be able 0:16:44.560 --> 0:16:48.320 to absorb that from the industrial products sector that we 0:16:48.440 --> 0:16:53.520 sit in those margins are typically too small, so our 0:16:53.600 --> 0:16:56.520 typical client base is not going to be who gets 0:16:56.560 --> 0:17:00.320 the space on the ship. And we actually had a 0:17:00.400 --> 0:17:04.439 client trying to ship a specialized rebar out of China. 0:17:04.640 --> 0:17:07.280 It was test shipments coming into the US. We needed 0:17:07.560 --> 0:17:09.800 and it was maybe a hundred tons or two hundred tons. 0:17:09.840 --> 0:17:15.040 It was nothing tremendous, five to ten containers, and we 0:17:15.080 --> 0:17:17.160 could not get the space on a ship for that 0:17:17.520 --> 0:17:20.159 because they weren't willing to pay up. So once you 0:17:20.240 --> 0:17:26.520 get to some of the higher sales point items or 0:17:26.760 --> 0:17:29.840 higher volume items that you can, you know, get a 0:17:29.840 --> 0:17:33.240 lot into the container, your margins are going up. I 0:17:33.280 --> 0:17:35.679 don't know what that answer is specifically, but I'm going 0:17:35.760 --> 0:17:40.560 to say it's probably more merchandise freight because that's where 0:17:40.560 --> 0:17:45.840 you where you can push push your costs into the 0:17:45.920 --> 0:17:49.440 price that's on the shelf. So when you're looking you're 0:17:49.440 --> 0:17:51.679 looking at something that's produced in Asia and it's not 0:17:51.760 --> 0:17:56.119 produced here or the production cost here to make I 0:17:56.160 --> 0:17:57.800 don't know a container of Teddy Bears, I don't know 0:17:57.840 --> 0:18:01.120 a container of of clothing would ever that product is 0:18:01.800 --> 0:18:04.920 it's still so cheap to produce it in Asia ship 0:18:04.960 --> 0:18:08.840 it here barely cost increase on the freight and then 0:18:08.840 --> 0:18:12.200 get it to market. But for us, and when we're 0:18:12.240 --> 0:18:16.960 working with traders that buy and sell point are are 0:18:17.080 --> 0:18:22.040 already established when they're looking to load out of Asia, 0:18:22.240 --> 0:18:24.760 and often the trade just doesn't have enough room to 0:18:24.880 --> 0:18:28.399 bear the increased freight cost and still be profitable. And 0:18:29.400 --> 0:18:32.720 often the industrial commodities that we're dealing with are produced 0:18:32.720 --> 0:18:37.600 here copper, aluminum, steel, right, So there is a market, 0:18:37.680 --> 0:18:41.199 domestic market to be able to make the deal at 0:18:41.240 --> 0:18:44.240 that shift if they just can't, if imports just can't work. 0:18:44.440 --> 0:18:46.280 And I think something else to add to add to 0:18:46.359 --> 0:18:52.280 it also is take the window example right where we 0:18:52.280 --> 0:18:56.199 were looking to shift that to break Ball. In that 0:18:56.240 --> 0:19:02.200 particular case, the ship operator offer put put a number 0:19:02.240 --> 0:19:06.680 out that was fairly really high for that that particular move. 0:19:06.840 --> 0:19:09.760 But they're just like any ship operator and the container 0:19:09.800 --> 0:19:13.359 ship operators are doing this also, they're going to allocate 0:19:13.400 --> 0:19:18.280 space to their regular contract clients. So that space is 0:19:18.320 --> 0:19:21.320 going to go to the to the producers that are 0:19:21.359 --> 0:19:24.399 shipping to Walbart and a target right on a regular 0:19:24.800 --> 0:19:29.119 regular basis. So just it's human nature, right essentially, in 0:19:29.520 --> 0:19:33.000 business nature in that respect, you take care of your 0:19:33.600 --> 0:19:37.320 of your largest clients at that point to give them 0:19:37.480 --> 0:19:40.120 the space that they need, and the others will fall 0:19:40.119 --> 0:19:44.159 by the wayside. So my understanding to that point is 0:19:44.200 --> 0:19:46.800 there were really three things that were against us on 0:19:46.840 --> 0:19:51.240 the Teddy Bear project. Number one was Bloomberg, you know, 0:19:51.280 --> 0:19:55.920 contrary to popular belief, was cost sensitive, and every time 0:19:55.920 --> 0:19:57.720 we had a price hike, I had to go back 0:19:58.160 --> 0:20:01.280 to the editor who approves our expenses and explained that, 0:20:01.359 --> 0:20:04.520 you know, freight costs were just out of control and 0:20:04.560 --> 0:20:07.480 that this thing that should cost a few thousand dollars 0:20:07.560 --> 0:20:11.720 was now closer to seven thousand. And then secondly, we 0:20:11.720 --> 0:20:15.240 weren't doing this as a massive client, so we weren't Walmart, 0:20:15.520 --> 0:20:18.679 we weren't Ikea or someone like that. We were just 0:20:18.800 --> 0:20:22.919 a single container, not even a full size container, but 0:20:23.359 --> 0:20:26.160 um half size I think twenty ft, which was also 0:20:26.200 --> 0:20:29.520 a problem because it's harder to get those onto a ship. 0:20:29.680 --> 0:20:32.480 So I guess my question is like, were we sort 0:20:32.520 --> 0:20:37.520 of doomed from the start in the current environment. Yeah, 0:20:37.560 --> 0:20:39.520 I wouldn't say we were doomed from the start, but 0:20:39.680 --> 0:20:44.720 it became apparent that the doom was coming right after 0:20:44.760 --> 0:20:48.280 waiting for the for the time that we that we did. Uh, 0:20:48.400 --> 0:20:50.199 for sure, there was going to be there was going 0:20:50.280 --> 0:20:55.120 to be delays. But but the delays were building and 0:20:55.400 --> 0:20:59.720 compounding right as we got further to the point where today, 0:21:00.240 --> 0:21:03.720 if we tried to do that today, uh we would 0:21:03.840 --> 0:21:06.080 we would say forget it, let's let's not even touch it. 0:21:06.119 --> 0:21:09.560 You see what's happening right right over the border from 0:21:09.600 --> 0:21:12.760 Hong Kong and Shenzen, at the part of Yen Tan, 0:21:13.720 --> 0:21:19.200 they have now a COVID outbreak that's causing some delays, 0:21:19.320 --> 0:21:24.960 massive congestion ship owners, the container container ship operators are 0:21:25.160 --> 0:21:29.840 now avoiding Yan Tan and and the and the congestion 0:21:29.920 --> 0:21:32.240 is starting to roll over into other local ports in 0:21:32.280 --> 0:21:36.359 the Pearl River delta. Uh So, if we tried to 0:21:36.960 --> 0:21:39.920 make that happen right now, I think we might even 0:21:39.920 --> 0:21:43.480 see container lines saying, you know, forget it, come let's 0:21:43.480 --> 0:21:47.520 look at it next year. Right at this point, so so, yeah, 0:21:47.840 --> 0:21:51.240 it was getting worse by the day, and uh and 0:21:51.280 --> 0:21:56.720 looking looking today, it's exponentially more of a problem right 0:21:56.720 --> 0:22:01.120 now based on what's happening locally there. So yeah, right 0:22:01.160 --> 0:22:05.399 next to Hong Kong is a complete and utter transportation 0:22:05.480 --> 0:22:08.960 congestion disaster at the moment. You know, but when we 0:22:09.000 --> 0:22:12.120 started talking about this back in January, and maybe it's 0:22:12.280 --> 0:22:16.879 really um quite parallel to this COVID world that we 0:22:16.960 --> 0:22:20.359 lived in the in the last year your plus, where 0:22:21.160 --> 0:22:25.320 you know, you you see the difficulty for many months ahead, 0:22:25.359 --> 0:22:27.240 and everyone's talking about it, and we know it be 0:22:27.280 --> 0:22:30.760 at COVID, be at shipping, but you know, we're always 0:22:30.840 --> 0:22:34.040 kind of hopeful, and the talking points have been on everything, 0:22:34.359 --> 0:22:37.320 but you know, maybe in six months out it's better 0:22:37.680 --> 0:22:39.920 or whatever that time frame is. So when we were 0:22:39.920 --> 0:22:43.879 talking in January, we knew it was bad, and we 0:22:43.960 --> 0:22:47.359 knew it wasn't getting great anytime soon. But the projection 0:22:47.440 --> 0:22:52.080 at that point for when possibly recovery would start coming 0:22:52.520 --> 0:22:56.080 and normalization to these shipping lanes would resume in the 0:22:56.119 --> 0:23:02.240 containerized market was a much rosier picture then what reality 0:23:02.280 --> 0:23:05.919 has been. So too for Anton to be correct in saying, 0:23:06.440 --> 0:23:10.280 we wouldn't even think about this today, because since January 0:23:10.480 --> 0:23:14.359 it's done nothing but stay horrible, this this prospect of 0:23:14.400 --> 0:23:18.000 trying to ship in containers. But back in January, we 0:23:18.440 --> 0:23:23.520 the conversation was talking about normalcy or you know, moving 0:23:23.560 --> 0:23:27.040 towards normalcy. By this point in the year, it just 0:23:27.080 --> 0:23:45.320 hasn't happened. It's not getting better yet. So this is 0:23:45.359 --> 0:23:49.119 really just to be clear, A it's its worst today. 0:23:49.600 --> 0:23:51.840 We're recording this June nine that will be out pretty soon. 0:23:52.440 --> 0:23:55.960 It's its worst today as it's uh been all year. 0:23:56.480 --> 0:23:58.600 There's no sign that it's getting better, and still the 0:23:58.640 --> 0:24:01.480 trajectory is going the wrong way in your view, why 0:24:01.600 --> 0:24:03.600 is that? Why has it? Why have we not seen 0:24:03.720 --> 0:24:06.880 any normalization? And what is what is the current outlook 0:24:06.880 --> 0:24:09.919 look look like right now? I would say that you know, 0:24:09.960 --> 0:24:14.879