Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast.
Speaker 1: I'm Tracy Allaway and I'm Joe. Isn't Joe? Do you
Speaker 1: remember that time I bought an actual barrel of oil?
Speaker 1: I tried to. Yeah, I thought about that, and you know,
Speaker 1: it's cool. I we used to sit right next to
Speaker 1: each other. I mean, now we're on the opposite side
Speaker 1: of the world. That was fun. We didn't appreciate that
Speaker 1: was great. We actually I got to work next to
Speaker 1: each other. And I remember you bought some oil and
Speaker 1: you kept it on your desk for what Yeah, well,
Speaker 1: I didn't really want to leave it in my apartment
Speaker 1: because I'd heard and learned that crude oil evaporates into
Speaker 1: the air and it's not very safe. So obviously I
Speaker 1: took it to the office and I put it um
Speaker 1: on the desk that was right next to you. But
Speaker 1: the whole point of the whole point of that, actually,
Speaker 1: you know I heard that that um, the little thing
Speaker 1: of oil fully of operated. After a few years, it's
Speaker 1: totally gone. Now it's kind of crazy. Oh man, wait
Speaker 1: where did it go into the air? Oh someone else
Speaker 1: at Bloomberg took it and then it evaporated, So I'm
Speaker 1: sure it's in the trash now anyway. Okay, that was
Speaker 1: a very um strange tangent. Okay, the point of doing
Speaker 1: that story, to actually try to buy a barrel of
Speaker 1: oil was to show exactly what was going on in
Speaker 1: a key commodities market in crude oil. Of course, at
Speaker 1: a really interesting time. This is when we had um
Speaker 1: some interesting patterns in the market, the contango structure where
Speaker 1: in theory you could buy oil and sit on it
Speaker 1: and forward sell it to someone else and you could
Speaker 1: pocket the difference and make some money just by buying
Speaker 1: oil and then storing it for a while. Do you
Speaker 1: remember that, I do? That was right, That was like
Speaker 1: the whole point. It wasn't just that you wanted to
Speaker 1: learn how to transfer oil, but there was like a
Speaker 1: carry trade or a contango traders. So, you know, I've
Speaker 1: taken an interest this year in logistics and transport and
Speaker 1: the shipping chaos that we've seen. We've done a number
Speaker 1: of episodes at this point on the gridlock in global shipping. Yeah,
Speaker 1: this is uh the topic de jour. I mean, I
Speaker 1: think there are many topics, but you know, it's all
Speaker 1: the interesting stories this year have not been really in
Speaker 1: anything related to uh, liquid markets or anything classically macro.
Speaker 1: But in micro, how does shipping work, how does home
Speaker 1: building work, how does saw mills work? Anything is sort
Speaker 1: of like real on the ground economy is where it's
Speaker 1: that's right. I'm so glad you said micro because we
Speaker 1: are going to be going very very micro in this episode.
Speaker 1: So in the spirit of actually buying a barrel of
Speaker 1: oil or some oil, earlier this year, around January, I
Speaker 1: set out to actually ship something via container from Hong
Speaker 1: Kong to the west coast of the US. Did I
Speaker 1: tell you about that. You brought it up on our
Speaker 1: interview with the Flexi Port and that was sort of
Speaker 1: but we didn't really get into what happened. I don't
Speaker 1: even know. Did you ship it? I don't even know what?
Speaker 1: Uh yeah, okay, so spoiler alert, we didn't ship it.
Speaker 1: In the end, it turns out that the gridlock in
Speaker 1: global shipping is so extreme that I couldn't make this work.
Speaker 1: And we tried for about four or five months, and
Speaker 1: I just kept getting bumped from ship to ship to ship.
Speaker 1: So I gave up eventually. I'm sorry, but I know
Speaker 1: that like all these ships are packed. However, I refused
Speaker 1: to believe that there wasn't space for a Teddy Bear
Speaker 1: on one ship. I mean, come on, come on, Okay,
Speaker 1: we're going to get into exactly what happened. We're going
Speaker 1: to go super micro, very granular and talk about what
Speaker 1: it is actually like to try to ship something via
Speaker 1: container from the east to the west at the moment um,
Speaker 1: and I think it's going to be a really enjoyable
Speaker 1: conversation in the spirit of you know, gonzo financial journalism. Great,
Speaker 1: let's do it all right. So our guests on this
Speaker 1: episode are two people that were very, very helpful to
Speaker 1: me in trying to arrange this experiment, and I spent
Speaker 1: an enormous amount of their time on this, and I
Speaker 1: feel really bad that we couldn't make it work. But
Speaker 1: we're gonna be speaking with Anton Posner, he's the chief
Speaker 1: executive officer at the Mercury Group, and Margot Brock, she's
Speaker 1: a president at Mercury Group as well. So Anton and Margot,
Speaker 1: thank you so much for coming on, Thank you for
Speaker 1: having us. Happy to be here, great, great to be on.
Speaker 1: So uh, Anton, I sort of I set it up
Speaker 1: a little bit there, but I'm trying to remember now
Speaker 1: how we actually met and embarked on this whole experiment,
Speaker 1: but shipping a single container that is mostly empty, and
Speaker 1: you know, we settled on putting a teddy Bear in
Speaker 1: it because it was easy to procure and kind of fun.
Speaker 1: But that is not what you do day in and
Speaker 1: day out at Mercury Group, is that, right? Right? We
Speaker 1: very very rarely are putting one teddy Bear and the container.
Speaker 1: It's almost almost never happens. Right. So you specialize in
Speaker 1: bulk freight, right, correct, right, So I'll give you a
Speaker 1: little back background. So Mercury Group are vast majority of
Speaker 1: our business is bulk and break bulk freight and supply
Speaker 1: chain management. We're commodity people, industrial commodity people. So so
Speaker 1: our cargo that we're typically dealing with is aluminium and
Speaker 1: steel and copper and copper concentrates and alumina which is
Speaker 1: a material for aluminium aluminum production. Organic soybean meal in
Speaker 1: bulk coming in from moving in UH containers transferred to
Speaker 1: bulk moving up the Mississippi River system for example. So
Speaker 1: so vast majority of what we do is on the
Speaker 1: bulk side, which is just as and that that it
Speaker 1: will get into it further, but that industry and that
Speaker 1: part of the supply chain sector is just as crazy
Speaker 1: these days as what the container world has seen. So
Speaker 1: what why do you walk us through a little bit
Speaker 1: of the differences. I mean, we uh recently talked to
Speaker 1: Ryan Peterson, CEO Flexport, and you know, we sort of
Speaker 1: have this idea of like, you know, I guess I'm
Speaker 1: kind of feel like I can wrap my head around
Speaker 1: how consumer goods moving from Asia to the US got
Speaker 1: all kinds of messed up for many reasons during the crisis.
Speaker 1: What are the similarities and differences like that we see
Speaker 1: or that just in general between sort of consumer goods
Speaker 1: movements versus uh bulk Shipman's sure both bulkshipman's for for
Speaker 1: those that may not may not understand the actual practical
Speaker 1: difference of it is that includes me about got yeah,
Speaker 1: so think about bulk in break bulk. It'll explain the
Speaker 1: difference between two of them. Are the is the old
Speaker 1: fashioned way of shipping where it's not in a nothing
Speaker 1: moves in a container, So dry bulk or bulk is
Speaker 1: thinking think about it as commodities that are measured in
Speaker 1: tons or volume, right, like soybeans, corn, iron, ore, coal,
Speaker 1: things like that that are just that are basically poured
Speaker 1: into a ship's hole. That's bulk, or what we call
Speaker 1: or bulk or dry bulk as we call it. Break
Speaker 1: bulk is is items that you can actually count, so
Speaker 1: steel coils, bundles of aluminum sows, crates of windows. We
Speaker 1: just looked at recently, which is an interesting story, looking
Speaker 1: to shift from containers to break bulk because of the
Speaker 1: misery in China at the moment. So so if you're looting,
Speaker 1: I think you think about the the old movies right
Speaker 1: on the waterfront of the the longshoreman on the west
Speaker 1: side of Manhattan loading crates, uh and and nets full
Speaker 1: of cargo bags of cocoa. That's break bulk. If you
Speaker 1: can count it, and you can count the number of pieces,
Speaker 1: then it's break bulk. If if you have to measure
Speaker 1: it in tons, that it's dribal essentially. And that's so
Speaker 1: these are goods that where it's just not practical or
Speaker 1: cost effective to work with container with containers. And so
Speaker 1: Margaret and I both come from diverse background uh. Margaret
Speaker 1: I both graduated from New York Maritime College in the
Speaker 1: Bronx came out as ship's officers. Neither one of us
Speaker 1: decided to go to sea as as a ship's officers.
Speaker 1: We did our see time as cadets and uh and
Speaker 1: and I always say, I decided I have no salt
Speaker 1: in my veins. I'm ready to gready to stay short
Speaker 1: side and I'm better navigating a cocktail party in London
Speaker 1: during London Medal Exchange week that I am navigating a
Speaker 1: ship to get to London. So so we went into both.
Speaker 1: Both of us went into shore side business of of shipping.
Speaker 1: Worked a few jobs together, but we both started in
Speaker 1: the container side of the business, working in various retainer lines, Margot,
Speaker 1: and they'll pass it over to you to like background on,
Speaker 1: but you did that at school, very much on the
Speaker 1: container side of the business, working for a container steamship line.
Speaker 1: From there, I went to a trading company where we
Speaker 1: moved containerized freight, but we also handled brake bulk UM
Speaker 1: and that was cocoa beans UM and I have eventually
Speaker 1: evolved into what we do now, which is much more
Speaker 1: rooted in industrial products of raw materials or semi finished product.
Speaker 1: So we do have a decent background of looking at
Speaker 1: both sides of the shipping industry. And you know, to
Speaker 1: Anton's point, it is all quite a mess, right now. Yeah,
Speaker 1: there's a phrase I've been using. It's probably not podcast
Speaker 1: friendly as to what's going on, so I'll leave that out.
Speaker 1: But but Joe, I want to get to that that
Speaker 1: heart of the question that different you're looking at the
Speaker 1: difference between the two. So very often when we're looking
Speaker 1: at moving, moving freight, moving these industrial commodities, where we're
Speaker 1: evaluating do containers make sense or is this going to
Speaker 1: make sense in bulk? For breakball, Let's say that we
Speaker 1: had a trading company that was looking to move copper
Speaker 1: cathodes from one of the copper producers like Freeport mcmaran
Speaker 1: or Rio tinto Kennicott Copper right uh in the southwest US,
Speaker 1: and they wanted to move those copper cathodes to Korea.
Speaker 1: So we would evaluate whether or not it makes sense
Speaker 1: to stuff those copper cathodes into containers and ship them
Speaker 1: to Korea, or if the volume was significant enough, does
Speaker 1: it make sense to rail those copper cathodes to l
Speaker 1: a long beach and load them onto a breakbook vessel
Speaker 1: bulk vessel to go to Korea. So that cost analysis
Speaker 1: is a big part of it. But in this day
Speaker 1: and age, it's not just the cost. It's also the
Speaker 1: ability to actually get equipment to make something happen, which
Speaker 1: leads leads me to that that that common I made
Speaker 1: about the windows. We recently one of our commercial people
Speaker 1: had a dialogue with a company that that imports some
Speaker 1: windows for consumer windows from China, and they're these windows
Speaker 1: are sitting in crates in northern China right now, just
Speaker 1: waiting the same as the Teddy Bear. They're the same
Speaker 1: fate as the Teddy Bear, missing ship after ship after ship,
Speaker 1: massive delays. Right this is the reason why everything is
Speaker 1: there's a shortage. So they had us look at taking
Speaker 1: those crates and loading them onto a break bulk vessel
Speaker 1: out of the port of tan gin Uh in China
Speaker 1: to shift into east coast of the US, and then
Speaker 1: we could truck them from there. They right now, on
Speaker 1: that particular one, they did end up going for it.
Speaker 1: The cost was fairly expensive in the transit time was
Speaker 1: not not fantastic in that particular case. But curious to
Speaker 1: see if they circle back to us after a few
Speaker 1: more weeks of waiting for waiting for a container availability,
Speaker 1: so we shall see. It's um. We're certainly getting phone
Speaker 1: calls from people that we've never gotten phone calls from before. Well,
Speaker 1: so that's a pretty good segue into the Teddy Bear
Speaker 1: project or experiment. But we started talking back in January
Speaker 1: when things were already pretty rough, but it seemed doable.
Speaker 1: The idea of sending a container from Hong Kong to
Speaker 1: I think were we aiming for l A. Yeah, I
Speaker 1: think that's right. Yeah, we're looking for l A long beach.
Speaker 1: We wanted, we chose, We chose the port that we
Speaker 1: knew was going to be potentially the most miserable. Well,
Speaker 1: we wanted that. We wanted that Teddy Bear to have
Speaker 1: some good anchor at anchor time off off the California coast,
Speaker 1: to have the real experience. That's right. So remind me
Speaker 1: what was the cost quote around that time in January
Speaker 1: when we first started talking. The all in cost for
Speaker 1: the local truck include the local local handling in Hong
Speaker 1: Kong and through to a warehouse to crack open the
Speaker 1: container take Teddy Bear out long But you think it
Speaker 1: was around seven thousand dollars at that point for that,
Speaker 1: and we knew that that was starting the skyrocket, right,
Speaker 1: it was heating heading upward, and we dealt with one
Speaker 1: cost increase while we were waiting for the Teddy Better
Speaker 1: Gets it is the space Book. Yeah, I think it
Speaker 1: went up by five hundred Is that right? Yeah, I
Speaker 1: think it went But even at that starting point, that
Speaker 1: freight rate was much too high for what the lane is,
Speaker 1: which is a common lane when you're talking Asia to
Speaker 1: the United States West coast, and it was that starting
Speaker 1: point was already so indicative of a skyrocketing market. It
Speaker 1: was already too high for where it should have been,
Speaker 1: say a year earlier, pre pandemic. And to your point,
Speaker 1: it did just continue to go from there and it moved,
Speaker 1: the rate moved north, and you still couldn't get your
Speaker 1: slot on a ship. We still couldn't get your container moving.
Speaker 1: So explain why you can't just buy your way onto it.
Speaker 1: I mean, you know it's you mentioned the windows, and
Speaker 1: I be you know, this is again a big thing
Speaker 1: that we've been covering obviously homebuilders in the United States.
Speaker 1: Lumber is a problem, like you can't have a home
Speaker 1: without windows, and so the windows are sitting in a
Speaker 1: factory in China and can't get here, Like is this
Speaker 1: is there? Essentially like there is no price too high?
Speaker 1: Um for what? When what people need that those just
Speaker 1: essentially paying anything, and that there's no way to like
Speaker 1: bid yourself onto these ships. Like explain, maybe walk us
Speaker 1: through a little bit the process, because the theory, it
Speaker 1: seems like there should be some price where it's worth
Speaker 1: it to ship a teddy bear. Actually why not, But
Speaker 1: there really should be a some price where it's worth
Speaker 1: it to ship windows at least because windows are crucial
Speaker 1: for the entire home. So can you walk us through
Speaker 1: the math and the calculations a little bit, whether it's
Speaker 1: on the builders side or the factory side of why
Speaker 1: they just can't move the windows. There's certainly becomes a
Speaker 1: point where it just doesn't make economic sense to ship,
Speaker 1: and that's why a lot of the cargo will sit.
Speaker 1: What happens when you end up with so much port
Speaker 1: congestion for loading, which is exactly what we're suffering now,
Speaker 1: is often the highest bidder will get, you know, the
Speaker 1: spot on the vessel when you're looking at it. Obviously,
Speaker 1: everything boils down to a cost per metric ton for
Speaker 1: any trader or any business, and or cost per unit.
Speaker 1: And where's that break even where does it become too
Speaker 1: expensive where it becomes a money losing proposition to pay
Speaker 1: the number you have to pay to guarantee yourself a
Speaker 1: slot on the ship. So it's much like, you know,
Speaker 1: to compare it to the trucking industry in the United States.
Speaker 1: Anyone can quote you a freight rate trucking or a
Speaker 1: container freight and sat and the number looks great on paper,
Speaker 1: but when it boils down to it and they're looking
Speaker 1: at a steamship line is looking to load their ship,
Speaker 1: and they have those ten containers over there willing to
Speaker 1: pay ten thous dollars per container. Your five thousand dollars,
Speaker 1: your seven thousand dollar freight rate container is not going
Speaker 1: to get the slop? Can I just ask a quick
Speaker 1: follow up? Then? What types of goods are crowding out
Speaker 1: the others such that Okay, let's say ten thousand dollars,
Speaker 1: What does it make sense to ship for ten thousand
Speaker 1: dollars that it doesn't make sense? I guess I does
Speaker 1: that question make sense? What are these high value goods
Speaker 1: that are dominating the space on the ships? Right? And
Speaker 1: it's not it's not so much high value as much
Speaker 1: as you need high margin. You have to be able
Speaker 1: to absorb that from the industrial products sector that we
Speaker 1: sit in those margins are typically too small, so our
Speaker 1: typical client base is not going to be who gets
Speaker 1: the space on the ship. And we actually had a
Speaker 1: client trying to ship a specialized rebar out of China.
Speaker 1: It was test shipments coming into the US. We needed
Speaker 1: and it was maybe a hundred tons or two hundred tons.
Speaker 1: It was nothing tremendous, five to ten containers, and we
Speaker 1: could not get the space on a ship for that
Speaker 1: because they weren't willing to pay up. So once you
Speaker 1: get to some of the higher sales point items or
Speaker 1: higher volume items that you can, you know, get a
Speaker 1: lot into the container, your margins are going up. I
Speaker 1: don't know what that answer is specifically, but I'm going
Speaker 1: to say it's probably more merchandise freight because that's where
Speaker 1: you where you can push push your costs into the
Speaker 1: price that's on the shelf. So when you're looking you're
Speaker 1: looking at something that's produced in Asia and it's not
Speaker 1: produced here or the production cost here to make I
Speaker 1: don't know a container of Teddy Bears, I don't know
Speaker 1: a container of of clothing would ever that product is
Speaker 1: it's still so cheap to produce it in Asia ship
Speaker 1: it here barely cost increase on the freight and then
Speaker 1: get it to market. But for us, and when we're
Speaker 1: working with traders that buy and sell point are are
Speaker 1: already established when they're looking to load out of Asia,
Speaker 1: and often the trade just doesn't have enough room to
Speaker 1: bear the increased freight cost and still be profitable. And
Speaker 1: often the industrial commodities that we're dealing with are produced
Speaker 1: here copper, aluminum, steel, right, So there is a market,
Speaker 1: domestic market to be able to make the deal at
Speaker 1: that shift if they just can't, if imports just can't work.
Speaker 1: And I think something else to add to add to
Speaker 1: it also is take the window example right where we
Speaker 1: were looking to shift that to break Ball. In that
Speaker 1: particular case, the ship operator offer put put a number
Speaker 1: out that was fairly really high for that that particular move.
Speaker 1: But they're just like any ship operator and the container
Speaker 1: ship operators are doing this also, they're going to allocate
Speaker 1: space to their regular contract clients. So that space is
Speaker 1: going to go to the to the producers that are
Speaker 1: shipping to Walbart and a target right on a regular
Speaker 1: regular basis. So just it's human nature, right essentially, in
Speaker 1: business nature in that respect, you take care of your
Speaker 1: of your largest clients at that point to give them
Speaker 1: the space that they need, and the others will fall
Speaker 1: by the wayside. So my understanding to that point is
Speaker 1: there were really three things that were against us on
Speaker 1: the Teddy Bear project. Number one was Bloomberg, you know,
Speaker 1: contrary to popular belief, was cost sensitive, and every time
Speaker 1: we had a price hike, I had to go back
Speaker 1: to the editor who approves our expenses and explained that,
Speaker 1: you know, freight costs were just out of control and
Speaker 1: that this thing that should cost a few thousand dollars
Speaker 1: was now closer to seven thousand. And then secondly, we
Speaker 1: weren't doing this as a massive client, so we weren't Walmart,
Speaker 1: we weren't Ikea or someone like that. We were just
Speaker 1: a single container, not even a full size container, but
Speaker 1: um half size I think twenty ft, which was also
Speaker 1: a problem because it's harder to get those onto a ship.
Speaker 1: So I guess my question is like, were we sort
Speaker 1: of doomed from the start in the current environment. Yeah,
Speaker 1: I wouldn't say we were doomed from the start, but
Speaker 1: it became apparent that the doom was coming right after
Speaker 1: waiting for the for the time that we that we did. Uh,
Speaker 1: for sure, there was going to be there was going
Speaker 1: to be delays. But but the delays were building and
Speaker 1: compounding right as we got further to the point where today,
Speaker 1: if we tried to do that today, uh we would
Speaker 1: we would say forget it, let's let's not even touch it.
Speaker 1: You see what's happening right right over the border from
Speaker 1: Hong Kong and Shenzen, at the part of Yen Tan,
Speaker 1: they have now a COVID outbreak that's causing some delays,
Speaker 1: massive congestion ship owners, the container container ship operators are
Speaker 1: now avoiding Yan Tan and and the and the congestion
Speaker 1: is starting to roll over into other local ports in
Speaker 1: the Pearl River delta. Uh So, if we tried to
Speaker 1: make that happen right now, I think we might even
Speaker 1: see container lines saying, you know, forget it, come let's
Speaker 1: look at it next year. Right at this point, so so, yeah,
Speaker 1: it was getting worse by the day, and uh and
Speaker 1: looking looking today, it's exponentially more of a problem right
Speaker 1: now based on what's happening locally there. So yeah, right
Speaker 1: next to Hong Kong is a complete and utter transportation
Speaker 1: congestion disaster at the moment. You know, but when we
Speaker 1: started talking about this back in January, and maybe it's
Speaker 1: really um quite parallel to this COVID world that we
Speaker 1: lived in the in the last year your plus, where
Speaker 1: you know, you you see the difficulty for many months ahead,
Speaker 1: and everyone's talking about it, and we know it be
Speaker 1: at COVID, be at shipping, but you know, we're always
Speaker 1: kind of hopeful, and the talking points have been on everything,
Speaker 1: but you know, maybe in six months out it's better
Speaker 1: or whatever that time frame is. So when we were
Speaker 1: talking in January, we knew it was bad, and we
Speaker 1: knew it wasn't getting great anytime soon. But the projection
Speaker 1: at that point for when possibly recovery would start coming
Speaker 1: and normalization to these shipping lanes would resume in the
Speaker 1: containerized market was a much rosier picture then what reality
Speaker 1: has been. So too for Anton to be correct in saying,
Speaker 1: we wouldn't even think about this today, because since January
Speaker 1: it's done nothing but stay horrible, this this prospect of
Speaker 1: trying to ship in containers. But back in January, we
Speaker 1: the conversation was talking about normalcy or you know, moving
Speaker 1: towards normalcy. By this point in the year, it just
Speaker 1: hasn't happened. It's not getting better yet. So this is
Speaker 1: really just to be clear, A it's its worst today.
Speaker 1: We're recording this June nine that will be out pretty soon.
Speaker 1: It's its worst today as it's uh been all year.
Speaker 1: There's no sign that it's getting better, and still the
Speaker 1: trajectory is going the wrong way in your view, why
Speaker 1: is that? Why has it? Why have we not seen
Speaker 1: any normalization? And what is what is the current outlook
Speaker 1: look look like right now? I would say that you know,
Speaker 1: what we're still experience and experiencing rather is that the
Speaker 1: volumes just haven't slowed. So there's definitely a shortage of
Speaker 1: space on ships. There's just you know, so many ships
Speaker 1: and so many slots to fill. And you can see
Speaker 1: articles now that the orders into shipyards for new vessels
Speaker 1: is absolutely increased and it is a reaction to what
Speaker 1: is happening now ship owner. Ship owners are seeing the
Speaker 1: opportunities to build ships. One statistic on Allenburgo just to
Speaker 1: jump over secon as just reading the new container ship
Speaker 1: orders into shipyards for the first five months of one
Speaker 1: are the amount is double the entire numbers of new
Speaker 1: ship orders for container ships of all twenty money so
Speaker 1: just the first five months. So I kind of goes
Speaker 1: to the housing market that I mentioned Joe right does
Speaker 1: the inventory right issue. So sorry, but that cure is reactionary,
Speaker 1: but it's not a it's a long term goal to
Speaker 1: you know, this is a big book of ship building
Speaker 1: that is now on the table. It doesn't resolve it today.
Speaker 1: And what we can't resolve is that we are still
Speaker 1: ordering a ton of online goods from you know that
Speaker 1: are all sourcing out of Asia. There is this residual
Speaker 1: congestion that is very, very difficult to overcome. And then
Speaker 1: a lot of the congestion is also due to the
Speaker 1: massive size of these vessels that are trying to get
Speaker 1: into these ports, and there just simply isn't enough physical
Speaker 1: space at these ports to accommodate the volume of containers
Speaker 1: that are going to come off a ship and what
Speaker 1: is potentially going to try and reload to a ship
Speaker 1: at any point. So that also continues to keep it
Speaker 1: a slow a slow clean up at the ports to
Speaker 1: try and get all this material through because they got
Speaker 1: to push out the loaded containers to make space for
Speaker 1: the next vessel to offload, but the railroad can't take
Speaker 1: them out fast enough and until they're out, we can't
Speaker 1: get the next ship in. So it's really quite the
Speaker 1: domino effect, which means the ships are not getting back
Speaker 1: to Asia to pick up the next round of loaded cargo.
Speaker 1: So what's the resolve, what's the timeline? I don't know
Speaker 1: what that is. I don't even know what people are
Speaker 1: realistically expecting at this point. We are seeing. Um, there
Speaker 1: was actually an email that came through our inbox yesterday
Speaker 1: to myself and Anton from someone we know that we
Speaker 1: know we do break ball work with them, but they
Speaker 1: have one of their colleagues trying to put together freight
Speaker 1: for a six month term containerized running through the end
Speaker 1: of the year, and asking us for help if we
Speaker 1: can direct them to anyone who will put a contract
Speaker 1: in place for them, which is never going to happen.
Speaker 1: As you know, Tracy, we couldn't. We couldn't maintain a
Speaker 1: price for your one container of a Teddy Bear. The
Speaker 1: prices are skyrocketing. What's what container Line today is going
Speaker 1: to say? Yes, I will take your brand new contract
Speaker 1: for six months to ship at a guaranteed rate in
Speaker 1: this total mess of a market. Guarantee you space, guarantee
Speaker 1: you a rate the whole the market could just continues
Speaker 1: to be to be quite a mess. Should we Should
Speaker 1: we do a whole another episode guys on infrastructure too,
Speaker 1: because you know, and Margot touched on it, the size
Speaker 1: of these container ships. When when we first got out
Speaker 1: of school and I went to work for used to
Speaker 1: be Neptune Orient Lines now it's American President lines uh
Speaker 1: I was working in Port Newark working ships. That word
Speaker 1: five six thousand t EU container ships. Those are Tu
Speaker 1: means twenty ft equivalent units, So that means that that
Speaker 1: ship could hold five or six thousand twenty ft containers
Speaker 1: right now, and then that was a like kind of
Speaker 1: all the ship on the on a little bit of
Speaker 1: a larger size of medium size. At that point that
Speaker 1: ship they ever given that got stuck in the US
Speaker 1: Canal was what twenty thousand ties I mean massive. The
Speaker 1: So imagine that ship calling in a port that hasn't
Speaker 1: been sufficiently upgraded to deal with not not only the
Speaker 1: actual ship operations right, but but the as Margot's said,
Speaker 1: also to just the flow of the containers off the
Speaker 1: ship out the door, out off the dock, conto trucks
Speaker 1: and the flow back back flow of empty containers coming
Speaker 1: back to those ports. Some ports in the in the
Speaker 1: United States have have significantly upgraded in some areas they
Speaker 1: made large improvements to deal with these very large container ships,
Speaker 1: but nowhere nearly enough. So, uh, you know, it certainly
Speaker 1: leads into the infrastructure discussion. Right. So we're seeing the
Speaker 1: I forty bridge right in Memphis fell falling apart, and
Speaker 1: it stopped up the barge traffic on the Mississippi River
Speaker 1: for days because of the chunks of bridge falling and
Speaker 1: truck mentally that the trucks couldn't can't transit over it.
Speaker 1: So we're seeing, we're seeing everything and note the no
Speaker 1: chunks fell off the bridge. You're right, it was a chunk.
Speaker 1: It was a crack in the steel said it was
Speaker 1: a crack. It was a crack you could see daylight through.
Speaker 1: It was kind of massive right into the river. Either way,
Speaker 1: I don't want to be on a tugboat going under it.
Speaker 1: Put it that way, Joe. I was just thinking, like,
Speaker 1: maybe the solution um to all our problems is infrastructure spending.
Speaker 1: Right Like, it's not. It might not actually be inflationary.
Speaker 1: It might solve the inflation problem if we could upgrade
Speaker 1: the ports that's the argument, right, And even instream economists
Speaker 1: make this argument that like, you know, you don't have
Speaker 1: to you know, it pays for itself if it reduces
Speaker 1: the cost of everything by making by making everything cheaper,
Speaker 1: by making everything more available. So I have at least
Speaker 1: like a dozen questions, um that I want to ask.
Speaker 1: I'm trying to focus it. So I guess, like my
Speaker 1: main question is when you're talking to your clients now,
Speaker 1: what sort of preparations are they making for the future
Speaker 1: and how creative are they being when it comes to
Speaker 1: actually transporting stuff, Because for instance, we talked about maybe
Speaker 1: trying to ship the Teddy Bear out of China. Um.
Speaker 1: Eventually we decided against that because Bloomberg doesn't actually have
Speaker 1: an export license and I didn't want to get my
Speaker 1: entire company in trouble for the purposes of, you know,
Speaker 1: a stunt journalism article. But is that the kind of
Speaker 1: stuff you're seeing now? Like are people just going to
Speaker 1: lengths or two roots that they wouldn't normally do? Yeah,
Speaker 1: we're seeing we're seeing all all of the above. Right,
Speaker 1: Some clients that that that are are adjusting well and
Speaker 1: are understand what's going on and working on a practical
Speaker 1: ways to to deal with it, to to set expectations
Speaker 1: properly with their with their customers. And then there's others
Speaker 1: right that are like the deer in the headlights, right
Speaker 1: that that what do you mean, why can't this happen? Uh?
Speaker 1: This has always been this. Uh, this has always worked.
Speaker 1: Why not now? And so the education process of what's
Speaker 1: going on where I'm spending a lot of time sending
Speaker 1: articles out to clients to show them what's what's happening
Speaker 1: in the market and explaining what others are, what others
Speaker 1: are seeing, and how it's not just a unique situation
Speaker 1: to not not a unique issue with their particular situation.
Speaker 1: So speaking of infrastructure and the degradation of the infrastructure
Speaker 1: or the fact that the infrastructure hasn't come up and
Speaker 1: Anton you kind of handed at it briefly, but you
Speaker 1: mentioned how has ing And one of the biggest themes
Speaker 1: that we talked about on the on the show was
Speaker 1: essentially been the supply side degradation two capacity, industrial, um, residential, etcetera.
Speaker 1: During the ten years basically between the eleven years between
Speaker 1: the end of the Great Financial Crisis and the start
Speaker 1: of COVID and how much we're paying for that now,
Speaker 1: and so I'm curious like sort of like your perspective
Speaker 1: on that from the from the transport perspective. I think
Speaker 1: we've talked about it a little bit, but how much
Speaker 1: did we essentially pay the price for a very big
Speaker 1: bear market in global trade and the way that that
Speaker 1: discourages fresh investment? Yeah, for sure, it's you know, in
Speaker 1: doing this for Margaret, I've been doing this for thirty
Speaker 1: years now, right, and uh so we we we've seen
Speaker 1: a we have a good historical overview of how things
Speaker 1: have been flowing. Let's take take the river system, right,
Speaker 1: and and this is something that allot of the listeners
Speaker 1: may not be too familiar with because it's not in
Speaker 1: day today in the day to day news, right, but
Speaker 1: but enormous amounts of commodities and cargoes move up and
Speaker 1: down the river system the Mississippi River. Ships coming into
Speaker 1: New Orleans loading out export greens and other commodities from
Speaker 1: barges to direct to ship for export, and then inbound
Speaker 1: ships going into into the New Orleans area the Mississippi
Speaker 1: River and transferring their cargoes direct from ships into barges
Speaker 1: to move up the river, going up the Mississippi River
Speaker 1: all the way as far as St. Paul, Minnesota, as
Speaker 1: far as Chicago on the Illinois River, and then moving
Speaker 1: up the Ohio River as far as Pittsburgh. You can
Speaker 1: get to Tulsa, Oklahoma via via the river system, going
Speaker 1: up the Missippi River and then making a left onto
Speaker 1: the Arkansas River essentially right. So so it's just this
Speaker 1: enormous marine highway right that that runs the run through
Speaker 1: the heart of the United States. Now we have seen
Speaker 1: just growing list of problems with the locks and dams
Speaker 1: throughout the river system. The U. S. Army Corps of
Speaker 1: Engineers maintains those, they're reliant on the federal budget to
Speaker 1: pay for those upgrades. And but so we're seeing now
Speaker 1: some some infrastructure upgrades happening, locks of dams being shut
Speaker 1: down in order to to affect those prepare repair work
Speaker 1: that's needed because there there are some real crumbling situations
Speaker 1: in these locks and dams. So the tugs and barges
Speaker 1: that are moving moving throughout the river system have reliant
Speaker 1: on moving through this system of locks and dams in
Speaker 1: order to transit. So the this is an infrastructure area
Speaker 1: that has just been so neglected over the years. But
Speaker 1: it's so so much a part of vital commerce for
Speaker 1: the United States. So iron ore to go into making
Speaker 1: steel grain, all the agricultural commodities that move move on
Speaker 1: barges and moving it's such a cost effective way. The
Speaker 1: cost to move move goods on barges compared to rail
Speaker 1: freight or truck freight is just exponentially lower because you
Speaker 1: can take one tug boat and put with that one
Speaker 1: tug boat it can push a unit of thirty barges
Speaker 1: at a time along the main line rivers. So going
Speaker 1: from New Orleans up to Cairo, Illinois, for example, which
Speaker 1: is a main transit point, you'll have a line tug boat,
Speaker 1: a large tug boat pushing thirty barges in each of
Speaker 1: those barges carrying let's say about sixte tons in those
Speaker 1: in each barge. So one tug boat pushing thirty barges
Speaker 1: at six tons each on average. You can imagine the
Speaker 1: efficiency in that the fuel efficiency right compared to an
Speaker 1: over over the road truck or even compared to rail throat.
Speaker 1: So that cost is low. So this infrastructure on the
Speaker 1: river system, the neglect that that's been there, we're now
Speaker 1: starting to pay the price for that we're seeing more
Speaker 1: and more delays. The barge lines that operate on the
Speaker 1: river system are passing along those costs to the shippers.
Speaker 1: Did the cargo interests like never before? Right? And Bargo
Speaker 1: some examples. Right. Margo's dealing with the barge land voices
Speaker 1: day to day and seeing what our clients are seeing. Well,
Speaker 1: it is a it is an ongoing problem and there
Speaker 1: is you know, there's a couple of different cost points
Speaker 1: that it hits, and it is the cost and curd
Speaker 1: for the weight time that is born or passed onto
Speaker 1: the cargo owner. But there's also a delay in getting
Speaker 1: to market. So you know, we had some we have
Speaker 1: barges that are trying to get up the Cumberland right
Speaker 1: now to get into Nashville, and those barges are suffering
Speaker 1: because of locks that are down with intermittent openings that
Speaker 1: you really have to hustle to try and get your
Speaker 1: barge scheduled on one of those openings. It's kind of
Speaker 1: like trying to get a container onto a ship in Asia. Um,
Speaker 1: it's pulling some strings and talking to some friends at
Speaker 1: the barge lines to say, can you get get a
Speaker 1: couple of my clients barges through but there's limited space.
Speaker 1: So now we have a cost of carry borne by
Speaker 1: or not born by, but uh suffered for the cargo owner,
Speaker 1: so they're paying additional fees. Then there they have cost
Speaker 1: of carry and they have a commercial tender that they're
Speaker 1: trying to not default on. It's it's very stressful to
Speaker 1: the market. It's not just that river. And at any
Speaker 1: point you can look at the barge lines weekly updates
Speaker 1: as to what is up and coming. And while I'm
Speaker 1: dealing with the Cumberland currently for one client, I'm also
Speaker 1: yesterday I was sending emails to other clients for cargo
Speaker 1: that they have scheduled up the Arkansas River this summer,
Speaker 1: which will also be closed for a period of time
Speaker 1: August into September. It is it is um just a
Speaker 1: moving a moving target at this point on where the
Speaker 1: next closure will be. Last year, it was Chicago for
Speaker 1: a couple of months that you couldn't get in and
Speaker 1: out of Chicago by barge. And the river system, as
Speaker 1: Anton has has mentioned, is really quite the super highway
Speaker 1: within Middle America that most of us don't know about.
Speaker 1: And you know, Anton and I only have an education
Speaker 1: in it for what we do, but until we started
Speaker 1: doing this. I I did not grow grow up understanding
Speaker 1: how much of the United States, how much of our
Speaker 1: trade relies on our river system. So it is really
Speaker 1: critical to to us, Tracy. I think we definitely now
Speaker 1: have to do another episode. Seriously, Like I had never liked,
Speaker 1: you know, in all the conversations. I think I was
Speaker 1: kind of aware, you know, like grains other things, but
Speaker 1: the degree to which a it's so crucial still and
Speaker 1: be so structurally degraded and congested right now, I had
Speaker 1: not appreciated that at all. So now we're adding that
Speaker 1: to the list of supply chain, logistics, infrastructure stories episodes
Speaker 1: that we have to do. I think we need to, uh,
Speaker 1: we need to charter like a tugboat up in Mississippi. Right,
Speaker 1: That'll be our next all thoughts event I'm ready to
Speaker 1: take that on, Tracy. I want to I want to
Speaker 1: throw I want to throw another curve all at you, right,
Speaker 1: throw in situation, and throw in the climate change issue
Speaker 1: too into where you have uh, you know, affecting the
Speaker 1: of her system, right, and ice melt that that the
Speaker 1: spring ice ice melt that then goes into the river
Speaker 1: system in the Mississippi River up north and creates, uh
Speaker 1: creates problems for us all the way down river to
Speaker 1: New Orleans because of high river conditions. Right, you have
Speaker 1: ships coming in that need to have stand by tugboats
Speaker 1: just to keep them in place because while they're working
Speaker 1: the ships because of just extreme high river high it's
Speaker 1: just high river flows at that point. So, um, I
Speaker 1: wouldn't even take take a stab at how climate change
Speaker 1: is going is affecting that, has been affecting that, and
Speaker 1: will continue to to affect and make that worse. But
Speaker 1: you could add a whole another element into the into
Speaker 1: the story of transportation. So our little part of our
Speaker 1: little part of the world of business is becoming all
Speaker 1: the more interesting these days. I think absolutely. I mean,
Speaker 1: it definitely sounds like it. But Okay, so a big
Speaker 1: question for you, given your expertise and given your very
Speaker 1: unique vantage point where you're looking at global shipping, you're
Speaker 1: looking at what a big a lot of big commodities
Speaker 1: players are doing. You're looking at things that are going
Speaker 1: up and down US rivers. I know you're not economists
Speaker 1: per se, but you're very aware of the inflation discussion
Speaker 1: at the moment. How much are these logistics snarls, these
Speaker 1: transport issues playing into pure commodity prices just from your
Speaker 1: sort of with your shipping hat on. Oh uh yeah,
Speaker 1: I mean there's no question, right the the cost the
Speaker 1: commodity price costs are our direct correlation to what's happening
Speaker 1: in the world of freight and transportation. Absolutely, you're seeing
Speaker 1: prices we're working. Let's take, um, take an example right
Speaker 1: now of one of our one of our clients, a
Speaker 1: steel trader that's looking to bring in to play coil
Speaker 1: from the far East into the States, and that tim
Speaker 1: plate coil is used for making cans, right, cans and
Speaker 1: for consumer goods, right. So we're trying to put a
Speaker 1: freight contract together for them right now for multiple shipments
Speaker 1: a few thousand tons each of these template coils. And
Speaker 1: the discussion right that they're having with the with the
Speaker 1: their end customer that's going to be using this steel
Speaker 1: is the how to price the cost of the steel
Speaker 1: with the freight fluctuation. Right. So you know, we're we're
Speaker 1: very used to seeing fuel search arges, right, which are
Speaker 1: directly correlated to a base benchmark fuel price, maybe the
Speaker 1: price of diesel at at rouge, right for for barge freight,
Speaker 1: or the U s Department of Commerce right for based
Speaker 1: diesel prices for truck fuel search arges. So now starting
Speaker 1: to see UH, starting to see commercial contracts UH with
Speaker 1: on these com on these types of commodities that have
Speaker 1: allowances for flight, for freight adjustments on there, so not
Speaker 1: just fuel adjustments but also for freight adjustments to to
Speaker 1: take into consideration that the container price for maybe in
Speaker 1: July maybe ten tho dollars, but in August it may
Speaker 1: be fifteen dollars, so that cost needs to be passed
Speaker 1: passed on. So we're not in a commercial role in
Speaker 1: this respect rate. So so we could talk talk a
Speaker 1: little bit to what we're seeing and how our clients
Speaker 1: are dealing with that freight uncertainty. If that kind of
Speaker 1: helps answer the question, I think, yeah, yeah, steal aluminum, right, copper,
Speaker 1: Everything is getting getting hit. So those those prices are
Speaker 1: just flowing flowing through and eventually it's flowing through to
Speaker 1: what's on the shelves. Right. So one of the themes
Speaker 1: again that we have is that you know, obviously some players,
Speaker 1: maybe shippers are in a position to make a lot
Speaker 1: of money right now with this incredible demand, But does
Speaker 1: everyone still think this is like sugar high or as
Speaker 1: a tory, or that it's totally a matter of time
Speaker 1: before the bottom falls out again and we return to
Speaker 1: something like normal, or will is this a kind of
Speaker 1: boom that would cause companies in this space to invest
Speaker 1: more and expand capacity in some way, something that leads
Speaker 1: or leads to sort of durable changes and how the
Speaker 1: industry does business. Let's remember that question a year from now,
Speaker 1: right and look back, because the cycle is is it
Speaker 1: just like the housing you know, housing, which it was
Speaker 1: a great episode, by the way, guys, I like, I
Speaker 1: really like that. The ship owners, as we said, right,
Speaker 1: the ship ship owners now are putting these orders into
Speaker 1: the shipyards to build, build, build, sure enough, just like
Speaker 1: drunken sailors of the past. Right, the money goes flowing
Speaker 1: out and it will only be a matter of time
Speaker 1: before they're looking at too many ships and they're killing
Speaker 1: each other for the for the freight. When that's going
Speaker 1: to happen, I won't uh that that that's above above
Speaker 1: my level of economic intelligence, I think. But it is sick.
Speaker 1: It is cyclical, right, downton. I mean it's it's the
Speaker 1: shipping community seems to hang their hat really on a
Speaker 1: supply and demand, but you're building a ship, the reaction
Speaker 1: time you just it's just not that quick, right, So
Speaker 1: so it's great on this high too. Then throw your
Speaker 1: money into new equipment, new vessels, which is wonderful, but
Speaker 1: you know you're not going to get it for a
Speaker 1: couple of years. And where's the market that. Let me
Speaker 1: throw an example out at your right to sticks in
Speaker 1: my head. Barge freight market. Um, but it was an
Speaker 1: unusually heavy grain season. Grain season is the harvest time
Speaker 1: when the grain producers and trading companies are moving grain
Speaker 1: southbound from from the harvest areas in the States down
Speaker 1: to down to the New Orleans area for export. Right,
Speaker 1: So typically that's a time when in barge freight market
Speaker 1: just moves upward in general. So let's say that barge
Speaker 1: freight per ton from New Orleans to Chicago northbound is
Speaker 1: running in the mid teens per per short ton on
Speaker 1: a on a typical year basis. In that green season,
Speaker 1: those rates, it was such a shortage of barges in
Speaker 1: such a such a surge of southbound green that the
Speaker 1: barge lines were much more happy to move their barges
Speaker 1: empty northbound just to keep them in place. In position
Speaker 1: for the green So we saw barge rates to Chicago
Speaker 1: in the mid forties per ton instead of set of fifteen,
Speaker 1: try forty five. Right fast forward from there was no
Speaker 1: grain season, it was it was a bust, right, So
Speaker 1: how many new barges were built by barge lines after
Speaker 1: that boom grain season? Right, I'm not sure. I don't
Speaker 1: know that statistic. But we see this this cycle, just
Speaker 1: this cycle constantly of of the ocean freight market, the
Speaker 1: bulk ocean freight market moving. But what's unusual about right now,
Speaker 1: and they think everyone would agree, is we haven't seen
Speaker 1: this across the board global surge the way we're seeing
Speaker 1: it now. It seems it seems far more broad. Right. Sure,
Speaker 1: I can relate that green season situation, but that was
Speaker 1: isolated to the barge freight market. And you know, we've
Speaker 1: seen truck drivers shortages. That's been building for years more.
Speaker 1: When I were talking this morning, that's not a new story.
Speaker 1: That's that's been I've been I've had that slide up
Speaker 1: on every presentation I've given it at a steal and
Speaker 1: Aluminum conference over the past few years about the shortage
Speaker 1: and truck drivers. So so that was that was coming
Speaker 1: I have a trucking episode coming up, so we already
Speaker 1: have that one in play. So two things here like
Speaker 1: really drilling down into the nature of these shipping industry.
Speaker 1: So number one, is there something about shipping that makes
Speaker 1: it inherently cyclical? And is there a reason overall that
Speaker 1: we get these big booms and bus And then secondly
Speaker 1: to something that Margot was talking about earlier, why can't
Speaker 1: you walk in a rate for you know, later in
Speaker 1: the year, Like, why can I not book space on
Speaker 1: a ship that's due to go out in December at
Speaker 1: some sort of pre agreed rate. Why is it so
Speaker 1: difficult When you know, I assume other types of business,
Speaker 1: other industries, you are able to lock in um some
Speaker 1: sort of forward agreement so that you can have certainty
Speaker 1: and an outlook on on what you're supposed to be doing. So,
Speaker 1: but shipping seems to be very different. So I guess
Speaker 1: my question is why is the shipping industry so different? Well,
Speaker 1: if we're going to look at containers, if you lock
Speaker 1: in today, it goes back to us trying to get
Speaker 1: a container with a Teddy Bear for seven thousand dollars
Speaker 1: on a vessel. You didn't get a slot because there
Speaker 1: was someone else probably willing to pay eight thousand dollars
Speaker 1: and your freight gut bumped. So the shipping market is
Speaker 1: like all others, and it really reacts to supply and demand,
Speaker 1: which is the production of vessels. Because money is flowing.
Speaker 1: Eventually we will have too much capacity and freight rates
Speaker 1: will be so so low because there's ships everywhere with
Speaker 1: empty slots that we can load onto. So I could
Speaker 1: get someone to lock in a rate and say, sure,
Speaker 1: China's a long beach, we're going to do that for
Speaker 1: five thousand dollars. We're going to book it. But do
Speaker 1: you get a guaranteed slot and are you guaranteed to
Speaker 1: load on a vessel? Probably not so right now where
Speaker 1: your market, where the market is, and to what Anton
Speaker 1: spoke to earlier, the you need to be the Walmarts
Speaker 1: and the Nikes and the big players, the i Keas
Speaker 1: of the world to have those garanteed slots at your
Speaker 1: contracted rate. But the rest of us that aren't don't
Speaker 1: have that contract in place, nor that annual guaranteed volume
Speaker 1: to ship. That's that's who's living in the free for all,
Speaker 1: and that's what that's what the market has been is
Speaker 1: a free for all. I remember, like when we were
Speaker 1: talking to Ryan Peterson, the Flex Sports CEO, and and
Speaker 1: I and I was actually, I'm glad you brought that up.
Speaker 1: And I wanted to like he was saying that, like
Speaker 1: the shipping industry is still sort of like it really
Speaker 1: helps to like if you just know a random guy
Speaker 1: in Denmark and like or like it helps to like
Speaker 1: know someone relationships, relationships, relationships probably named like Lars or
Speaker 1: something like that, and to like that, like if you
Speaker 1: really need to get your windows shipped out of China,
Speaker 1: like you gotta call it Lars. And so I'm curious, like,
Speaker 1: is it because the industry so so concentrated that it
Speaker 1: hasn't had the need to create a more competitive booking process?
Speaker 1: Is it a simple technological fix, Like why not sort
Speaker 1: of like up it in a bed such that people
Speaker 1: can just sort of have a more dynamic auction for
Speaker 1: for first space. Yeah, there's not a lot, not a
Speaker 1: lot of transparency in that respect. That dynamic auction type
Speaker 1: situation um been tried in many different many different ways,
Speaker 1: right platforms to be able to uh take a bulkship,
Speaker 1: it's just talk about bulkshipping for a second, right there's
Speaker 1: been many different uh attempts by technology companies are technologically
Speaker 1: focused people in the shipping industry to put together a
Speaker 1: more open auction, transparent platform exchange and exchange to some
Speaker 1: extent right for for actual booking freight. But it always
Speaker 1: seems to revert back to the herror, back to the
Speaker 1: old old fashioned of right, knowing the right guy in
Speaker 1: Copenhagen type thing, which is kind of you know what
Speaker 1: keeps us in business, right to some extent as a
Speaker 1: third party intermediate right, which is what we what we are,
Speaker 1: right or logistics management company. Right, our our value. We
Speaker 1: don't own ships, we don't own barges, we don't own
Speaker 1: rail cars. Right, So so there's a value in having
Speaker 1: expertise and knowing where to go for for that. That's
Speaker 1: so yeah, there's been a natural right resistance to the
Speaker 1: to that. Well, let's and anton its expertise and relationships.
Speaker 1: M M yeah, exactly, I tell you it. Just another
Speaker 1: thing too on the bulk fright, looking backlistic that that
Speaker 1: steel coming out of out of the Far East I
Speaker 1: mentioned in that particular case, we're working to get a
Speaker 1: three three shipment contract together right for October December and
Speaker 1: February to move to move that steep, to move that steel.
Speaker 1: We're seeing resistance from ship operators for offering that far out,
Speaker 1: and the ones that have are pricing it quite significantly
Speaker 1: higher right that they're taking certainly a big premium on that. Um,
Speaker 1: you have a situation to on the bulk side, and
Speaker 1: it's it's a little bit if this is where it
Speaker 1: differs from the container side. Bulk ship operators and I'm
Speaker 1: using the term operators rather than owners here are often
Speaker 1: not the actual owners of the ship. They operate as
Speaker 1: a as a as a ship ship operator, but they
Speaker 1: take the ships that they're using on time charter. Essentially
Speaker 1: they're renting those ships, they're chartering those ships. So, um,
Speaker 1: we have a situation at the moment where the handy
Speaker 1: size market which is a handy size market rate for
Speaker 1: ships and handy size of these ships that are running
Speaker 1: in the twenty thousand ton capacity range. Right, these ships
Speaker 1: were going on the market at the very beginning of
Speaker 1: the year in January, and maybe you've got ten thousand
Speaker 1: dollars a day to time charter one of those ships.
Speaker 1: They're now in the thirty dollars to day in the
Speaker 1: Pacific market. So, if you're a ship operator, let's say
Speaker 1: your your ABC Shipping, and you priced moving steel from
Speaker 1: the Far East to the US Gulf at let's say
Speaker 1: a sixty five dollars a ton. But you you based
Speaker 1: that sixty a ton rate that you gave to the
Speaker 1: steel mill. You based that rate on a ten tho
Speaker 1: dollar a day ship being able to get a ship
Speaker 1: at ten thousand dollars a day. And now you have
Speaker 1: to go out and perform under that contract. Right, you
Speaker 1: agreed to sixty five dollars to that steel. Now you've
Speaker 1: got to go charter in a ship at thirty dollars
Speaker 1: a day. That sixty doesn't make economic sense anymore. And
Speaker 1: we're seeing some very very serious problems in delays with
Speaker 1: ship operators that that are not performing at the moment
Speaker 1: because of because of this. Right. And this is where
Speaker 1: this type of market situation has happened in the past. Right,
Speaker 1: But it's where it separates the professionals and the ship
Speaker 1: operating side from the from the amateurs, the ones that
Speaker 1: prepared at a time, that had ships on sufficient long
Speaker 1: enough time charter periods to perform under their contracts, versus
Speaker 1: the cowboys that book that sixt with the mill but
Speaker 1: hoped that the market didn't didn't anticipate the market jumping
Speaker 1: like this and that now that now can't perform and
Speaker 1: are leaving cargoes behind strewn about the Far East, which
Speaker 1: is one of the situations for dealing with at the
Speaker 1: moment too. All right, Aunton and Margot, thank you so much.
Speaker 1: Really appreciate your time on the podcast and also your
Speaker 1: months of hard work trying to get the shipment out
Speaker 1: of Hong Kong and all your patients with with the
Speaker 1: US doing the paperwork. So thank you so much. Thanks everyone.
Speaker 1: That was fun. Hold onto that. How do you barry Tracy,
Speaker 1: because when you get the Hong Kong next time to visit,
Speaker 1: I will personally carry it back to the States. Okay, yeah,
Speaker 1: we'll get really creative with our transport situations. All right,
Speaker 1: thank you. That was great, So Joe, you can probably
Speaker 1: tell I very much enjoyed that conversation. It was nice
Speaker 1: to get more of a breakdown between the container shipping
Speaker 1: world versus bulk because I hadn't considered that. It was
Speaker 1: also interesting to hear about what's going on in US
Speaker 1: rivers because that was definitely something I hadn't considered before. Yeah,
Speaker 1: I hadn't. I hadn't thought about that at all before.
Speaker 1: But I also and I feel like each time I
Speaker 1: love these series because I feel like, um, you know,
Speaker 1: we started with Mark Levinson with the Box, which you know,
Speaker 1: look at really big picture of shipping. We keep getting
Speaker 1: more granular and then keep and it keeps turning over
Speaker 1: new leaves. Obviously we've got to talk about the canals
Speaker 1: and the river systems and how important they still are,
Speaker 1: but I feel like both of them. Antona Margo just
Speaker 1: had so many sort of like specific insights, specific details
Speaker 1: about what makes the situation so tricky that was super helpful. Absolutely,
Speaker 1: and um, I should do this before I forget. But
Speaker 1: I just want to give a big shout out slash
Speaker 1: thank you to some of the Bloomberg staff that helped
Speaker 1: with the Teddy Bear project. UM, in particular dil en
Speaker 1: Rico and Coco Live from our supply chain office in
Speaker 1: Hong Kong, who very patiently answered all these questions about
Speaker 1: how to like secure a teddy Bear, a single teddy
Speaker 1: Bear in a crate UM and worked on organizing uh,
Speaker 1: you know, the the transport within Hong Kong as well,
Speaker 1: so she was amazing. Of course, um the guy who
Speaker 1: approves my expense accounts as well, which is Reddo. So
Speaker 1: thank you DdO for allowing us to spend thousands of
Speaker 1: dollars on this um even though we didn't actually do
Speaker 1: it in the end. There you go. Well, let's try again,
Speaker 1: and let's let's try again in the year. Hopefully there
Speaker 1: will be some stability and they'll find they'll find some
Speaker 1: space for you on a ship. How much do you
Speaker 1: think a tugboat costs of the Mississippi? I don't know.
Speaker 1: Do you know the answer? No? I think you like
Speaker 1: I thought you're like going to give you like a
Speaker 1: trivia question or something like that. All right, we got
Speaker 1: Let's let's get to work on booking that episode. Okay,
Speaker 1: all right, shall we leave it there? Let's leave it there.
Speaker 1: This has been another episode of the All Thoughts Podcast.
Speaker 1: I'm Tracy Alloway. You can follow me on Twitter at
Speaker 1: Tracy Alloway and I'm Joey Isn't Though. You can follow
Speaker 1: me on Twitter at the Stalwart. Follow our producer on Twitter,
Speaker 1: Laura Carlson. She's at Laura M. Carlson. Followed the Bloomberg
Speaker 1: head of podcast, Francesco Levi at Francesco Today and check
Speaker 1: out all of our podcasts at Bloomberg under the handle
Speaker 1: at podcasts. Thanks for listening to