1 00:00:11,160 --> 00:00:14,640 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,720 --> 00:00:19,400 Speaker 1: I'm Tracy Alloway and I'm Joe Wisen't thal So, Joe, 3 00:00:19,840 --> 00:00:23,160 Speaker 1: I have something to admit to you. Oh boy, here 4 00:00:23,200 --> 00:00:26,880 Speaker 1: we go. Okay, I'm worried you're going to think less 5 00:00:26,920 --> 00:00:30,160 Speaker 1: of me. There's no chance of that. Just just tell So. 6 00:00:30,400 --> 00:00:34,320 Speaker 1: One of my long held ambitions in life is to 7 00:00:34,840 --> 00:00:39,400 Speaker 1: travel via container ship perfectly, you know, a long journey 8 00:00:39,400 --> 00:00:43,239 Speaker 1: across the Pacific. I think I know someone who did that. 9 00:00:43,360 --> 00:00:47,360 Speaker 1: I think I know someone who went from Japan to 10 00:00:47,479 --> 00:00:53,440 Speaker 1: the US as a traveler on a industrial contender ship. Yeah, 11 00:00:53,600 --> 00:00:56,279 Speaker 1: it's something you can do, or I should say you 12 00:00:56,360 --> 00:01:00,480 Speaker 1: were able to do it before the global pandemic. I'm 13 00:01:00,520 --> 00:01:04,080 Speaker 1: sure it's not allowed right now for many reasons. Obviously, 14 00:01:04,120 --> 00:01:07,280 Speaker 1: you have restrictions on travel, you have border restrictions. But 15 00:01:07,360 --> 00:01:11,480 Speaker 1: the other big reason is that global shipping is kind 16 00:01:11,520 --> 00:01:15,319 Speaker 1: of just a mess at the moment, right and that's 17 00:01:15,319 --> 00:01:19,520 Speaker 1: related to the pandemic and the supply chain disruptions, and 18 00:01:19,600 --> 00:01:22,000 Speaker 1: of course they've been happening for about a year now, 19 00:01:22,560 --> 00:01:25,720 Speaker 1: but they don't seem to be abating like the general 20 00:01:25,760 --> 00:01:28,640 Speaker 1: disruptions that we've seen. I mean, the world seems to 21 00:01:28,680 --> 00:01:32,040 Speaker 1: be getting by, and maybe we haven't had as severe 22 00:01:32,160 --> 00:01:36,000 Speaker 1: shortages of things that we might have feared last spring, 23 00:01:36,520 --> 00:01:40,160 Speaker 1: but there are still all kinds of reports about how 24 00:01:40,560 --> 00:01:43,520 Speaker 1: sort of messed up everything. Yeah, and I think people 25 00:01:43,600 --> 00:01:46,479 Speaker 1: were expecting it to get better. So, as you mentioned, 26 00:01:46,520 --> 00:01:49,840 Speaker 1: when the pandemic first started, we saw a bunch of 27 00:01:49,840 --> 00:01:53,600 Speaker 1: countries suddenly close their borders, and this meant that ships 28 00:01:53,640 --> 00:01:56,920 Speaker 1: that were supposed to head somewhere and then head somewhere else, 29 00:01:57,280 --> 00:01:59,360 Speaker 1: we're all sort of knocked out of place. So it 30 00:01:59,400 --> 00:02:01,520 Speaker 1: takes a lot long time to get them back into 31 00:02:01,560 --> 00:02:04,559 Speaker 1: position and to get them on the routes that they're 32 00:02:04,600 --> 00:02:08,480 Speaker 1: supposed to be going. But now what we're seeing is 33 00:02:08,560 --> 00:02:11,440 Speaker 1: that even you know, almost a year on from the 34 00:02:11,480 --> 00:02:14,800 Speaker 1: start of the pandemic, at least in China, this problem 35 00:02:14,840 --> 00:02:17,320 Speaker 1: seems to be getting worse. And I'm looking at a 36 00:02:17,360 --> 00:02:21,720 Speaker 1: headline on Bloomberg right now saying that surging shipping rates 37 00:02:22,160 --> 00:02:25,919 Speaker 1: are a new headwind for the global economy. So it's 38 00:02:25,960 --> 00:02:29,920 Speaker 1: gotten so bad that we could actually feel an outsized 39 00:02:29,960 --> 00:02:34,919 Speaker 1: economic impact from all of this. Yeah, you know, it's 40 00:02:34,960 --> 00:02:38,760 Speaker 1: funny like when when the crisis first hit, there was 41 00:02:38,800 --> 00:02:41,400 Speaker 1: a lot of talk here in the US about, oh, 42 00:02:41,440 --> 00:02:44,560 Speaker 1: are we gonna start reshoring more of our manufacturing? Are 43 00:02:44,600 --> 00:02:47,520 Speaker 1: we gonna buy less from China over time? And maybe 44 00:02:47,960 --> 00:02:50,280 Speaker 1: that will happen at some point, who knows. But in 45 00:02:50,360 --> 00:02:53,880 Speaker 1: the meantime, people are spending a lot on e commerce. 46 00:02:54,120 --> 00:02:57,799 Speaker 1: They're buying things. They're buying things from Walmart dot com 47 00:02:57,800 --> 00:03:00,560 Speaker 1: and Amazon dot com, and a lot of those things 48 00:03:00,560 --> 00:03:04,160 Speaker 1: come from China. So there is an extraordinary amount of 49 00:03:04,240 --> 00:03:08,919 Speaker 1: demand for imports ship from China. I don't think there's 50 00:03:08,960 --> 00:03:10,960 Speaker 1: as much going in the other direction, and I think 51 00:03:11,000 --> 00:03:13,200 Speaker 1: that's sort of like part of the story is that 52 00:03:13,639 --> 00:03:16,959 Speaker 1: although there has been this revival of economic activity, it's 53 00:03:17,040 --> 00:03:20,160 Speaker 1: not the same patterns as it was before, and so 54 00:03:20,240 --> 00:03:24,680 Speaker 1: this sort of like equilibrium stability of global global supply 55 00:03:24,760 --> 00:03:29,520 Speaker 1: lines has not been established yet. No, that's exactly right. 56 00:03:29,560 --> 00:03:32,840 Speaker 1: I think I saw some anecdote about how it's cheaper 57 00:03:32,960 --> 00:03:37,800 Speaker 1: to send a container from the US to China empty. 58 00:03:37,880 --> 00:03:41,000 Speaker 1: So you ship something over to the US a full container, 59 00:03:41,240 --> 00:03:42,800 Speaker 1: but then when it gets there, you just send it 60 00:03:42,800 --> 00:03:46,040 Speaker 1: back empty because you can make more money by making 61 00:03:46,160 --> 00:03:49,040 Speaker 1: more trips versus actually spending the time to load it 62 00:03:49,160 --> 00:03:54,360 Speaker 1: up in the US. So it's stuff like that. Well, anyway, 63 00:03:54,400 --> 00:03:56,760 Speaker 1: that's a good one. That's a good one. On this podcast, 64 00:03:56,800 --> 00:03:59,200 Speaker 1: we're going to hit all of these big themes. So 65 00:03:59,360 --> 00:04:03,040 Speaker 1: we're going to hit it um, how shipping actually works, 66 00:04:03,320 --> 00:04:05,880 Speaker 1: what's going on now? And you know when we say 67 00:04:05,880 --> 00:04:10,520 Speaker 1: stuff like the rate on a standard container has quadrupled 68 00:04:10,640 --> 00:04:13,880 Speaker 1: versus a year ago, what do we actually mean by 69 00:04:13,960 --> 00:04:17,039 Speaker 1: a standard container? And how did we get into a 70 00:04:17,080 --> 00:04:21,440 Speaker 1: place where shipping and global trade was standardized in this way? 71 00:04:21,480 --> 00:04:23,919 Speaker 1: So we're going to talk to someone who has actually 72 00:04:24,160 --> 00:04:28,320 Speaker 1: fulfilled my ambition in life, someone who has traveled on 73 00:04:28,400 --> 00:04:32,039 Speaker 1: container ship. We're gonna talk to Mark Levinson. He's an 74 00:04:32,040 --> 00:04:35,559 Speaker 1: economist and a historian and the author of a really 75 00:04:35,560 --> 00:04:38,200 Speaker 1: good book that I read quite a few years ago, 76 00:04:38,240 --> 00:04:41,000 Speaker 1: but it's called The Box, How the shipping Container made 77 00:04:41,040 --> 00:04:44,240 Speaker 1: the World smaller and the World economy bigger. He also 78 00:04:44,279 --> 00:04:48,000 Speaker 1: has a new book called Outside the Box, How globalization 79 00:04:48,120 --> 00:04:52,160 Speaker 1: changed from moving stuff to spreading ideas. So the perfect 80 00:04:52,160 --> 00:04:57,080 Speaker 1: person to talk about this, all right, Marca, Welcome to 81 00:04:57,080 --> 00:05:01,360 Speaker 1: odd Bots. Good to be with you, Tracy. So it's 82 00:05:01,440 --> 00:05:05,479 Speaker 1: nice to meet someone who shares my affinity for container shipping. 83 00:05:05,560 --> 00:05:09,200 Speaker 1: Could you maybe explain how you got into this as 84 00:05:09,279 --> 00:05:12,640 Speaker 1: an area of interest because I think, I mean, I'm 85 00:05:12,640 --> 00:05:16,000 Speaker 1: pretty sure that your book is well one of the 86 00:05:16,040 --> 00:05:18,039 Speaker 1: only ones that I know of certainly that deals in 87 00:05:18,080 --> 00:05:22,520 Speaker 1: the history of container shipping. Sure, I'm I'm not a 88 00:05:22,560 --> 00:05:26,520 Speaker 1: shipping person. I'm a trade person. I'm very interested in 89 00:05:26,680 --> 00:05:32,400 Speaker 1: international economics and international trade. And my observation was that 90 00:05:32,800 --> 00:05:37,800 Speaker 1: economists paid a whole lot of attention to things that 91 00:05:37,960 --> 00:05:41,320 Speaker 1: governments did as being responsible for the growth in trade, 92 00:05:41,360 --> 00:05:45,040 Speaker 1: for example, cutting tariffs, and that they really hadn't paid 93 00:05:45,120 --> 00:05:48,920 Speaker 1: much attention to these changes in transport costs and the 94 00:05:49,240 --> 00:05:53,120 Speaker 1: greater reliability that came with container shipping. So I decided 95 00:05:53,160 --> 00:05:55,159 Speaker 1: to take a look at that, and that's really where 96 00:05:56,360 --> 00:05:59,640 Speaker 1: my book The Box came from, was really trying to 97 00:05:59,720 --> 00:06:04,200 Speaker 1: under stand how this technology developed and how it then 98 00:06:04,240 --> 00:06:10,120 Speaker 1: affected the international economy. My argument that globalization as we 99 00:06:10,160 --> 00:06:12,880 Speaker 1: know it today wouldn't have been possible without the container 100 00:06:13,600 --> 00:06:16,080 Speaker 1: originally struck a lot of people as strange, but I 101 00:06:16,120 --> 00:06:19,000 Speaker 1: think many people have come around to understand that that's true. 102 00:06:20,920 --> 00:06:24,680 Speaker 1: What is the core thesis of the book, that this 103 00:06:24,960 --> 00:06:29,480 Speaker 1: standardized container that can guard ships and rail is so 104 00:06:29,600 --> 00:06:33,160 Speaker 1: crucial to globalization as we know it? The core thesis 105 00:06:33,320 --> 00:06:38,880 Speaker 1: is that the shipping container made such a huge difference 106 00:06:39,200 --> 00:06:42,720 Speaker 1: in not only the cost of shipping but in the 107 00:06:42,800 --> 00:06:48,320 Speaker 1: reliability of shipping, that it led businesses to adopt new strategies. 108 00:06:49,240 --> 00:06:53,680 Speaker 1: The containerization made what we think of today as long 109 00:06:53,720 --> 00:06:58,400 Speaker 1: distance value chains possible. The idea that you would ship 110 00:06:59,600 --> 00:07:03,080 Speaker 1: inter idiot goods from here to their products that have 111 00:07:03,200 --> 00:07:06,040 Speaker 1: been partially processed and they're being sent to some place 112 00:07:06,080 --> 00:07:09,080 Speaker 1: else to be incorporated into a component, which will be 113 00:07:09,160 --> 00:07:12,320 Speaker 1: sent someplace else to be incorporated into a finished product. 114 00:07:12,920 --> 00:07:17,120 Speaker 1: That wasn't common before containerization came along, because the transport 115 00:07:17,280 --> 00:07:21,840 Speaker 1: was too expensive and too unreliable. And so this type 116 00:07:21,840 --> 00:07:27,320 Speaker 1: of globalization is really a consequence of containerization. So you 117 00:07:27,440 --> 00:07:29,680 Speaker 1: made the point in the book, or I mean a 118 00:07:29,680 --> 00:07:32,200 Speaker 1: big chunk of the book is actually about this. The 119 00:07:32,280 --> 00:07:37,160 Speaker 1: standardized container didn't just happen. Someone had the idea for it, 120 00:07:37,400 --> 00:07:42,360 Speaker 1: and then actually getting it adopted in the wider roles 121 00:07:42,360 --> 00:07:45,640 Speaker 1: of trade took a lot of investment and and quite 122 00:07:45,680 --> 00:07:48,720 Speaker 1: a bit of time. Could you describe that process? Where 123 00:07:48,720 --> 00:07:52,280 Speaker 1: does the container actually come from? And how was it 124 00:07:52,600 --> 00:07:58,200 Speaker 1: uh spread around the world. The container was actually not 125 00:07:58,400 --> 00:08:02,720 Speaker 1: a new invention by any stretch. There's evidence of the 126 00:08:02,840 --> 00:08:07,040 Speaker 1: use of containers to ship goods more efficiently since the 127 00:08:07,160 --> 00:08:11,880 Speaker 1: eighteenth century, and it makes sense, right. It's more efficient 128 00:08:11,920 --> 00:08:15,240 Speaker 1: to handle things once like a box with a lot 129 00:08:15,240 --> 00:08:18,320 Speaker 1: of little boxes inside, than to handle each of these 130 00:08:18,400 --> 00:08:21,880 Speaker 1: different boxes. So there's been a lot of use of 131 00:08:21,960 --> 00:08:25,920 Speaker 1: containers in different ways, including in the United States, but 132 00:08:26,160 --> 00:08:28,760 Speaker 1: none of these made any money. It proved to be 133 00:08:28,880 --> 00:08:32,840 Speaker 1: not a very efficient way to move goods. And then 134 00:08:32,880 --> 00:08:39,280 Speaker 1: what happened Starting in ninety six, US entrepreneurs, notably a 135 00:08:39,320 --> 00:08:45,720 Speaker 1: trucking industry magnet named Malcolm McClain, began to use containers 136 00:08:45,760 --> 00:08:54,280 Speaker 1: aboard purpose built ships and tied the container into a system, 137 00:08:54,360 --> 00:08:57,960 Speaker 1: so it wasn't simply uh, something that went on a 138 00:08:58,040 --> 00:09:00,880 Speaker 1: ship but could also be put on top of a 139 00:09:01,040 --> 00:09:04,320 Speaker 1: rail car, could be attached to a truck, and you 140 00:09:04,679 --> 00:09:09,160 Speaker 1: then had the development of intermodal freight. Containers were a 141 00:09:09,240 --> 00:09:13,600 Speaker 1: domestic US phenomenon for a dozen years, and then starting 142 00:09:13,600 --> 00:09:18,560 Speaker 1: in n there was international container shipping, first across the 143 00:09:18,600 --> 00:09:23,560 Speaker 1: Atlantic and then across the Pacific, and this led to 144 00:09:23,920 --> 00:09:28,480 Speaker 1: a steep drop. I think readers may not recall, but 145 00:09:28,920 --> 00:09:34,320 Speaker 1: before containers came along, doc work was very, very labor intensive. 146 00:09:34,920 --> 00:09:37,720 Speaker 1: To load a ship, the ship had to spend a 147 00:09:37,760 --> 00:09:41,120 Speaker 1: couple of weeks at the dock, and you had workers 148 00:09:41,200 --> 00:09:46,280 Speaker 1: literally handling two hundred thousand separate items, getting them out 149 00:09:46,280 --> 00:09:48,280 Speaker 1: of the warehouse and into the ship, and then at 150 00:09:48,320 --> 00:09:51,240 Speaker 1: the other end of the trip doing the reverse. So 151 00:09:51,400 --> 00:09:55,760 Speaker 1: shipping things took a long time. Many things got lost, stolen, broken, 152 00:09:56,480 --> 00:09:59,840 Speaker 1: and the cost was extremely high. And what that meant 153 00:09:59,880 --> 00:10:03,360 Speaker 1: was a lot of things just weren't worth shipping. Once 154 00:10:03,679 --> 00:10:08,160 Speaker 1: container shipping developed internationally, then all of a sudden it 155 00:10:08,240 --> 00:10:12,800 Speaker 1: made sense to send things like socks and cheap wine 156 00:10:13,000 --> 00:10:17,720 Speaker 1: and electric fans and other relatively inexpensive goods around the world, 157 00:10:17,760 --> 00:10:22,600 Speaker 1: and so the container really made that possible. Was Season 158 00:10:22,679 --> 00:10:26,880 Speaker 1: two of The Wire a pretty accurate depiction of them, 159 00:10:27,400 --> 00:10:31,439 Speaker 1: sort of the intersection of new shipping technology against or 160 00:10:31,600 --> 00:10:35,920 Speaker 1: sort of with sort of traditional union power and workers strongholds. 161 00:10:37,600 --> 00:10:42,880 Speaker 1: It was different in every country. Typically, the pattern prior 162 00:10:42,960 --> 00:10:49,040 Speaker 1: to containerization was that doc work paid well when there 163 00:10:49,120 --> 00:10:52,560 Speaker 1: was work, but because of the nature of shipping that 164 00:10:52,679 --> 00:10:57,000 Speaker 1: was fairly labor intensive, there was this it was necessary 165 00:10:57,000 --> 00:11:00,480 Speaker 1: to have a surplus of workers. So you have all 166 00:11:00,520 --> 00:11:04,760 Speaker 1: of these guys showing up at the dock every day 167 00:11:04,760 --> 00:11:07,960 Speaker 1: trying to find work. Some days there was work for 168 00:11:08,000 --> 00:11:10,920 Speaker 1: everybody because the ship had just come in. Some days 169 00:11:10,960 --> 00:11:13,800 Speaker 1: there was work for only a handful of guys. And 170 00:11:13,920 --> 00:11:17,000 Speaker 1: so then how do I get a job while you 171 00:11:17,040 --> 00:11:20,360 Speaker 1: get your job for your friend? And and it became 172 00:11:20,520 --> 00:11:24,720 Speaker 1: rather a racket infested in some countries. Uh, that was, 173 00:11:24,960 --> 00:11:29,480 Speaker 1: you know, definitely an issue. Um. In other countries, this 174 00:11:29,559 --> 00:11:31,760 Speaker 1: was simply an important source of work, and there was 175 00:11:31,800 --> 00:11:35,199 Speaker 1: a lot of resistance to these jobs disappearing. So every 176 00:11:35,240 --> 00:11:39,320 Speaker 1: country had to resolve this in its own way. So 177 00:11:40,240 --> 00:11:44,680 Speaker 1: I think you've laid out the importance of standardized shipping 178 00:11:45,040 --> 00:11:50,080 Speaker 1: to global trade beautifully. If we fast forward to today 179 00:11:50,840 --> 00:11:53,559 Speaker 1: and the disruptions that Joe and I were talking about 180 00:11:53,720 --> 00:11:58,280 Speaker 1: in the intro, what's your understanding of what's going on 181 00:11:58,480 --> 00:12:04,280 Speaker 1: right now and how much of a problem is it. Well, 182 00:12:04,400 --> 00:12:07,600 Speaker 1: let me give you just a little very recent history 183 00:12:07,760 --> 00:12:11,720 Speaker 1: of containerization, and this is some of what I deal 184 00:12:11,760 --> 00:12:15,200 Speaker 1: with in my my new book, Outside the Box. Starting 185 00:12:16,000 --> 00:12:21,000 Speaker 1: in the early two thousand's, the container ship lines built 186 00:12:21,360 --> 00:12:25,520 Speaker 1: bigger and bigger and bigger ships. Okay, the first ship 187 00:12:25,880 --> 00:12:33,000 Speaker 1: that carried only containers back in carrying sixty eight containers. Okay, 188 00:12:34,240 --> 00:12:39,920 Speaker 1: now the biggest carry more than twelve thousand containers what 189 00:12:39,960 --> 00:12:43,640 Speaker 1: they call twenty ft units, and it was really in 190 00:12:43,679 --> 00:12:47,080 Speaker 1: the early two thousands, around two thousand, five thousand six 191 00:12:47,120 --> 00:12:50,800 Speaker 1: of these big ships started to come online, and then 192 00:12:50,800 --> 00:12:54,480 Speaker 1: they got bigger and bigger over time. These were built 193 00:12:54,559 --> 00:12:57,640 Speaker 1: on the assumption that international trade would continue to grow 194 00:12:57,800 --> 00:13:03,680 Speaker 1: very quickly, as it had for decades up until that time. 195 00:13:04,400 --> 00:13:09,479 Speaker 1: What happened then was in the financial crisis, trade crashed, 196 00:13:09,840 --> 00:13:14,200 Speaker 1: and after that the growth of trade never recovered. Okay, 197 00:13:14,240 --> 00:13:17,840 Speaker 1: international trade as a share of the world's GDP actually 198 00:13:17,880 --> 00:13:21,520 Speaker 1: peaked back in two thousand eight, and so there was 199 00:13:21,640 --> 00:13:26,120 Speaker 1: all his excess capacity in shipping, and every time a 200 00:13:26,200 --> 00:13:29,040 Speaker 1: new ship came online that had the capacity to carry 201 00:13:29,080 --> 00:13:33,640 Speaker 1: thousands of containers, the excess capacity got worse, to the 202 00:13:33,720 --> 00:13:37,120 Speaker 1: point that you can send a container across the Pacific 203 00:13:37,360 --> 00:13:40,640 Speaker 1: for for under a thousand dollars. At one point when 204 00:13:40,640 --> 00:13:45,000 Speaker 1: this happened, many ship lines went bust or else found 205 00:13:45,120 --> 00:13:49,679 Speaker 1: merger partners, and so what had been a very competitive 206 00:13:49,720 --> 00:13:54,120 Speaker 1: industry was transformed into what's basically an oligopola. To day, 207 00:13:54,960 --> 00:13:58,880 Speaker 1: there are three groups of ship lines, and between them 208 00:13:58,920 --> 00:14:03,000 Speaker 1: they probably can troll five or so percent of the 209 00:14:03,080 --> 00:14:08,720 Speaker 1: trade on the major trade routes, and that means that 210 00:14:08,800 --> 00:14:13,240 Speaker 1: they are able to control over capacity. You don't have 211 00:14:13,640 --> 00:14:16,000 Speaker 1: as many ships being built as you had a few 212 00:14:16,080 --> 00:14:19,440 Speaker 1: years ago because of these three big groups kind of 213 00:14:19,520 --> 00:14:23,840 Speaker 1: keep a handle on things, and so that means that 214 00:14:24,880 --> 00:14:27,160 Speaker 1: when all of a sudden there's a spike in demand, 215 00:14:27,280 --> 00:14:31,520 Speaker 1: as there was towards the middle of that, rates are 216 00:14:31,520 --> 00:14:36,200 Speaker 1: going to go up. That's really what's happened. After years 217 00:14:36,200 --> 00:14:40,680 Speaker 1: and years of extremely low rates, rates really popped starting 218 00:14:41,320 --> 00:14:45,480 Speaker 1: in August or September of last year. Why did this 219 00:14:45,560 --> 00:14:49,080 Speaker 1: happen aside from the demand, Well, in the early days 220 00:14:49,120 --> 00:14:52,880 Speaker 1: of COVID, there were a lot of foul ups. Trade 221 00:14:53,600 --> 00:14:57,680 Speaker 1: dropped off precipitously for a brief period, uh, and then 222 00:14:58,320 --> 00:15:01,640 Speaker 1: that it picked up again. And at the same time, 223 00:15:01,680 --> 00:15:05,440 Speaker 1: you had consumers in the wealthy countries who couldn't spend 224 00:15:05,560 --> 00:15:09,080 Speaker 1: on services. So you actually had in the midst of 225 00:15:09,120 --> 00:15:12,520 Speaker 1: this crisis, people with a lot of money to spend. 226 00:15:12,680 --> 00:15:16,080 Speaker 1: They couldn't go out to dinner, they couldn't go on vacation, 227 00:15:16,720 --> 00:15:20,160 Speaker 1: they couldn't go to the theater, they could buy things, 228 00:15:20,640 --> 00:15:25,560 Speaker 1: and so that actually increased the demand for physical products, 229 00:15:25,840 --> 00:15:27,760 Speaker 1: and that's a lot of what we're seeing now in 230 00:15:27,840 --> 00:15:48,480 Speaker 1: this um sudden surge of exports from China. Let me 231 00:15:48,480 --> 00:15:51,320 Speaker 1: ask you a sort of technical question, because I'm sort 232 00:15:51,360 --> 00:15:55,680 Speaker 1: of fascinated about where prices come from. So you know, 233 00:15:55,720 --> 00:15:58,360 Speaker 1: I have a Bloomberg terminal and I can look up 234 00:15:58,440 --> 00:16:04,120 Speaker 1: the Shanghai Shipping Exchange Containerized Freight Index, and I see 235 00:16:04,200 --> 00:16:07,720 Speaker 1: that now that long ago as a thousand. Anyway, now 236 00:16:07,880 --> 00:16:13,080 Speaker 1: it's significantly higher than that. It's exploded. Where do these 237 00:16:13,160 --> 00:16:16,360 Speaker 1: numbers come from? If I'm trying to think how I 238 00:16:16,360 --> 00:16:18,920 Speaker 1: want to phrase the question, if a manufacturer of a 239 00:16:18,920 --> 00:16:21,400 Speaker 1: good or a buyer of a good, is there a 240 00:16:21,400 --> 00:16:25,840 Speaker 1: transparent price? Did they negotiate directly with the shippers? And 241 00:16:25,880 --> 00:16:30,080 Speaker 1: then how did those get fed into a unified index. 242 00:16:31,480 --> 00:16:35,800 Speaker 1: That's a terrific question, Uh, Joe. If you show up 243 00:16:35,840 --> 00:16:39,360 Speaker 1: at the dock with a container and you say, hey, 244 00:16:39,480 --> 00:16:43,200 Speaker 1: I want to send this off to Hamburg or Long Beach, 245 00:16:44,360 --> 00:16:48,320 Speaker 1: well the ship line will do business with you reluctantly. 246 00:16:48,400 --> 00:16:51,880 Speaker 1: But that's not really how the shipping business works. Okay, 247 00:16:52,160 --> 00:16:57,800 Speaker 1: the shipping business works almost entirely under contract, which is 248 00:16:57,840 --> 00:17:06,240 Speaker 1: to say, a big shipper Walmart for um Caterpillar will 249 00:17:06,240 --> 00:17:11,040 Speaker 1: reach an agreement with either a ship line or with 250 00:17:11,119 --> 00:17:13,640 Speaker 1: a freight forward or which will negotiate with the ship 251 00:17:13,680 --> 00:17:18,879 Speaker 1: line on its behalf. These agreements typically last six months, 252 00:17:18,920 --> 00:17:23,840 Speaker 1: sometimes longer, and they're typically filled with contingencies, which means 253 00:17:24,240 --> 00:17:27,119 Speaker 1: you can't actually know what the cost of the shipment is. 254 00:17:28,440 --> 00:17:33,919 Speaker 1: A typical contract might say something like the shipper, that is, 255 00:17:33,920 --> 00:17:38,600 Speaker 1: the company with the goods export, agrees to have at 256 00:17:38,720 --> 00:17:44,639 Speaker 1: least fifty containers on the dock going from Shanghai to 257 00:17:45,760 --> 00:17:50,600 Speaker 1: Los Angeles every Tuesday, and any week in which it 258 00:17:50,640 --> 00:17:55,680 Speaker 1: has less than fifty containers, the agreed price will be higher. 259 00:17:56,320 --> 00:17:59,920 Speaker 1: And if over the entire six months of the pure 260 00:18:00,080 --> 00:18:04,240 Speaker 1: it uh it has fewer than so and so many containers, 261 00:18:04,400 --> 00:18:07,639 Speaker 1: the price will be this much higher. And if the 262 00:18:07,680 --> 00:18:10,560 Speaker 1: ship line misses a sailing, then it will have to 263 00:18:10,600 --> 00:18:14,240 Speaker 1: pay a penalty of so much per container. And those 264 00:18:14,359 --> 00:18:17,400 Speaker 1: kinds of contingencies, and there are many of them, then 265 00:18:17,520 --> 00:18:22,399 Speaker 1: determine what the total prices. So actually a company can't 266 00:18:22,440 --> 00:18:25,000 Speaker 1: tell you what it would cost to send a container 267 00:18:25,520 --> 00:18:30,040 Speaker 1: from Shanghai to Los Angeles today. It will only know 268 00:18:30,359 --> 00:18:32,960 Speaker 1: at the end of the six months when it adds 269 00:18:33,040 --> 00:18:35,879 Speaker 1: up all of the payments that's made, all of the 270 00:18:35,920 --> 00:18:39,480 Speaker 1: penalty payments that's received from the other party, and and 271 00:18:39,520 --> 00:18:43,880 Speaker 1: then it becomes obvious in retrospect what the actual cost 272 00:18:43,920 --> 00:18:47,879 Speaker 1: per container was. So this is not public information. Just sorry. 273 00:18:48,000 --> 00:18:50,359 Speaker 1: So then like I'm looking at this chart again, so 274 00:18:50,480 --> 00:18:54,760 Speaker 1: is it a thousand and now it's it's not public information. 275 00:18:55,440 --> 00:18:59,560 Speaker 1: How does it then get fed into an observable index? 276 00:19:01,440 --> 00:19:04,639 Speaker 1: What you're looking at is the market forecast of a 277 00:19:04,640 --> 00:19:09,200 Speaker 1: spot rate. Okay, as some of the contracts are pegged 278 00:19:09,200 --> 00:19:13,040 Speaker 1: to that index, some are not. Uh, And and there's 279 00:19:13,040 --> 00:19:16,720 Speaker 1: a question here about what kind of information and index 280 00:19:16,800 --> 00:19:20,199 Speaker 1: like this has. Okay, you may have some players in 281 00:19:20,240 --> 00:19:23,800 Speaker 1: the industry who want this information to get out about 282 00:19:23,840 --> 00:19:26,360 Speaker 1: what they actually are paying for freight. You have some 283 00:19:26,480 --> 00:19:28,680 Speaker 1: players in the index in the industry who don't want 284 00:19:28,680 --> 00:19:32,080 Speaker 1: it to get out. And so this is, as is 285 00:19:32,119 --> 00:19:36,159 Speaker 1: the case with many other traded commodities, many of the 286 00:19:36,200 --> 00:19:41,040 Speaker 1: transactions occur in private and what is known in the 287 00:19:41,119 --> 00:19:44,560 Speaker 1: public sphere is not the full story. You don't really 288 00:19:44,600 --> 00:19:49,560 Speaker 1: know what what the actual prices are or were. So 289 00:19:49,760 --> 00:19:53,120 Speaker 1: we described it the outset this idea that the pandemic 290 00:19:53,359 --> 00:19:57,399 Speaker 1: had caused chaos in shipping in part by putting a 291 00:19:57,440 --> 00:19:59,840 Speaker 1: bunch of the big container ships out of place. So 292 00:20:00,160 --> 00:20:02,080 Speaker 1: you know, they expected to go somewhere, they were turned 293 00:20:02,080 --> 00:20:04,920 Speaker 1: away at the border, or they got stuck somewhere, and 294 00:20:05,000 --> 00:20:09,000 Speaker 1: so you have like all these ships out of position. 295 00:20:09,920 --> 00:20:15,439 Speaker 1: How difficult is it to get them back online and 296 00:20:15,480 --> 00:20:19,280 Speaker 1: sort of going where they need to be going? I guess, 297 00:20:19,400 --> 00:20:23,000 Speaker 1: I guess. My question is how flexible are these giant 298 00:20:23,080 --> 00:20:27,440 Speaker 1: container ships. There are a couple of things that make 299 00:20:27,560 --> 00:20:32,880 Speaker 1: them not very flexible. One is that these big ships 300 00:20:33,800 --> 00:20:39,200 Speaker 1: don't necessarily fit at all ports on some routes, they're 301 00:20:39,240 --> 00:20:42,680 Speaker 1: simply not enough demand to handle a ship that can 302 00:20:42,760 --> 00:20:46,399 Speaker 1: carry ten thousand containers, or perhaps the harbor in some 303 00:20:46,440 --> 00:20:50,320 Speaker 1: places isn't deep enough to handle that ship, and so 304 00:20:50,400 --> 00:20:53,040 Speaker 1: a ship that can serve one route may not be 305 00:20:53,080 --> 00:20:57,439 Speaker 1: able to serve another route profitably. The other factor to 306 00:20:57,520 --> 00:21:01,919 Speaker 1: understand here is that no one in the container shipping 307 00:21:01,920 --> 00:21:07,119 Speaker 1: business sends out a ship. When a ship line is 308 00:21:07,240 --> 00:21:12,240 Speaker 1: offering a route, it's offering a regular service. Okay, So 309 00:21:12,720 --> 00:21:17,000 Speaker 1: every Tuesday, to take an example, there will be a 310 00:21:17,160 --> 00:21:22,080 Speaker 1: ship that leaves ching Dao in China and it will 311 00:21:22,160 --> 00:21:26,200 Speaker 1: stop in this place, and it will stop in that place, 312 00:21:26,320 --> 00:21:29,920 Speaker 1: and it will stop in Singapore so many days later, 313 00:21:30,000 --> 00:21:34,159 Speaker 1: and it will stop in Umhis Sirius in Spain so 314 00:21:34,240 --> 00:21:37,639 Speaker 1: many days later, and eventually, so many days later, it 315 00:21:37,640 --> 00:21:40,040 Speaker 1: will end up in Rotterdam. And it will do that 316 00:21:40,119 --> 00:21:42,800 Speaker 1: on the same day every week, and it will be 317 00:21:43,200 --> 00:21:46,600 Speaker 1: a ship of the same design every week in most cases. 318 00:21:47,320 --> 00:21:51,080 Speaker 1: So this is called a string in the shipping industry. 319 00:21:51,520 --> 00:21:56,400 Speaker 1: And so if you have a ship that sales between 320 00:21:57,080 --> 00:22:00,679 Speaker 1: China and Rotterdam and my example, every Tuesday, you're probably 321 00:22:00,720 --> 00:22:04,600 Speaker 1: going to have seven or eight versions of the same 322 00:22:04,640 --> 00:22:08,880 Speaker 1: ship about the same size ready to go on that date, 323 00:22:08,960 --> 00:22:11,680 Speaker 1: and you're trying to keep on the schedule, which means 324 00:22:12,440 --> 00:22:14,880 Speaker 1: if one or two or three of them are out 325 00:22:14,880 --> 00:22:17,240 Speaker 1: of position, it takes a while to get back on 326 00:22:17,320 --> 00:22:20,960 Speaker 1: that regular rotation. You can't just put any old ship 327 00:22:21,040 --> 00:22:24,720 Speaker 1: on that run, because that's not what the traffic requires. 328 00:22:24,960 --> 00:22:30,439 Speaker 1: Coordinating these is quite a task. Typically these days, ships 329 00:22:30,480 --> 00:22:32,760 Speaker 1: are built with the idea that they will be used 330 00:22:32,760 --> 00:22:36,800 Speaker 1: on a specific route, uh and and so you don't 331 00:22:36,840 --> 00:22:41,439 Speaker 1: want to just plug them in any place. So you know, 332 00:22:41,480 --> 00:22:43,200 Speaker 1: there's sort of I guess a couple of things going 333 00:22:43,240 --> 00:22:47,360 Speaker 1: on here at once. There's the acute disruption that we're 334 00:22:47,359 --> 00:22:50,480 Speaker 1: still working through. I mean, the coronavirus crisis isn't over. 335 00:22:51,119 --> 00:22:54,880 Speaker 1: Basically nobody's economy has really returned to normal, so we're 336 00:22:54,920 --> 00:22:59,040 Speaker 1: dealing with the aftermath of that, and that's obviously snarled 337 00:22:59,480 --> 00:23:04,440 Speaker 1: shipping and uh scrambled the situation. What about I mean, 338 00:23:04,560 --> 00:23:08,040 Speaker 1: is there any prospect long term for there to actually 339 00:23:08,160 --> 00:23:13,960 Speaker 1: be a sustained capacity shortage if the economies around the world, 340 00:23:14,080 --> 00:23:16,520 Speaker 1: you know, you have like lots of governments doing fiscal 341 00:23:16,520 --> 00:23:19,920 Speaker 1: stimulus and they're going to need supplies and so forth, 342 00:23:19,920 --> 00:23:21,640 Speaker 1: that if we have this sort of boom, I mean, 343 00:23:22,320 --> 00:23:26,960 Speaker 1: perhaps could we have a sustained capacity constraint the likes 344 00:23:27,040 --> 00:23:30,040 Speaker 1: we haven't seen since prior to the Great Financial Crisis. 345 00:23:32,320 --> 00:23:36,159 Speaker 1: The capacity shortage such as it is, comes from the 346 00:23:36,200 --> 00:23:39,320 Speaker 1: fact that you've really only got these three alliances, and 347 00:23:39,400 --> 00:23:42,520 Speaker 1: so people are not building so many ships now because 348 00:23:42,520 --> 00:23:45,440 Speaker 1: they don't have to worry about their competitors so much. 349 00:23:46,640 --> 00:23:50,199 Speaker 1: I think though in the longer term the concerns are 350 00:23:50,200 --> 00:23:54,480 Speaker 1: actually in the other direction. We had for many, many 351 00:23:54,560 --> 00:23:59,159 Speaker 1: years international trade growing probably twice as fast as the 352 00:23:59,160 --> 00:24:04,919 Speaker 1: world economy since two thousand eight, international trade has grown 353 00:24:04,960 --> 00:24:07,879 Speaker 1: more slowly than the world economy. And I think that's 354 00:24:07,880 --> 00:24:10,960 Speaker 1: going to continue, and the growth of international trade is 355 00:24:11,000 --> 00:24:14,920 Speaker 1: going to slow down even more. And and that means 356 00:24:15,040 --> 00:24:21,280 Speaker 1: that we have the prospect of overcapacity returning as the 357 00:24:21,400 --> 00:24:24,000 Speaker 1: pandemic receipts. You know, I think that there are a 358 00:24:24,040 --> 00:24:27,520 Speaker 1: couple of reasons for this in the long run. One 359 00:24:27,640 --> 00:24:32,359 Speaker 1: is that you've got demographics right in a world in 360 00:24:32,400 --> 00:24:36,080 Speaker 1: which most countries except in Africa, are filling up with 361 00:24:36,200 --> 00:24:40,719 Speaker 1: older people. There's less demand for physical products. People are 362 00:24:40,760 --> 00:24:44,160 Speaker 1: spending more and more of their money on services, and 363 00:24:44,880 --> 00:24:47,119 Speaker 1: I think that that's really just going to affect the 364 00:24:47,160 --> 00:24:51,400 Speaker 1: amount of trade in physical goods over the long run. 365 00:24:52,400 --> 00:24:57,840 Speaker 1: You're seeing a lot of manufacturers and retailers change their 366 00:24:57,880 --> 00:25:01,520 Speaker 1: sourcing decisions in way that will affect the demand for 367 00:25:01,640 --> 00:25:06,000 Speaker 1: container shipping. One of the things I write about is 368 00:25:06,320 --> 00:25:10,320 Speaker 1: that there was a lot of misjudgment of risk in globalization. 369 00:25:10,680 --> 00:25:14,280 Speaker 1: A lot of companies looked at production costs and transport 370 00:25:14,359 --> 00:25:18,040 Speaker 1: costs and said, we've got to make these things in China. 371 00:25:18,920 --> 00:25:21,440 Speaker 1: People have now taken risk on board, you know, they 372 00:25:21,520 --> 00:25:24,720 Speaker 1: understand that risk has to be factored into their calculations, 373 00:25:24,760 --> 00:25:27,880 Speaker 1: because if the good zone arrive on time, it can 374 00:25:27,960 --> 00:25:30,480 Speaker 1: really be very bad for the bottom line, and it 375 00:25:30,520 --> 00:25:33,840 Speaker 1: can harm their reputation in the long term. You've had 376 00:25:33,880 --> 00:25:38,520 Speaker 1: many companies now starting to diversifying. There's a lot of 377 00:25:38,520 --> 00:25:42,960 Speaker 1: talk in the States about reshoring. It's not exactly re shoring, though. 378 00:25:43,359 --> 00:25:48,760 Speaker 1: What's going on is rather redundancy. Firms are concerned about 379 00:25:49,160 --> 00:25:53,280 Speaker 1: making a product only in one place, being reliant only 380 00:25:53,280 --> 00:25:55,840 Speaker 1: on one supplier, or on one ship line, or on 381 00:25:55,840 --> 00:26:00,399 Speaker 1: one board, and so people are looking for options in 382 00:26:00,480 --> 00:26:04,480 Speaker 1: case something goes wrong somewhere. This raises production costs a 383 00:26:04,480 --> 00:26:09,840 Speaker 1: little bit, but provides better insurance effectively in case there's 384 00:26:09,840 --> 00:26:13,760 Speaker 1: a fire, a hurricane, a strike, ship sinks, whatever the 385 00:26:14,440 --> 00:26:17,240 Speaker 1: issue is. And then the other big thing you've got 386 00:26:17,280 --> 00:26:22,240 Speaker 1: obviously coming along is a concern about climate change, and 387 00:26:22,359 --> 00:26:27,760 Speaker 1: as the costs of making production and transportation more sustainable 388 00:26:28,080 --> 00:26:30,560 Speaker 1: but begin to be felt, that's going to raise the 389 00:26:30,600 --> 00:26:35,040 Speaker 1: cost of international shipping and domestic freight transportation and is 390 00:26:35,040 --> 00:26:37,760 Speaker 1: going to make these long distance value chains more costly 391 00:26:37,800 --> 00:26:40,960 Speaker 1: to operate. I have a dumb question, but what's the 392 00:26:41,119 --> 00:26:45,399 Speaker 1: downside of over capacity of mega ships? So you know, 393 00:26:45,440 --> 00:26:49,160 Speaker 1: I could see it maybe hitting profits of the big 394 00:26:49,160 --> 00:26:52,320 Speaker 1: three shipping companies. But why is that bad for the 395 00:26:52,400 --> 00:26:58,240 Speaker 1: overall global economy? Well, I wouldn't say necessarily that it's 396 00:26:58,320 --> 00:27:02,240 Speaker 1: bad for the overall global economy, but it's really bad 397 00:27:02,440 --> 00:27:08,160 Speaker 1: for a ship lines for sure. But be these mega 398 00:27:08,240 --> 00:27:13,919 Speaker 1: ships have generally fouled up the transportation system. Okay, you 399 00:27:14,040 --> 00:27:18,680 Speaker 1: actually have fewer ships calling at most ports today than 400 00:27:18,760 --> 00:27:22,240 Speaker 1: you used to have. They're much bigger, and so think 401 00:27:22,280 --> 00:27:25,359 Speaker 1: of what this does to the operation of the port. 402 00:27:25,880 --> 00:27:28,560 Speaker 1: You don't have a smooth flow of cargo going through 403 00:27:28,560 --> 00:27:32,200 Speaker 1: the port. Now you've got nothing happening in the port. 404 00:27:32,240 --> 00:27:35,520 Speaker 1: It's dead today, and then tomorrow a ship shows up 405 00:27:35,560 --> 00:27:38,960 Speaker 1: and it wants to unload three thousand containers in your port. 406 00:27:39,800 --> 00:27:41,360 Speaker 1: What do you do with this? How do you get 407 00:27:41,400 --> 00:27:44,840 Speaker 1: it unloaded? Where do you put the containers? One thing 408 00:27:44,880 --> 00:27:48,800 Speaker 1: that's happened is that ships spend more time in port, 409 00:27:48,880 --> 00:27:51,640 Speaker 1: which is very wasteful because it just takes more time 410 00:27:51,680 --> 00:27:56,119 Speaker 1: to get so many containers on and off. The trucks 411 00:27:56,160 --> 00:27:59,440 Speaker 1: are lined up at the gate because there's so many 412 00:27:59,440 --> 00:28:02,520 Speaker 1: containers to bring in to send out on these ships 413 00:28:02,520 --> 00:28:07,040 Speaker 1: are so many containers to deliver the railroads can't handle 414 00:28:07,720 --> 00:28:11,680 Speaker 1: this sudden flood of containers, so you have the cargoes 415 00:28:11,720 --> 00:28:14,680 Speaker 1: sitting around longer before it gets removed from the port. 416 00:28:15,480 --> 00:28:18,959 Speaker 1: All of these things have tended to make transit times 417 00:28:19,040 --> 00:28:24,480 Speaker 1: longer uh and have made it harder for shippers to 418 00:28:24,680 --> 00:28:26,760 Speaker 1: get their freight where it's supposed to be on deadline, 419 00:28:27,040 --> 00:28:30,280 Speaker 1: and that's bad for everybody. Who are the three big 420 00:28:30,320 --> 00:28:34,439 Speaker 1: players right now in shipping and is there hold on 421 00:28:34,480 --> 00:28:37,760 Speaker 1: the industry? Like is it sustainable? Do you expect in 422 00:28:37,880 --> 00:28:39,600 Speaker 1: ten years from now it will probably just be those 423 00:28:39,640 --> 00:28:46,560 Speaker 1: three big players. Still, the big players have formed what 424 00:28:46,720 --> 00:28:53,000 Speaker 1: are called alliances. So these alliances have kind of squeezed 425 00:28:53,080 --> 00:28:56,440 Speaker 1: most of the smaller players out of the business. One 426 00:28:56,480 --> 00:29:02,200 Speaker 1: alliance involves IMMERSK, the Danish company, and Mediterranean Shipping, which 427 00:29:02,240 --> 00:29:06,040 Speaker 1: is based in Switzerland, and between them those two companies 428 00:29:06,080 --> 00:29:08,600 Speaker 1: have a little bit over a third of all of 429 00:29:08,640 --> 00:29:13,040 Speaker 1: the container shipping in the world. There's another alliance that 430 00:29:13,200 --> 00:29:17,880 Speaker 1: has um Costco, the China Ocean Shipping Company, the French 431 00:29:17,920 --> 00:29:21,280 Speaker 1: company m c M a c GM, and Evergreen, a 432 00:29:21,360 --> 00:29:26,200 Speaker 1: Taiwanese company, and it has about of the world's shipping. 433 00:29:26,760 --> 00:29:30,400 Speaker 1: And then there's another alliance that has the German company 434 00:29:30,440 --> 00:29:34,760 Speaker 1: HAPAG Lloyd and the Japanese lines and the Korean line, 435 00:29:35,440 --> 00:29:39,120 Speaker 1: and it has about so if you put those three 436 00:29:39,280 --> 00:29:44,280 Speaker 1: alliances together, their market share and container shipping is close 437 00:29:44,320 --> 00:29:49,160 Speaker 1: to Will those alliances stay together. At the moment, the 438 00:29:49,200 --> 00:29:52,480 Speaker 1: system looks pretty stable. You can imagine that at some 439 00:29:52,520 --> 00:29:54,840 Speaker 1: point a government will step in and say you, guys 440 00:29:54,880 --> 00:29:58,920 Speaker 1: can no longer have this alliance. It's anti competitive. But 441 00:29:59,040 --> 00:30:17,560 Speaker 1: so far that hasn't had them. Is there anything that 442 00:30:17,600 --> 00:30:21,680 Speaker 1: shipping companies could do right now to unsnarl traffic and 443 00:30:21,840 --> 00:30:26,640 Speaker 1: get it going again? A part of the snarling of 444 00:30:26,720 --> 00:30:32,600 Speaker 1: traffic is due to things beyond their control. For example, 445 00:30:33,200 --> 00:30:36,840 Speaker 1: traffic into and out of the UK is totally snarled 446 00:30:36,920 --> 00:30:40,760 Speaker 1: for reasons related more to Brexit than to problems with 447 00:30:40,880 --> 00:30:46,240 Speaker 1: container shipping. I think that in general, ship lines have 448 00:30:46,800 --> 00:30:51,680 Speaker 1: decided that these giant ships were not a brilliant idea, 449 00:30:52,240 --> 00:30:56,719 Speaker 1: and so we're seeing now that the ship lines are 450 00:30:56,760 --> 00:31:00,160 Speaker 1: interested in building vessels that were a bit smaller. You know, 451 00:31:00,240 --> 00:31:04,480 Speaker 1: as I mentioned earlier, the average ship size went from 452 00:31:04,520 --> 00:31:08,760 Speaker 1: carrying the equivalent of containers to the equivalent of twelve 453 00:31:08,760 --> 00:31:12,360 Speaker 1: thousand truck size containers in the in the span of 454 00:31:13,040 --> 00:31:16,720 Speaker 1: a dozen years. But I think the ship lines have 455 00:31:16,840 --> 00:31:22,560 Speaker 1: discovered that these ships that have twenty thousand, two thousand 456 00:31:22,640 --> 00:31:25,280 Speaker 1: t e u s okay divide by two for the 457 00:31:25,360 --> 00:31:29,720 Speaker 1: number of containers, that those ships really don't work very well. 458 00:31:30,160 --> 00:31:32,400 Speaker 1: It takes too long to load them, it takes too 459 00:31:32,440 --> 00:31:35,040 Speaker 1: long to unload them, there are too many places they 460 00:31:35,080 --> 00:31:38,719 Speaker 1: can't go. It's too often the case that they're not needed. 461 00:31:39,280 --> 00:31:43,280 Speaker 1: And so the ship lines are interested in building vessels 462 00:31:43,280 --> 00:31:46,840 Speaker 1: that are somewhat smaller than that. Now, as that happens, 463 00:31:46,880 --> 00:31:49,360 Speaker 1: I think that may resolve a lot of these problems 464 00:31:49,400 --> 00:31:52,760 Speaker 1: that are caused by these ships just being too damn big. 465 00:31:53,400 --> 00:31:57,560 Speaker 1: Is that just the bigness? Was that just unanticipation of 466 00:31:58,520 --> 00:32:01,600 Speaker 1: a sort of never ending in world trade such as 467 00:32:01,680 --> 00:32:07,040 Speaker 1: we saw pre grade financial crisis, Like had that vision materialized, 468 00:32:07,120 --> 00:32:11,000 Speaker 1: had that continued, had the so called bricks got bigger 469 00:32:11,000 --> 00:32:13,560 Speaker 1: and bigger and the commodity boom gone on, would that 470 00:32:13,640 --> 00:32:15,360 Speaker 1: have made sense? And it was just that was a 471 00:32:15,400 --> 00:32:18,840 Speaker 1: different world, and now the equipment build for that world 472 00:32:18,880 --> 00:32:23,560 Speaker 1: and making an increasingly less sense. The slump in the 473 00:32:23,600 --> 00:32:28,240 Speaker 1: growth of trade wasn't really the only factor here. Ship lines, 474 00:32:28,320 --> 00:32:33,440 Speaker 1: like companies in many other industries have relentlessly pursued economies 475 00:32:33,480 --> 00:32:37,200 Speaker 1: of scale. Bigger was better, and it was true. When 476 00:32:37,240 --> 00:32:40,120 Speaker 1: you could build a ship that could carry three thousand 477 00:32:40,120 --> 00:32:43,760 Speaker 1: containers instead of two thousand containers, the costs per container 478 00:32:43,880 --> 00:32:46,240 Speaker 1: dropped a lot. And when you could build a ship 479 00:32:46,280 --> 00:32:49,480 Speaker 1: that could carry ten rather than five, the cost per 480 00:32:49,520 --> 00:32:55,040 Speaker 1: container was much lower. So ship lines were aggressively pursuing 481 00:32:55,040 --> 00:32:58,560 Speaker 1: economies of scale. What they didn't count on was that 482 00:32:58,640 --> 00:33:01,880 Speaker 1: at some point the hstles would get so big that 483 00:33:02,000 --> 00:33:05,680 Speaker 1: diseconomies of scale would set in. And that's what's happened 484 00:33:05,680 --> 00:33:10,560 Speaker 1: in shipping. The point at which ships got built beyond 485 00:33:10,720 --> 00:33:14,920 Speaker 1: perhaps seventeen or eighteen thousand tu s was the point 486 00:33:14,920 --> 00:33:17,440 Speaker 1: at which they just got too big, and that's when 487 00:33:17,440 --> 00:33:20,200 Speaker 1: you started to have this confusion in the ports. That's 488 00:33:20,200 --> 00:33:23,360 Speaker 1: when you started to have these delays in shipping. That's 489 00:33:23,400 --> 00:33:26,880 Speaker 1: when you start to have h the the entire industry 490 00:33:26,960 --> 00:33:32,480 Speaker 1: become less reliable, and the diminished reliability is one of 491 00:33:32,480 --> 00:33:37,520 Speaker 1: the things that is leading manufacturers and retailers to have 492 00:33:38,040 --> 00:33:41,920 Speaker 1: a new sourcing pattern, to make their products in different places, 493 00:33:41,960 --> 00:33:46,920 Speaker 1: and to have redundant value chains. Size isn't everything, and 494 00:33:47,080 --> 00:33:49,880 Speaker 1: many of the ship lines mistakenly thought that it was 495 00:33:50,640 --> 00:33:54,520 Speaker 1: there any other sort of key idea, mark that you 496 00:33:54,560 --> 00:33:56,680 Speaker 1: think we're sort of missing or that would help us 497 00:33:56,880 --> 00:34:01,760 Speaker 1: understand the current situation. There is a lot of concern 498 00:34:01,920 --> 00:34:06,600 Speaker 1: now about shortages of containers and shortages of chassisas and 499 00:34:06,680 --> 00:34:10,040 Speaker 1: that sort of thing. In general. Part of this is 500 00:34:10,080 --> 00:34:11,960 Speaker 1: that the ship lines have gotten out of that business 501 00:34:11,960 --> 00:34:16,520 Speaker 1: and left it to other people to to to deal with. Yeah, 502 00:34:16,760 --> 00:34:21,839 Speaker 1: there is a huge amount of of confusion. And let 503 00:34:21,840 --> 00:34:26,320 Speaker 1: me put this way, international trade after all these years, 504 00:34:26,360 --> 00:34:31,120 Speaker 1: still doesn't work very smoothly. There are still lots and 505 00:34:31,239 --> 00:34:34,680 Speaker 1: lots of manual steps in the process of arranging a shipment. 506 00:34:35,200 --> 00:34:39,080 Speaker 1: There are still lots and lots of unexpected delays, and 507 00:34:39,080 --> 00:34:41,799 Speaker 1: and this situation really hasn't gotten better in recent years. 508 00:34:42,680 --> 00:34:44,200 Speaker 1: You would have thought that we'd be better at it 509 00:34:44,239 --> 00:34:47,760 Speaker 1: by you would think so. What happens in a system 510 00:34:47,920 --> 00:34:51,720 Speaker 1: like we've got in shipping is that the ship lines 511 00:34:52,200 --> 00:34:56,560 Speaker 1: built ships that they thought were best for their own needs. 512 00:34:57,880 --> 00:35:02,600 Speaker 1: They didn't really give much consideration shan to the system. 513 00:35:02,640 --> 00:35:07,200 Speaker 1: And the system includes the container terminals in the ports. 514 00:35:07,280 --> 00:35:11,560 Speaker 1: It concerns the ports themselves, It concerns the railroads that 515 00:35:11,600 --> 00:35:13,719 Speaker 1: pick up and deliver to the ports. It concerns the 516 00:35:13,760 --> 00:35:16,680 Speaker 1: truck lines that pick up and deliver to the ports, 517 00:35:16,719 --> 00:35:19,960 Speaker 1: and various other players in the business, the companies that 518 00:35:20,040 --> 00:35:24,600 Speaker 1: provide containers, the companies that provide the chassis that trucks use. 519 00:35:25,080 --> 00:35:28,399 Speaker 1: All of those folks are players in this ecosystem. And 520 00:35:28,640 --> 00:35:32,960 Speaker 1: what was most efficient for the ship lines alone hasn't 521 00:35:32,960 --> 00:35:35,600 Speaker 1: been most efficient for this whole system. It's really made 522 00:35:35,600 --> 00:35:40,319 Speaker 1: it less efficient over time. Well, Mark, that was a 523 00:35:40,400 --> 00:35:44,560 Speaker 1: fantastic conversation, and I'm always grateful for the opportunity to 524 00:35:44,600 --> 00:35:47,360 Speaker 1: talk about shipping. And I don't know, part of me 525 00:35:47,440 --> 00:35:51,840 Speaker 1: I understand it's still kind of crazy that global shipping 526 00:35:51,920 --> 00:35:54,680 Speaker 1: isn't as smooth as you might think it would be 527 00:35:54,760 --> 00:35:57,600 Speaker 1: given the amount of global trade that we currently do. 528 00:35:57,880 --> 00:36:01,320 Speaker 1: But part of me also likes the romance of having, 529 00:36:01,560 --> 00:36:04,399 Speaker 1: you know, a system that's very physically based where you're 530 00:36:04,440 --> 00:36:07,600 Speaker 1: moving goods, uh, you know, in these big packages and 531 00:36:07,600 --> 00:36:09,239 Speaker 1: you can kind of see the flow of goods, you 532 00:36:09,280 --> 00:36:12,440 Speaker 1: can see them unloaded up ports. I don't know, I 533 00:36:12,520 --> 00:36:15,040 Speaker 1: kind of like that in the modern economy. It's nice 534 00:36:15,040 --> 00:36:17,600 Speaker 1: that there's something still analys Do you recommend everyone at 535 00:36:17,680 --> 00:36:20,399 Speaker 1: least do that one to take a global ship as 536 00:36:20,440 --> 00:36:23,640 Speaker 1: a as a passenger? Is that a fun experience? Are 537 00:36:23,719 --> 00:36:26,040 Speaker 1: you asking me? Yeah, I will tell you the truth. 538 00:36:26,080 --> 00:36:29,080 Speaker 1: I've not done that. Oh oh sorry, I thought I 539 00:36:29,080 --> 00:36:31,640 Speaker 1: thought Tracy said that you did. No, I was not 540 00:36:31,640 --> 00:36:34,920 Speaker 1: going to contradict Tracy on the air. No, I have 541 00:36:35,040 --> 00:36:39,800 Speaker 1: not done that. Uh. And you know most of what happens. 542 00:36:39,880 --> 00:36:42,520 Speaker 1: There have been several people have tried to write books 543 00:36:42,560 --> 00:36:47,040 Speaker 1: about the experience of traveling on a container ship, and 544 00:36:47,600 --> 00:36:53,479 Speaker 1: they're not very good books because nothing happens. Yeah. Well, 545 00:36:53,960 --> 00:36:57,120 Speaker 1: you know what. One of the books turned out to 546 00:36:57,160 --> 00:37:00,640 Speaker 1: be an interesting book because the author wrote about things 547 00:37:00,640 --> 00:37:02,640 Speaker 1: that didn't happen on the container ship that she was 548 00:37:02,680 --> 00:37:05,360 Speaker 1: traveling on, but she had heard happened on other container ships. 549 00:37:06,800 --> 00:37:08,440 Speaker 1: But I mean, what do you do? Look? Was that 550 00:37:08,480 --> 00:37:11,160 Speaker 1: because I think I'm I think I was thinking about 551 00:37:11,160 --> 00:37:14,000 Speaker 1: a different book where it starts out with the author 552 00:37:14,200 --> 00:37:18,720 Speaker 1: taking like this big container ship journey. That Rose George 553 00:37:18,719 --> 00:37:21,200 Speaker 1: wrote a book on container shipping a few years a 554 00:37:21,239 --> 00:37:24,000 Speaker 1: couple of years after I did. Yeah, that must be it. 555 00:37:24,200 --> 00:37:27,160 Speaker 1: I think I've read both of them. And Rose George's 556 00:37:27,200 --> 00:37:30,799 Speaker 1: book was called in the US Everything, it had a 557 00:37:30,800 --> 00:37:34,239 Speaker 1: different name. In the UK and what she found and 558 00:37:34,360 --> 00:37:36,360 Speaker 1: it was it was a fun book to read. But 559 00:37:36,640 --> 00:37:38,840 Speaker 1: her conceit was that she was going to write about 560 00:37:38,840 --> 00:37:41,880 Speaker 1: what went on during this voyage and the book wasn't 561 00:37:42,040 --> 00:37:45,800 Speaker 1: successful in that sense because nothing went on during the voyage, 562 00:37:46,840 --> 00:37:49,479 Speaker 1: which is typical of you know. So she was talking 563 00:37:49,480 --> 00:37:52,920 Speaker 1: about piracy that had occurred on other ships and problems 564 00:37:52,920 --> 00:37:56,400 Speaker 1: with the treatment of workers on other ships. A ship 565 00:37:56,440 --> 00:38:01,480 Speaker 1: from Shanghai to Los Angeles, it takes the days somewhere 566 00:38:02,040 --> 00:38:05,080 Speaker 1: U sixteen seventeen days. It actually takes a couple of 567 00:38:05,160 --> 00:38:08,840 Speaker 1: days longer than it did twenty years ago. The price 568 00:38:08,880 --> 00:38:12,120 Speaker 1: of fuel is one of the most expensive costs in shipping, 569 00:38:12,920 --> 00:38:18,160 Speaker 1: and so initially the ship lines slowed down their vessels 570 00:38:18,760 --> 00:38:20,920 Speaker 1: when the price of fuel went up. This was called 571 00:38:21,000 --> 00:38:26,000 Speaker 1: slow steaming and UH the idea was that they would 572 00:38:26,000 --> 00:38:31,720 Speaker 1: operate more slowly to hold down the total cost of fuel. UH. 573 00:38:31,760 --> 00:38:35,440 Speaker 1: Then newer generations of vessels were built, like these ships 574 00:38:35,480 --> 00:38:40,160 Speaker 1: that carry EU, and they were built to steam slowly, 575 00:38:40,640 --> 00:38:44,040 Speaker 1: so they can't speed up. And one of the reasons 576 00:38:44,160 --> 00:38:47,600 Speaker 1: for these delays is that it's harder now than it 577 00:38:47,719 --> 00:38:51,560 Speaker 1: used to be for a ship to make up time. Okay, 578 00:38:51,560 --> 00:38:53,920 Speaker 1: It used to be that a ship would sail let's say, 579 00:38:53,920 --> 00:38:57,400 Speaker 1: an average of twenty one knots, but if it got behind, 580 00:38:57,440 --> 00:38:59,399 Speaker 1: it could sail it, it could steam it twenty four 581 00:38:59,440 --> 00:39:02,680 Speaker 1: knots for a while to get back on schedule. The 582 00:39:02,719 --> 00:39:06,120 Speaker 1: ships can't do that anymore. They're typically sailing at seventeen 583 00:39:06,200 --> 00:39:09,600 Speaker 1: knots and they can't go much faster than that, so 584 00:39:09,760 --> 00:39:12,799 Speaker 1: once they're behind, there behind. I'm glad we brought this 585 00:39:12,920 --> 00:39:15,520 Speaker 1: up because I it really is painting this picture of 586 00:39:16,160 --> 00:39:21,040 Speaker 1: global trade is a complicated problem and why even after 587 00:39:21,080 --> 00:39:24,479 Speaker 1: all these years, it's not an efficient solved one, Because 588 00:39:24,520 --> 00:39:27,000 Speaker 1: even something like that, it makes total sense the trajectory. 589 00:39:27,320 --> 00:39:29,360 Speaker 1: They concerned about fuel costs, but then you end up 590 00:39:29,360 --> 00:39:34,719 Speaker 1: building these boats that can't accelerate. Super interesting and sort 591 00:39:34,719 --> 00:39:37,960 Speaker 1: of just really sort of drives home how how tough 592 00:39:38,000 --> 00:39:40,839 Speaker 1: this whole thing is, and probably helps explain why these 593 00:39:40,840 --> 00:39:42,840 Speaker 1: prices are so volatile, because I mean, I know, like 594 00:39:42,880 --> 00:39:44,799 Speaker 1: when I pull up these charts, I mean they just 595 00:39:44,960 --> 00:39:48,839 Speaker 1: swing back and forth all the time. Yeah. One thing 596 00:39:49,080 --> 00:39:52,359 Speaker 1: that hasn't come to the four yet because interest rates 597 00:39:52,400 --> 00:39:56,000 Speaker 1: are very low, but it will is that this drives 598 00:39:56,120 --> 00:40:01,240 Speaker 1: up inventory costs. Uh, you think about time you're goods 599 00:40:01,280 --> 00:40:04,759 Speaker 1: spend on the ship, right, that's those are goods in inventory, 600 00:40:05,200 --> 00:40:08,600 Speaker 1: and so if it's taking you three days longer to 601 00:40:08,680 --> 00:40:14,160 Speaker 1: send your stuff, then your cost is effectively higher. Well, 602 00:40:14,239 --> 00:40:18,400 Speaker 1: right now, with money going out for free, that's not 603 00:40:18,520 --> 00:40:22,600 Speaker 1: really a big deal. But if interest rates become significant again, 604 00:40:23,560 --> 00:40:26,480 Speaker 1: this is will be a cost burden. It'll be costly 605 00:40:26,520 --> 00:40:30,000 Speaker 1: to have their their goods sitting on these vessels. All right, Well, Mark, 606 00:40:30,080 --> 00:40:32,200 Speaker 1: I think we're gonna have to leave it there. But 607 00:40:32,840 --> 00:40:36,520 Speaker 1: absolutely a great conversation. Yeah, I really appreciate it, and 608 00:40:36,560 --> 00:40:38,319 Speaker 1: you've laid it out very clear. Well, I've enjoyed it. 609 00:40:38,760 --> 00:40:41,319 Speaker 1: I've enjoyed it. Thank you very much for having me on. 610 00:40:41,840 --> 00:41:01,960 Speaker 1: Thanks Mark. I can't believe if I mixed up the 611 00:41:02,000 --> 00:41:04,919 Speaker 1: intros of these two books on shipping that I've read, 612 00:41:04,920 --> 00:41:06,840 Speaker 1: but yeah, one of them started with someone going on 613 00:41:06,880 --> 00:41:09,680 Speaker 1: an actual container journey and the other one didn't. Both 614 00:41:09,719 --> 00:41:12,799 Speaker 1: are are pretty good, although I mean Mark laid out 615 00:41:12,840 --> 00:41:17,200 Speaker 1: his thesis in a really great, clear and concise way, 616 00:41:17,400 --> 00:41:20,520 Speaker 1: and I think he was very good at illustrating why 617 00:41:21,080 --> 00:41:24,920 Speaker 1: global trade the shipping industry isn't as flexible or as 618 00:41:24,960 --> 00:41:27,640 Speaker 1: efficient as you might think it should be at this 619 00:41:27,719 --> 00:41:30,879 Speaker 1: point in time. Yeah, absolutely, I mean, like I would 620 00:41:30,880 --> 00:41:33,400 Speaker 1: not have guessed that at all. Like I, you know, 621 00:41:33,440 --> 00:41:37,640 Speaker 1: I sort of had some intuition that prices were volatile 622 00:41:37,760 --> 00:41:43,600 Speaker 1: because okay, you you can't just supply that fast relative 623 00:41:43,680 --> 00:41:45,680 Speaker 1: to demand, and so you could have a modest hit 624 00:41:45,760 --> 00:41:49,200 Speaker 1: to demand and then suddenly of a glut and vice versa. 625 00:41:49,640 --> 00:41:52,880 Speaker 1: But then adding in all the different layers of why 626 00:41:52,960 --> 00:41:56,879 Speaker 1: it's so complicated and delays at the ports and all 627 00:41:56,920 --> 00:41:58,719 Speaker 1: that kind of stuff, you really started to see and 628 00:41:58,840 --> 00:42:00,680 Speaker 1: you know, anyone should just sort of look up some 629 00:42:00,760 --> 00:42:03,799 Speaker 1: of these great index charts and you can see they 630 00:42:03,840 --> 00:42:06,399 Speaker 1: really like swing wildly in a way that very few 631 00:42:06,400 --> 00:42:09,160 Speaker 1: things do. And I think he laid it out very well. 632 00:42:09,360 --> 00:42:12,319 Speaker 1: And of course, right now all of these charts are 633 00:42:12,360 --> 00:42:16,640 Speaker 1: basically you know, surgery. I guess the other question is 634 00:42:16,640 --> 00:42:20,440 Speaker 1: whether or not the current experience, the gridlock and the 635 00:42:20,480 --> 00:42:23,799 Speaker 1: snarling that we've described, whether or not that does leave 636 00:42:24,239 --> 00:42:28,040 Speaker 1: lead to a reconsideration for the shipping industry about how 637 00:42:28,040 --> 00:42:31,040 Speaker 1: they do things. So Mark mentioned this idea that everyone's 638 00:42:31,080 --> 00:42:33,920 Speaker 1: been obsessed with mega ships because they were more efficient 639 00:42:34,080 --> 00:42:37,640 Speaker 1: for the shipping companies themselves, but they don't actually work 640 00:42:37,680 --> 00:42:40,400 Speaker 1: that well for a lot of the customers, and he 641 00:42:40,520 --> 00:42:43,080 Speaker 1: made a pretty convincing argument about why they might not 642 00:42:43,320 --> 00:42:47,920 Speaker 1: work well in a sort of post coronavirus, post globalization 643 00:42:48,239 --> 00:42:52,520 Speaker 1: trade environment where things become a lot more localized. People 644 00:42:52,560 --> 00:42:55,160 Speaker 1: need to be more nimble, people are worried about supply 645 00:42:55,239 --> 00:43:00,239 Speaker 1: chain vulnerability. You can see an argument for going smaller. Yeah, 646 00:43:00,320 --> 00:43:01,839 Speaker 1: you know, we didn't get into it, but I once 647 00:43:02,000 --> 00:43:05,640 Speaker 1: watched a reality TV show on like Discover channel about 648 00:43:05,760 --> 00:43:11,600 Speaker 1: ship building that also seems insanely complicated and really, you know, 649 00:43:11,719 --> 00:43:14,600 Speaker 1: really difficult, and not many people like actually know how 650 00:43:14,640 --> 00:43:18,399 Speaker 1: to like engineer the process of a big building a ship. 651 00:43:18,480 --> 00:43:21,400 Speaker 1: So we didn't get into that. But another aspect of 652 00:43:21,400 --> 00:43:24,640 Speaker 1: this that seems very hard. Yeah, Actually, that reminds me 653 00:43:24,760 --> 00:43:27,520 Speaker 1: there's one other really important aspect of this, which is 654 00:43:27,600 --> 00:43:30,680 Speaker 1: that because all these ships are out of position and 655 00:43:30,719 --> 00:43:34,280 Speaker 1: in some cases stuck off the coast of various countries, 656 00:43:34,719 --> 00:43:37,719 Speaker 1: there are people working on the ships who have been 657 00:43:37,719 --> 00:43:40,359 Speaker 1: stuck on them for months at a time, you know, 658 00:43:40,440 --> 00:43:43,840 Speaker 1: in some cases, without medical care, in some cases, without 659 00:43:43,880 --> 00:43:47,560 Speaker 1: being paid, while they have families back at home. That's 660 00:43:47,560 --> 00:43:52,360 Speaker 1: been a humanitarian crisis that we've actually been writing about it. Bloomberg. 661 00:43:52,440 --> 00:43:56,000 Speaker 1: We've done a series on this topic. It also lays 662 00:43:56,000 --> 00:44:00,000 Speaker 1: out some of the problems and issues in getting um 663 00:44:00,080 --> 00:44:03,439 Speaker 1: these ships back into into position. The idea of who 664 00:44:03,480 --> 00:44:07,480 Speaker 1: bears responsibility for the crew and for the vessel itself 665 00:44:07,600 --> 00:44:11,359 Speaker 1: is not as clear cut as you might imagine. But 666 00:44:11,480 --> 00:44:15,440 Speaker 1: if you're interested in this topic, you know, google Seafarers 667 00:44:15,520 --> 00:44:19,799 Speaker 1: and Bloomberg and you'll get some really good stories on this. 668 00:44:19,520 --> 00:44:22,759 Speaker 1: H this issue, all right, uh, and this crisis just 669 00:44:22,840 --> 00:44:25,640 Speaker 1: needs to take Yeah, it's a sad note. Yeah, it's 670 00:44:25,640 --> 00:44:27,279 Speaker 1: a sad note to end on, but you know there 671 00:44:27,360 --> 00:44:31,160 Speaker 1: is a humanitarian cost to global shipping as well. Okay, 672 00:44:31,360 --> 00:44:34,279 Speaker 1: let's leave it there. This has been another episode of 673 00:44:34,320 --> 00:44:37,280 Speaker 1: the All Thoughts Podcast. I'm Tracy Alloway. You can follow 674 00:44:37,320 --> 00:44:41,680 Speaker 1: me on Twitter at Tracy Alloway. I'm Joe Wisn'tal. You 675 00:44:41,680 --> 00:44:45,160 Speaker 1: can follow me on Twitter at the Stalwart. You should 676 00:44:45,200 --> 00:44:49,000 Speaker 1: check out our guest Mark Levinson. Check out his UH books, 677 00:44:49,000 --> 00:44:51,120 Speaker 1: particularly At the Box, as well as his new one 678 00:44:51,239 --> 00:44:55,200 Speaker 1: Outside the Box. Follow our producer Laura Carlson. She's at 679 00:44:55,280 --> 00:44:58,880 Speaker 1: Laura M. Carlson. Follow the Bloomberg head of podcast, Francesca 680 00:44:58,960 --> 00:45:02,000 Speaker 1: Levie at frances Good Today and check out all of 681 00:45:02,040 --> 00:45:06,479 Speaker 1: our podcasts at Bloomberg unto the handle at podcasts. Thanks 682 00:45:06,520 --> 00:45:07,000 Speaker 1: for listening.