Global Trade This Week – Episode 123
What’s going on in Global Trade this Week? Today Trade Geek Pete Mento & Doug Draper of Inland Star Distribution cover:
2:06 -East Coast / West Coast Tug of War
8:02 -Maersk Layoffs - Everyone Calm Down
12:31 -Halftime
20:23 -Talk about Modernizing Rail Corridor between Boston & DC
25:16 -Expansion of Forced Labor Goods?
-
Keenan Brugh 0:00
You're watching Global Trade this Week with Pete Mento and Doug Draper.
Pete Mento 0:10
Hello, everyone, and welcome to another edition of global trade this week. I am Pete mento. Coming to you live with the soundtrack. Doug, we just can't seem to get away from the music. And with me as always, as my co host, definitely the brains in the operation. Doug Draper. Doug, how you doing, buddy?
Doug Draper 0:28
I'm doing good. I appreciate that. I'm not sure about about brains, but I appreciate the comment checks in the mail. So, yeah, it's when I was just looking at a collared shirt. I'm usually in a collared shirt, and you got a baseball cap and the Johnny Johnny Cash black. So that means you got your A game on today? For sure.
Pete Mento 0:46
I do. I've gotta go put a suit on. On attending the healthcare. Healthcare logistics professional. Hold on. I want to say it right, because I am speaking tomorrow, the health and personal care logistics conference. You're going to attend the conference today. I'm going to speak tomorrow. So I do have to dress like an adult here in about an hour or so and go over there and you know, wave the flag, buddy? Yeah, yeah,
Doug Draper 1:12
good. Well, I know, I know, your topic that you're speaking on is something that we spoke about last week or the week before. So? Yeah, the Black Swan. I like your take on it. So yeah,
Pete Mento 1:24
there's no such thing anymore. I've just got a cup of something new.
Doug Draper 1:31
For sure. All right. Well, anyway, I know you're
Pete Mento 1:35
in the
Doug Draper 1:37
alcove of a lobby. So if there's some background noise, then it is what it is. So
Pete Mento 1:41
Doug doesn't always show up when we can, right. Yes. Yes, I am in the coffee room in the lobby in the Talbot. But I'll tell you what, I'm here. Yeah. And I've got my A game, buddy. So let's let's do it.
Doug Draper 1:53
Yeah, well, if need be bring that guy that's making all the noise over into the into the camera shot. And we'll we'll get his take on black swan events. Yeah,
Pete Mento 2:00
we can do that. You can do that, buddy. Yeah. Well, I kicked off. So you go ahead and do the first topic though. All
Doug Draper 2:06
right. All right. So this one is pretty basic. And I'm sure a lot of people have seen the news, but I'm going to refer to it as an East Coast. And a West Coast, tug of war, rap battle as it relates to ports, and ports of entry. So you know, a quick overview right when la Long Beach was congested, crazy, the COVID You know, explosion. Everybody said, Forget this, we're gonna go to the East Coast Panama Canal got busy, all the second tier ports along the southern East east coast, really, excuse me, took a spike, and very beneficial for that geographic area and was a great relief valve. Well, now that the labor strike is over, now that congestion is no longer relevant and doesn't exist there anymore. And with the Panama Canal challenges and the water levels, and you know, the controlled nature of how vessels are moving through that, shocker, everybody thinks LA is the place to be now. So we're seeing a big shift back to to California, which completely makes sense, right? You chased price, which things are ungodly and expensive. Now, as you bring on to the west coast, the labor issues are gone, the congestion is gone. They said the rates are lower Panama Canal. And I think that this statistic I heard on Freightways was that LA and Long Beach is up 14 and 19% respectively, year over year over year in September. So basically volumes are starting to ramp up volumes are static in the other markets. And, you know, it's just, it's all about about costs and efficiencies. So I think that we're gonna see that trend. It's funny that just the pendulum swing. And we've talked about this throughout multiple topics on on on different aspects of the swing that took us through the roaring 20s During COVID is now shifting back, you know, people, companies have gone back to their core competency, and let's just when push comes to shove, let's be laser focused on what we do best. Now that the craziness of the LA port is is done from congestion and labor. Everybody shipped in back back to LA so I don't know how that's gonna affect the East Coast ports. The one thing to wildcard here and we've talked about, maybe this is a black swan event with the water levels of the Panama Canal because you can't sit there in idle waiting to get your product because the worst thing you can have Pete is lack of control when your goods are on a vessel that you cannot access that your bottom line is being impacted. So the transit time to LA is less less Just get it over there and redirect. And so it'll be interesting to see, I think it's going to be a banner year and 2024 for the LA Long Beach market. And it should be interesting. So I was thinking, this wouldn't be appropriate without any this I'm thinking of that Thin Lizzy song that the boys are back in town. And I'm gonna see if Keenan can overlay that, that on intro into this segment, but everybody's coming back to LA baby.
Pete Mento 5:28
I love that song. I wonder if Kevin's even heard it. But I actually love that song. A lot to unpack here about these coasts. So first, and I guess probably most important is the lesson learned. People learned that you can effectively manage supply chains by by using both both coasts, you have a lot of American companies now that have decided to mix and match, try to do some west coast, do some East Coast and I put all their eggs in one basket, but also to be able to manage distribution and inbound logistics from the East Coast. Because the price right now is so low, you know, it's it's it's not as low as using a West Coast port. Don't get me wrong. But it's low enough now where people are seeing that, that constricted lead time from when it gets to the port on the east coast to distribution centers on the East Coast. And the great lesson learned, I think, as the price maintains as low as it is, which looks like it could be happening for a while. It's gonna let people to again continue to mix and match and the competitiveness, the modernization, the amount of automation, just how well the east coast was able to perform, I think surprised a lot of people, they weren't expecting that the ports in New York, Savannah, Florida, you know all of them, we're going to be able to be as competitive. I spent a lot of time in Charleston the last couple of weeks, I was pleasantly surprised to hear how many people do not plan on abandoning their East Coast process. Now you bring up the Panama Canal, which is a great point, but it's not going to last forever. So with any luck, knock on wood, right? Hope not being a strategy. People do continue to use that. But Doug, your your your first comments, were the ones that really are the most important ones. This is a business that follows cost. And if you're able to find a way to use that West Coast feel comfortable without the port strikes over with, you're absolutely going to use every single opportunity you can to shave in some instances, you know, dollars cents out of supply chains, depending on volumes. So the west coast will be coming back. Absolutely.
Doug Draper 7:36
Yeah, yeah. And when you're financing inventory with the way interest rates are now and your product is sitting on a vessel that is stalled or stopped out, you know, the smaller importer of the emerging brands may now have Crusher, right. So get it, get it off the vessel where you have more control. So it'll be interesting, but you're right, LA is coming back baby.
Pete Mento 8:00
West Coast, the best coast. And sticking sticking with that that maritime theme. You know, my first topic done delves into this as well, we, we have spoken a lot about what's going on with the ocean carriers. And last week, there was a very big news report about how Maersk has been laying people off and the total layoff was around 10% of its labor force and they've gotten they've gotten to a point where they've, they've resized themselves by about 10,000 people. That's a lot. That's a lot. And if you go through LinkedIn, just a casual browse through LinkedIn. Or if you do, you know, a Google News search, and you start reading the opinion pieces about this. They're talking about how this is, you know, this is a bellwether, of just how awful things are going to be for those, those companies. I think that that's really exaggerated. Doug, if you look at the profit margins, that the carriers are still making, they're actually in line with 2019. If not in line, they're doing better than they were before the pandemic. So these these ocean carriers are still making money. And they're doing they're doing well with volumes as compared to pre pandemic. I use the word ridiculous in LinkedIn. Comment this week, what we saw was ridiculous. And the profit that came from it was ridiculous during the COVID period. I think it's it's not so much about this bellwether of everything going to hell, buddy. I think it's just a great indication of the fact that they're looking at where they are now post pandemic, all these acquisitions that people have made, and they're making decisions about where they like you said, do the things they're good at, but also make sure that they've they're marshaling those resources into the right things for growth during what's definitely going to be a downed couple of years. There was one report where the CEO of Maersk was expecting things not to really get into their idea of a positive situation to 2026 and that being the case he just got to right size so I think you're gonna see See that across the industry? We've talked a lot about that before, Doug, this isn't going to end won't be the last time we hear about significant layoffs. Let's just hope it's not one of us. Yeah.
Doug Draper 10:12
Yes, I would agree to that. So the mayor's thing in the headline is the number 10,000. Right? I mean, 10% of a workforce is a lot. But when you throw a number out, like 10,000, when I saw that tweet, and you send it over to me, and a text message, I think over the weekend, or maybe last Friday, I was like, Oh, my God, right? My, I was like, oh, when the big guys like that, start dropping numbers like 10,000. It can create, you know, maybe even a little bit of panic. But I think the one thing that you made mention is that forget COVID, let's snapshot what it looked like in 2019. Because remember, the pandemic hit, you know, March of 2020. And everything froze, right? And then, you know, the roaring 20s started really, until 2021. Second half. So if you get rid of that craziness, and you just focus on what things were like 20 2019, which is which and four and a half years ago, right? Memories are short, so only people focus on the hay day. And in the cliff, that's happened, but it is scary. When I saw that number. I was like, Oh my gosh, if a company like Maersk is dropping 10,000 people, you know, are we doom and gloom, but I think you got a good perspective. Let's look at the right metric, not the COVID metric, as far as growth, and now things are going so but it makes a good headline with 10,000 people, we compare the last four years on how things have changed. Yeah,
Pete Mento 11:43
what really gets me teed up, though, Doug, is all these forward looking comments that the carriers are making about how well you know, everyone thinks you're going to be pretty tough out there. You know, it's like, it's like, they're making excuses for their, their shareholder calls. Already. When this is, this has never been an easy business to make money. We just have to go out there and work hard. You know, it's it's it my whole career, it's, it's almost always been a very challenging environment. And you just got to sell hard, work hard, keep your clients given the service that they that they wanted in the first place that don't let them down. This is an opportunity to go out there and, and sell more work harder. So in the words of Jocko willing, Nick, nobody cares. Work harder.
Doug Draper 12:29
All right, that sounds good. That's a good way to end it. All right. So halftime, that's where we are right now. And that's brought to us by CAP logistics. They're the ones that put this whole show on and we can't thank them enough. So cap logistics.com Check them out for your supply chain needs. Pete, I'm gonna let you roll this one. You go with halftime first. All right.
Pete Mento 12:51
Yeah. Not to go on a rant here. But not Dennis Miller.
Doug Draper 12:56
Not to go on a rant, comma, but yeah.
Pete Mento 13:01
Are you okay, America? Are you okay? Everywhere I go, now. I see dogs. And I love dogs, dogs. You know, I love dogs, right? But do we really need them in bars? And in restaurants? When you when you go to Walmart? Do you really need your dog with you? When you when you're walking? It's just there. It's become almost like a fashion accessory to have your dog everywhere you go. And, you know, I was at a restaurant this weekend. And there was there was a person who actually had a Great Dane at a fine dining restaurant. And again, love dogs. But what are we France? You know, we got to have these things everywhere now. So America, are you okay? Are you okay? Have we gotten to the point now where we've got to bring our dog everywhere we go. Because we're just we're just not there. Right? It's a dog love dogs. But I also love to eat my meal without having to worry about you know, 125 pound animal across for me. It just seems a little bit counterintuitive, buddy.
Doug Draper 14:08
Yeah, it's crazy. When you were when you were just talking about that? I mean, I'm indifferent with dogs. I don't have a dog. I don't dislike them. I don't necessarily whatever it mean, they are what they are. But I was thinking most of the dogs that you see out there our company their their. Their owners are young, right? I mean, I don't see any 60 7080 year old people kicking it with their dog in public places. It's usually you know, Bart here in Colorado, you can you know, swing a dead cat without seeing the dog in a bar. No, you know, no, no joke intended, but maybe it was intended. But no, I would agree. The funny thing is, it's all younger folks. Right? And then Pete When I see a dog on an airplane, just roll my eyes like Are you freaking kidding me? So yeah, I would say what's going on in some instances? What is going on?
Pete Mento 14:58
Are you okay? It is this part of just the attention seeking behavior of look at me Look at me, I brought my dog to the bar. Hey, don't get me wrong. They can be real magnets for you know, if you're trying to pick somebody up, but I just I don't get it duck. I don't understand it. Right? It's, it's getting to the point now where people have them all dressed up with them. They've got strollers for their dogs. You need to get it together. Okay, folks, just get it together. And you know, you know, Kevin's probably probably takes his dog everywhere. I bet that Kenan, like, as soon as we're done is really like, How dare you? Dare you when I go up for my chem Bucha? And, you know, I always have my dog with me. Well, good for you, buddy. Get it together. Yeah.
Doug Draper 15:47
Good deal. All right. Well, yeah, so mine is speaking about chat GPT. And it's more specific to another company that Elon Musk created that nobody's heard about. It's called x ai X. I'm sure that's a spin for Twitter. And it's Elon Musk's entry into the artificial intelligence and chat GPT. So it is called grok G R, okay. And I went online, I want to make sure I was pronouncing that correctly. So it's rock with the G not Gronk, with the football player that retired but grok like rock. So it's the newest from from us. And the one thing that the article that I read is said that it has wit, sarcasm and a little bit of rebelliousness. And they said that it's demeanor was taking, taken from that movie, The Hitchhiker's Guide to the Galaxy. And if it was a book, I'm sure the movie was better. But anyway, sarcasm. And I think the the test which blows me away, is that grok explained how to make cocaine. That was the test, like, here's this cool new chat or not chat, GPS, this AI piece, and let me show you how cool it is. It's going to tell you how to make cocaine. And then at the very end, it had a disclaimer and said, Oh, you shouldn't do that. Really, it's not safe. It's illegal, blah, blah, blah, blah. But wit sarcasm and rebellious is, is a thing, and it will monitor X slash Twitter in real time. So I don't know how that's gonna play out, you know, you can kind of see what's going on with Twitter and, and is that is that, you know, newsworthy. But that's unique. That's unique. So the weird thing Pete is, I don't know how it happened. But I was on an email with some executives at x. I don't know how they got my email that slipped through and they were talking about some of the terminology that grok was going to be using. So here's a couple of them. Pete, I don't know how, again, I don't know how I got on this email chain. But one of them, Brock is gonna say what you're talking about Willis? Right? That's one of the things. Another one for our older crowd. Kiss my grits, which I don't know, there must be some older people working at at x. But that's flow from that TV show. There's another one this is kind of funny. As if, which I think is a spin off from from clueless, right. And the last one I saw this was the most important repeat again, I don't know how I got in this email, but I did. It referred to as respect my authority. And I'm like, if they're dropping Cartman in this thing, and I'm all for it. So I don't think that they're going to bring out that grok is going to be speaking towards so I don't know if you heard of this thing.
Pete Mento 18:49
Of not until you brought it up. And then, you know, I'm looking at it and thinking it's funny in what he says who? Right like who? Who says that? And my immediate fear was it says an Elon Musk product. Elon Musk thinks he's hysterical. He is not. He's brilliant. He's thoughtful. He's a genius. Sure, but I don't think any of us ever really listened to him and say, That guy's sister. Right. So it sounds like they're trying to model it after his brand. But it brings up a broader point, you know, we talk about the purchase of Twitter. And its transformation to x. It's real. It's real value to a company that manages AI is just access to all that content. It's access to how people speak, how they interact with one another comments versus what was said and being able to upload that in a way that will help to teach these machine learnings AI models how to interact more, more like a human being by looking how we act on Twitter. And if that's the case, we are truly doomed because Twitter is a cesspool. But I think that's a big reason why he did what he did more than trying to save humanity and give us a place to be able to use our First Amendment rights. It's just that The incredible amount of data that will be available.
Doug Draper 20:01
Yeah, yeah, the X connection is is, is the unique angle. So, but yeah, so that was halftime, good topics, dogs and Elon Musk. That's a hell of a combo. So this, this is when we shift to the second half of global trade this week. So I don't know, do I go first on this one? All right. So this is not directly related to transportation logistics, but it caught my attention the other day, and it made a little bit of news, but part of the Recovery Act that that went into place at the tail end to COVID, was talking about modernizing the rails. And that was specific to moving people, primarily the quarter on the East Coast, right? Between Boston, which you're familiar with, and DC, which you're familiar with. And so it's the busiest rail corridor that stretches from Boston to DC $16 billion in 25 Different passenger rail projects, primarily on Amtrak in their Northeast Corridor. I'm sure there's some nickname that that that has, but I didn't realize it's been 800,000 trips per day. In that region, I'm looking at some notes here represents 20% of the nation's GDP on any given day. So lots of people, lots of commerce, things of that nature. So I love it. Right. I love the fact that they're doing this. And I think it could be a phenomenal rally cry for Mayor Pete, this is kind of his bailiwick, right? And, listen, we need a paradigm shift. And we want to reduce emissions. So I'm hoping that not only are they talking about look at all this infrastructure, but if they could spin it, to talk about the benefit, because there is true benefit. Yes, we can create an electric vehicle and give you a device that's going to generate less emissions. But you're going to be doing the same thing that you've been doing, we're just replacing a, a gas car and a fuel. With electric, why don't we talk about paradigm shifting the way people move and getting more people on the rail, we spoken about the amount of fuel it takes to move a ton of cargo X number of distances on the rail, I think that they that they can spin this in the same way. And that I'm a fan of it, right? Denver doesn't have much rail access, but I take the train out to the airport every single time I travel. It's easy, it's cheap. And I'm glad that they're focusing on that. The one thing, they need to figure out how to drop some past packages on that thing. And I didn't do enough research on this, maybe Amtrak is already doing this, but they need to amplify that sucker and the amount of cargo that they could put just like airplanes, put it in the belly of the plane, put it in the belly of the train. I love that Pete That's my next that's my next thing. Forget Vocus belly of the train is my new catchphrase. But if they can add capacity to move tangible products, in addition to improving the rail system for the movement of people, I think it can be a big win. So you know we badmouth some, some some of that stuff and, and, and whatnot. But Mayor Pete needs to jump on this thing, big time. And I'm glad that they're, they're improving the infrastructure out there. It does mean a lot and it is impactful.
Pete Mento 23:32
Yeah, I'm a big fan. On top of that before, but I love taking the train between Boston and DC. If I go to New York, I almost always take the train, it's just more convenient. I enjoy the whole experience, you know, being able to go to the bar card, get a drink, if it's early in the morning, get something for breakfast, get some coffee, they have internet the entire time. It's wonderful. And I compare it though, to my experiences in other countries, when I go on these high speed rail connections in China, that are incredible. And this, you know, same for Japan, when I'm when I'm in Europe, getting on a train is just more convenient. It's easier, but the infrastructure already existed. So as much as I love my Northeast Corridor buddy, you know, bring up the point right there. When are we going to have high speed rail over longer distances? And when are we going to have it in in places that really could use it because of the growth that it seems like Colorado like Texas, where it would make so much more sense. And there are instances of passenger carriers having a spare spare car that is carrying cargo and they sell it on a high end priority service that says if you have something that needs to get to another major city in eight hours, we can do that for you, or six hours or five hours. And, you know, consistently speaking if you look at how well the rail does generally on time, it's it's not as affected by traffic. It's not as affected by a lot of the external forces. as it hit trucking, so that I couldn't agree with you more, how can we use a hybrid of these two things together to not only lower emissions, but to also bring more opportunity and variety to the supply chain?
Doug Draper 25:11
Yeah, agreed. All right, bring us home.
Pete Mento 25:16
Yeah, tough topic, but one that we that we give a lot of attention to on the show. And that's forced labor. You know, the weaker situation in China opened up an opportunity for us as a global trade, to dig a decision, not just in the United States, but practically every major country, that we weren't going to support the exploitation of a working force, in order to make things cheap, and customs. Here in the US, I can speak to that one directly, has done some very sophisticated things, to catch people who are breaking the rule here. And it's been incredible to watch, Doug, how the whole world has sort of coalesced around this idea. Now we're seeing it pushed into chemicals as well. Customs is able to do some analysis of chemicals to determine if they were produced in areas or by companies that also use forced labor, slave labor, child labor. And the the interest on Capitol Hill now is how can we expand this into other areas of commodities, one of the first ones I've heard about is chocolate, cocoa that's used for chocolate, about 60% of that comes from two particular areas, Ghana, and the Ivory Coast. And in those instances, most of it is produced by hand, by child labor and forced labor who's being paid less than $1 a day if they're paid at all. There's other commodities as well, that have been brought up things like the rubber that's used in LaTeX, tremendous amounts of agricultural goods. But then how can it be expanded beyond that, a great example of that would be going after drug cartels that are currently trying to legitimize their fortunes, by being involved with things like avocado farms. So I think, Doug, what we're gonna see as early as next year, is a call for people to expand this program into other areas and other commodities, and make this more of a, an ongoing way that we enforce against forced labor and slave labor in childhood.
Doug Draper 27:12
Yeah, I think when you peel the onion back, per se, I think there's a lot more of that happening across the world that we may not be aware of, and, you know, kudos to Customs and Border Patrol to have technology and, and the ability to identify it, not control it, but prevent it, or have the ability to sanction against it, where there's companies. So I think it's a long way that this isn't going to fix the problem or eliminate the problem, but it will bring to light. A lot of this forced labor that's happening on the markets, the one thing that keeps coming to my mind, Pete is the push for electric vehicles in the United States. And the raw materials needed to support the battery manufacturing is coming from third world countries where there are humans with picks and axes, digging stuff out of the ground. And it's kind of a quandary, because that is exactly what you're talking about. But at the same time, US government is absolutely promoting that with, with big business here in United States to try to go green. So it'll be interesting to see, when those two worlds collide, or come together. What's that gonna mean, but I'm going to keep an eye on that aspect of forced labor. piece of it.
Pete Mento 28:29
I agree that you know, and finding the intelligent, creative, cost effective ways to recycle those materials, I think is also going to be important, so that we don't have to put so many people in jeopardy to collect them. I think that's another very important aspect of what we're talking about here.
Doug Draper 28:44
Yeah, yeah. Good deal. Well, Pete, we're gonna wrap that thing up. I think the team around you became quiet after that after our intro. So I think I don't know the name of the hotel you're at. And maybe we shouldn't make mention on that. But, you know, there's no desks in the rooms, but which seems strange, but you made it work. So I want to thank you for that.
Pete Mento 29:04
Oh, buddy. Who could who could miss this opportunity to check in with with Uncle Dougie? Yeah,
Doug Draper 29:10
yep, yep, yep. So I think that's it. Good luck with the the show and your speech tomorrow. And again, I don't want to forget the road trip that global trade this week is taking to Boca Raton on the first part of December, September 5, and sixth down in Boca Raton with Tampa. We're doing a live version of global trade this week. And we appreciate Cindy allowing us the opportunity. So we'll talk more about it. And I look forward to seeing you in person again. And I want to thank everybody for joining us today on global trade this week. Have a good one and we'll catch you here in like seven days. Thanks. Thanks, bye
Transcribed by https://otter.ai