Global Trade This Week – Episode 183
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Keenan Brugh 0:00
You're watching global trade this week with Pete mento and Doug Draper,
Doug Draper 0:09
good morning everyone. I am. Doug Draper with inland star distribution, coming to you live from manifest out in Las Vegas, I decided to jump down here in the conference. I don't know the registration area. It's early, early in the morning. You may hear a carpet cleaner in the background, but it's important that we're here, and I wanted to do the show Pete's on assignment. Shocker, there's some crazy things going on in the world right now related to tariffs. So Keenan is jumping in as always. We appreciate that. Keenan, how you doing? Hey,
Keenan Brugh 0:45
I'm doing. Well, great to be here. Excited to see you. Have a decent internet at that hotel and conference center situation. I know a couple colleagues I was working with yesterday. We're also at that show. So seems like a big one for our space. Yeah,
Doug Draper 0:59
yeah. Well, big gambling, big hotels, big swimming pools and big internet. That's really why I come to Vegas.
Keenan Brugh 1:08
Absolutely. Well, yeah, definitely. A lot of news. I know that's what I was taking Pete from us this morning, and we're also hearing lots of things on our end. So excited to get into it and explore what we know and ask questions about what we don't. So kick us off. What do you have going for us? First this morning?
Doug Draper 1:23
All right? Well, I'm gonna, we're gonna couch the tariff to the second half, right? So my first topic, we can motor through this thing, right? But I've been hearing some rumblings about Amazon, their supply chain and potential acquisitions, right? They have built it themselves, their entire network for since its inception, right? It's been impressive. They've rivaled the biggest in the world, but there's some rumblings that they're saying now it's time to do some acquisition, primarily in the LTL space, right? Odfl has come up Saya, kind of secondary. And my take on that Keenan is, why, right? I'm not really sure what the purpose would be, right? I guess you'd gain access or assets for middle mile, right, but efficiency is going to be gained from full truck loads going over there, wherever they are in the middle mile, right? And efficiency and cost savings is why you and I buy on on Amazon, right? So my take on this one is that it's a little out of their norm. Some of their leadership has changed. As you know, went over to flex sport and then subsequently moved away and started his own tech company. I'm sure he's here at manifest, but so are 6000 people, so it's hard to keep everybody keep everybody track. But anyway, if there was a acquisition, I think it would be more in the international vertical, either partnering. You know, I don't know if they would buy a steamship line, so to speak, but an aggressive partnership with the movement of goods internationally, the logistics, supply chain with Amazon is not just self serving to their organization, but they're actively selling it to other consumers. So if you and I make a widget and we don't really know how to bring it into the US or manage a warehouse, or want to do any of that, you know, Amazon will take care of that for you. So I think it's going to be more internationally focused if they decide to do some sort of acquisition. In my basic research from our friend chat GPT this morning, 22% that's the information I had gathered. Is Amazon's revenue comes from outside of the United States, so international as a whole market. So I just think that it's a small space. If they're looking to really, you know, amp things up and either look at acquisitions or really aggressive partnerships. I think it's gonna be an international play, not a domestic LTL play. So Keenan, I don't know if you've heard about that or have any comments,
Keenan Brugh 3:55
so I hadn't heard about the latest with Amazon, though you're reminding me of overall trends, and we had heard or seen relatively recently lower M and A activity in 2023 compared to 2022 and it maybe started to pick up a little bit in 2024 but it just kind of reminds me how there's always these swings from one side to the other. And I feel like you and Pete have also been talking about companies right sizing and spinning different aspects off, and then when companies or the industry overdose that specialization, there may be some pretty good deals. And to your point about how Amazon might be thinking about this logistics. They are obviously a big user, and it's a core part of their value proposition is making cheap and efficient logistics to be able to get the goods to their consumers very quickly. It's similar, I think, about how they went about Amazon Web Services, amazon.com and the app and all that needs good web services. They moved into that space. But Amazon Web Services is a big revenue generator for Amazon, of them selling it to other people. Goal. So I think they're trying to give themselves the competitive edge, but to get as much of the economies of scale or the cheapness, they're also going to need to be selling to other people. So I don't know the latest on what Amazon's intentions or moves are, but what I'm thinking about is maybe they're trying to be ahead of the curve. If it has been muted, people haven't been expanding, or there's right sizing or starting to pick up, maybe they're seeing some opportunities to get ahead of what they think the competition would be doing. Amazon is pretty aggressive, and, you know, they've made bets on their fire phone and things that they've had to cut losses on, but for something that's core to their operations as logistics, they're probably putting a lot of strategic thought into so it is definitely one to watch. I'm glad you brought
Doug Draper 5:42
it up. Yeah. Well, selling services to service providers is a pretty good gig, right? And so that's kind of what you had spoken about. So, well, hey, we kind of just got two bang, bang topics, so, but we missed half time last weekend, so we got to chat a little bit about it, right? And obviously, this whole show and halftime is brought to you by your company, right? Hopefully, that's right. Yeah, you're on my left, so I'm pointing to you correctly. Cap logistics, Keenan, we really appreciate you. I'm the nice guy. Pete's the asshole that comes in and hammers it. So, anyway, so brought to you. So anyway, I saw this thing in the paper Pete that there is something called the leaning tower of New York, and is a skyscraper that was built pre COVID
Keenan Brugh 6:34
that they had to shut relatively recently. Then, okay, yeah,
Doug Draper 6:37
yeah. Like, it's under construction. And it, it's leaning at the top three inches. I think they said to the north. I don't think it really matters. North, south, east, west, it's leaning three inches. And so they shut down. And this isn't recently, this is pre COVID, right? So they're building it. They shut it down pre COVID, and now shocker, lawsuits out the wazoo with who's at fault and everything else. So if you check out a picture, it's just this tower under construction, right? That's just sitting as an albatross out there in New York City. And apparently, builders, contractors, I don't know exactly who we're trying to save $6 million and I'm sure this building's gonna cost a billion, right? No, no, they tried to save $6 million by doing some different foundation pour, which is the source of the problem. So anyway, that led me to one of those wormhole things. I started like, hey, skyscrapers, and then you just circle the drain, right? And so what I wanted to talk about is that skyscrapers that over 150 meters. Chat, GPT, what is that in feet? It's basically 500 feet, 492, right? And so I was like, Where are the largest or what's the most skyscrapers that are over 500 feet in the world? Like what city? And give me the total number of skyscrapers for that city, Hong Kong. So here's the outside Hong Kong. 564 buildings are over 500 feet tall.
Keenan Brugh 8:17
There's a lot of tall buildings in Hong Kong. I was gonna guess Shanghai is that on the list?
Unknown Speaker 8:22
It is not
Keenan Brugh 8:25
gonna say Hong Kong over Shanghai. Okay, Shanghai is there
Doug Draper 8:28
Hong Kong? And here's a surprising one, Shenzhen. That Yeah, 440 right? So, I mean, I remember a few
Keenan Brugh 8:38
skyscrapers in Shenzhen, but yeah, compared to the port area, or just huge city of Shanghai, and compared to the like limited mass of Hong Kong, Shenzhen, kind of surprises me, but it has been growing, so there's probably quite a few more than the last time I was there 10 years ago. Yeah,
Doug Draper 8:53
number I'm just doing the top five, number three, New York City, 319 so if you think of Hong Kong, they have over 200 right? Almost 250 more buildings over 500 feet than New York City. And you've seen the skyline New York is is amazing. So shocker to buy that comes in fourth place. I guess I'm doing the top six here. So to buy 265 Shanghai, 195 that's lower than I would have thought. Yeah, me too. And then the last one, Kuala Lumpur, at 184 so okay,
Keenan Brugh 9:35
I wouldn't have guessed it, but now that you say it, I feel like I've seen some some photos of their buildings. They have a couple towers and things that I recognize now that you see it, yeah, oh, that's crazy. I had not heard of the Leaning Tower, just pulling it up here. Now that you have mentioned it sounds like a disaster. And yeah, you hate to see when they try to save a few pennies and then end up costing billions of dollars with a. Mistakes like that. Some people are saying it needs to just be taken down. Some people are saying they need to redesign like a facade to accommodate the lean. Oh, man, that sounds pretty brutal. I always am excited when I hear about stories of concrete. I know it's like a boring back of the mind industrial service or facility product that is so important, but it is exciting, and there are new innovations. I know a lot of people will be motivated for the cheapest or do save some dollars, and it won't work out. But there's also a lot of material scientists doing some really cool stuff with the sustainability, the strength of concrete, everything from kind of reinventing how the Roman concrete lasted so long with volcanic ash or the jagged pieces, and then also the lion class and people are doing cool stuff with 3d printing, or, I think Japan is doing some cool recycling of old, bad concrete into new, stronger concrete, and reusing that material. So I always like to hear those stories. But there's also the stories of people costing billions of dollars, trying to save a few Yeah,
Doug Draper 11:06
yeah, it's crazy. And you guys, there's a podcast I did with CAP years ago called uptime logistics. And I remember talking to one of your clients in that in in that space, and I was like, concrete, really, this is going to be like a 32nd podcast.
Keenan Brugh 11:22
There's a lot about concrete. Oh, yeah, I was Yeah. So it was called
Doug Draper 11:26
uptime logistics. If anybody's super into concrete, I'm sure you could find it online. But yeah. And I just want to end this topic with my hometown of Wichita, Kansas. This may shock you, because it wasn't on the top 10, and there is actually zero skyscrapers above 500 feet in Wichita, Kansas, I think you could stack, like, four buildings that are in our
Keenan Brugh 11:52
Midwest cities. They're just not that geographically constrained. So you could just, like, you know, buy another piece of land right next to it. Why go up? Yeah,
Doug Draper 12:00
all right. Well, that was half time brought to us by catholicistics and Keenan yourself. Man, appreciate it. So let's, let's jump into the next topic, which is kind of the elephant in the room that pivots literally, literally daily, right? It's crazy. And I'm going to take the softer, gentler approach, and then you can talk specifically about two commodities that have really been in in focus that is really your guys's sweet spot. So, so I'll go with the kinder, gentler thing, right? Meaning, emotion, right? And so people like risk when they're in control, skydiving for an example, right? That may be a weird analogy, but I'm going to take a risk. I got the backpack. I'm jumping. I'm in control. I've been trained. I know what I'm going on, but a little chaos, which is what we are in, turns risk takers into safety seekers, right? And I that's not an impromptu I did. I did have that jot it down beforehand. But when the S goes D, people are like, they just they come in. They want to control they want to be safe. And my point with all that is that with all the uncertainty, even if their commodity is not related to the two that you're going to talk about, uncertainty says, I need my stuff. I need it in the US. I need to control it, and that means, I think that we spoke about a quiet, quiet season with ocean freight, I think you're going to see things creep up. I don't think it's going to spike, right, because it's a daily change, right? So there may be solutions that are figured out very quickly from this topic, but I think it's going to be like the mortgage industry. It's going to spike up, it's going to stay up, right? So the short term is going to be a spike. I really can't determine if it's going to be massive or short, but there will go up, then it'll be steady at a higher level, just like interest rates jump from three, three and a half up to seven, right? It's going to be steady state. And then the long term. I don't know, you know, long term could be six months a year out the road, but I think sourcing strategies are going to minimize that here at the show. A lot of people are talking about diversifying their supply chain, their manufacturing, and people have been talking about that for a couple years now, right? So the diversification, I think, is not going to be so detrimental, right? With single sourcing, their supply chain, primarily in China. So I think it'll go up in the short term, level off, like interest rates, and then maybe drop a little bit, or stay there. But it's interesting. That's the emotional play of it. Keenan, let's flip into the real world. Let's talk about the commodities that you're near and dear to
Keenan Brugh 14:49
Sure. So a lot of heavy industry and production of power and heavy manufacturing and those sorts of things are very reliant on steel and aluminum. And we just heard that there's. A new Trump admin proposed tariff starting about a month from now. So today is February 12, starting on March 12, 25% tariff to all steel and aluminum products and different derivatives. There's some changes in there. I was reading through the details. You know, I'm not a broker. I don't know all the ins and outs, but there's another 200 well, not another. There's a 200% tariff on Russian origin, primary aluminum. There's also some other maybe ways of getting around it, if it's American. So who knows what countries will have those deals of recycling American aluminum or steel, or doing those? I do recall Japan was recently working with Trump and US Steel for foreign direct investment. I don't know the numbers off the top of my head, but significant Japanese capital invested in US steel manufacturing, and this seems to be kind of a part of that, and supporting the US steel environment where it's not just competing against, speaking of going to China, I've seen Bao steel like a state sponsored type company that was massive. Imagine like a city that we would see in the Midwest, but it's all one big steel plant in Shanghai. Pretty crazy. Those machines were made in Japan and made in Germany. Lots of Mitsubishi machines making those steel machines I saw anyway, filling up these massive, buildings. But another thing I've been hearing described is that a lot of this also has to do, or some people criticizing Trump's move, is that it is a little bit of energy incarnate. It takes energy to to make these raw ingredients, to recycle them, to make them pure, mixed in the right ways, rolled in the right ways, especially aluminum, where it's basically all electricity costs. And so right now, this has been something sourced from where areas have really cheap energy, you know, and a lot of that is from government, state sponsored projects, whether it's a hydro dam that was built but then now, like provides very low cost electricity, or state sponsored things in China that then just makes very consistent low electricity, that then a company can take advantage of to make cheap steel. It'll be interesting. I think, like a lot of these other topics we've been covering here, there is very dynamic news on one hand, but also it's worth not losing your head over being somewhat calm, having plan, but not necessarily freaking out, because there have been announced tariffs and things and then rolled back, or could be a part of a negotiating strategy. So it's it's one where companies would probably be best advised to not overreact and change everything, but like they've probably already had some signals over the previous COVID years or previous other trade tiff situations. They've started to look at Mexico or Canada. They've started to look at other other countries and other places of sourcing their raw goods. It'll be remain to be seen. This is a kind of a new era of if these tariffs go through, and if this is how government is going to be generating its revenue, what does that all mean? There could be periods of uncertainty and shifting, but I bet the markets will find appropriate prices pretty quickly. I don't think it'll be ongoing chaos, just for my my view so far, but it's a dynamic space. I know our team is looking into things and we're fielding lots of questions. We'll be learning on a daily or if not hourly basis, I'm sure, yeah,
Doug Draper 18:30
yeah. Well, like we, we spoke about last week, patience is less expensive than panic, or panic is more expensive than patience, and I think in the last, well, said, two weeks, right? Or even the last, yeah, basically, since January 21 right? Patience will seize the day. So, so, yeah, I think that's that's about, Oh, hold on, a second, yeah. Blue Tommy, yeah, I'll be there in a second. Yeah, yeah. Cool. Anyway. Blue Tommy's the guy I met last night the craps table. He's been up all night, and he said he wants to get back into the action, so I guess we need to shut the show down and sign off. Keenan, well, appreciate
Keenan Brugh 19:13
you taking time out of the Vegas tables to come come join us and give us an update, and I appreciate all of you in the audience for tuning in with us and exploring these rapidly changing topics as we live in interesting times. Absolutely
Doug Draper 19:28
Good deal. Well, thanks for joining us the week. This week on global trade this week. Keenan awesome fill in. Really appreciate that and have an awesome week. Okay, hey, there's now. That's blue Tommy's buddy. That's not Goodbye, everybody. Thanks for listening.
Unknown Speaker 19:46
You.
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