Global Trade This Week – Episode 236
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Pete Mento 0:00
You're watching global trade this week with Pete mento and Doug Draper, Hello everyone, and welcome to Global Trade this week. I'm Pete mento, and with me is my co host, Doug Draper, Doug, I'm sitting on my couch again in my walking boot, making progress. Things are getting better. It's just an uncomfortable position to work from. I want to be behind my desk where I'm happier, but can't have it all.
Doug Draper 0:27
Buddy, yeah, well, if you got a walking boot, can't you just mean you it's called a walking boot for mobility. Can't you supposed
Pete Mento 0:37
to be elevated? Pal, my ankle is supposed to be elevated, so it's a weird, weird position to work from.
Doug Draper 0:46
Yeah, interesting, yeah. Well, I went to this lovely town called Vernal, Utah this weekend. It's about two and a half hours from steamboat. I call it the mini Moab. For any listeners that have ever been to Moab, Utah, same kind of thing as Dinosaur National Park. Anyway, very interesting. And I was hiking down off of this arch. On the arch, we went to view it, rolled my ankle, did two or three rolls, and have this bruise on the side of my leg that's like the size of a dino footprint. You okay? Yeah, I was, yeah, yes. I am okay. The show must go on, so to speak. But yeah, it was kind of great. I mean, if people have been to Moab or some of those areas, I mean, it is remote, and your hiking is remote, where you are is remote, and you have injuries or something out on the on the trail, and you're on your own out there, so it was a little rough getting back to the car, but I'm doing okay, my friend.
Pete Mento 1:48
So like any pro, you're playing through the pain,
Doug Draper 1:53
yeah, a little, a little hobble. So you got your your your your foot up. And I don't have an ice pack on my on my leg today, but I did over the weekend.
Pete Mento 2:05
Well, Doug, I'm happy you're in one piece. You didn't have one of these, you know, accidents where you broke a hip and didn't have your medical alert. I guess everything's fine. You're not quite that old. You're getting there every day, getting closer. Why don't you go ahead and kick us off on your first fantastic. And these are great topics this week. First, fantastic. Yeah, yeah.
Doug Draper 2:28
Well, over the weekend, this is about aluminum production, and I learned a lot about aluminum when I saw this, and I did a little research on it. And I don't know if anybody saw but we did some bombing over the Middle East. And two of the locations that were hit Abu Dhabi and Bahrain, they make a lot of aluminum. And I'm not going to say they make it's more well, I guess it is because they produce it. They don't mine it. But 9% of the world's aluminum production comes out of those two locations. Now that's not a huge amount significant, but noticeable. And think of the chaos that's happened with the Strait of Hormuz and the 20% of oil that moves through there, and what we're seeing north of $100 a barrel. I think it was $1.16 over the weekend or today. It's crazy. It's one of my whole lot of aluminum made there. Now, I didn't know this Pete, but aluminum, it's not mined, per se. It's manufactured with a ton of energy and electricity. So I had to call my chemistry professor from high school at Wichita High School, southeast blue Tommy red wine was his name is very, very efficient guy. And if you think that's his real name, and I'm just making that up, but anyway, the aluminum is locked into bauxite ore, all right, and it's in there as aluminum oxide, and then you basically got to zap it, for lack of a better term, right? The analogy that I saw was think of it as like a bathtub full of molten material, and that's continually electrified, non stop, 24/7, and that's how you actually make the aluminum so you never shut it down. Because if you shut down the plant, it takes a hell of a lot of time to ramp it back up. So my whole point with this is it takes a lot of energy, which comes from fuel, and it's kind of tight right now in the Middle East, related to accessibility, and here in the US, we're competing with another data hog called data centers, and then doing a little bit of research. There's two active facilities in the US that literally makes aluminum. Right? One is owned by Alcoa. Sure you've heard of that company. The other one is owned by Century aluminum. And I think century aluminum is building one in Oklahoma. But it doesn't take a weekend to build it. It takes I think I read that they want to have this online by the end of the decade, and we're in 2026 so call that three or four years out. So my whole point is that it takes a heck of a lot of power. Power is challenging in the Middle East. Production in the Middle East has just been decreased 10% of everything, the global consumption or the global manufacturing of it. Anyway. My broker is Ef Hutton, and EF Hutton tells me you should probably do some investing into Alcoa and century aluminum. But my point is that the aluminum shortage could be real. It could happen very, very quickly, and there isn't a lot of domestic Oh, we'll just make it here in the US, because there's not a lot of options, and the power grid is stressed with data centers right now, so it'll be interesting to see. Is this a blip, or is this going to be a big problem moving forward? And oh, by the way, to your point and to your knowledge base, there's a 50% duty rate on aluminum. So it could get really funky, really fast.
Pete Mento 6:17
All the aluminum we need Doug is right next door, right it's right next door. Our largest supplier of aluminum forever were our dear kind friends in Canada. But for whatever reason, we decided to get drunk at a party and punch him in the mouth. I still haven't figured out why. Just similar story with steel, you know, but we just decided I'm gonna we just decided hey, Canada, Doink. We gave him the double I poke the double Mo. I poke on on curly. And for a long time, we kind of depended on them for aluminum and steel. They were a very dependable friend. And I don't know what happened, you know? I guess we went saw a movie together. They didn't layer the butter on the popcorn, right? Now, we're not talking, I don't know, I don't know what it is, right? But the the solve to this is pretty simple. We just allow Canada to start supplying it again. But is that really a solve? Is that really a solve? You know, if you've been around ships, been around the war machine of America, you know, aluminum is everywhere. Do we need to be a self sufficient nation when it comes to the production of aluminum right now, the US is saying we do, and it's kind of like giving birth to a cow and saying, great time for dinner. That's not how it works. We got to raise it. We got to feed it. We got to keep it alive and keep it healthy. Then we can slaughter and eat it. That's going to be a couple, a couple months down the road from here. So, yeah, this is a problem of our own creation. Didn't have to happen, did it anyway? And there's an easy fix to it. With our friends up north that see a boot and a a whole lot, I don't get it done. We can fix this so easily, and we're not going to.
Doug Draper 7:54
Yeah, interesting topic, for sure. And your analogy was, bueno, my friend, very good analogy. Yeah.
Pete Mento 8:03
Well, my topic is a little more hopeful. How's that for a switch every week this meeting happens between Brandon Lord at customs and judge EATON at the court of international trade, where they say, Great, we got a problem. We got to figure how to solve it. It's very man intensive, very hour intensive, and neither party wants to have to do all the heavy lifting. But the court of trade has, they've got the whip, so they're the ones that will ultimately decide, but they want to try to make it as fair as possible, because fair is going to mean it gets done. And it's starting to look like, you know, this week, we got more focused that cape is going to handle a lot of this. They're going to handle a lot of the original submission of information to get the refund. But the big question about what happens for entries that have gone past liquidation in the protest period seems to be getting closer and closer to that's going to court. That's a lot of tariffs. So there's a play here that I think importers should be paying attention to, and that's the protest if you get your duties that you believe you are owed money on into customs as a protest. Now that creates a placeholder. Customs may deny it. They might even not look at it, but you've told the government, we want our money back, and here's our placeholder to get that money back. This is a secret weapon. They're intensive. They take a lot of time. They need more backup than what's being proposed in case, but it's much better than waiting three to five years to get your money back from the judge. So call to action to everyone is, look at your liquidation reports. Try to understand what's already in the protest period. Get those protests in.
Doug Draper 9:36
Yeah, the protest, it's almost like a pause button, right? You just sit there I'm going to take a pause, and it gives you time. I mean, I'm just, when I saw this one in the show notes, I'm like, All right, so I'm playing a video game, right? We're going to, we're going to be heavy on analogies for this show. And you haven't really won it yet. You haven't figured it out, but you got to, like, take a time out and grab a sandwich. Use the bathroom, so you just hit pause, go back, get your strategy, talk to your suppliers, talk to your vendors, talk to your banks. How does this apply? And you have time to develop a strategy, versus just moving forward to the to the clicking, talk of the US government, so that that is a good play. The other thing, and I don't know how relevant this would be, but if it's not going to the court, then there's no rulings, and you don't have to tell the world what you're trying to do, right? So you're kind of under the radar a little bit. It's my mind thinking here is that, if it's just you and I, and we're having a disagreement and a protest and we're talking through it, or if I take you to court, there's official documentation about what you're attempting to do, and competitors could look at that and use it to their advantage or disadvantage, I don't know, but it's not as open, which could be another benefit to hitting the pause button and kind of keeping everything in house. Yeah, I don't disagree. Good. All right. Well, that brings us to halftime, brought to us by our friends at CAP logistics, even when technology is challenged like it is today, Keenan is running the show from his phone, and we appreciate it. So we get it done every single week, and cap logistics makes that happen. So check them out. Cap logistics.com, all right, half time. Pete, what you got? We're gonna
Pete Mento 11:25
play in and out this week. Doug, your favorite? Yeah, so rapid fire, are you in or are you out? Ready rip it paying for airport lounge, access in or out out. Wow. That one kind of surprises me. Consultants speak in meetings. We're going to circle back. Let's find some synergy, etc. Do you use these are you in, or are you out?
Doug Draper 11:53
You mean me using those terms? Yes, no, I'm out, I'm out. I'm you know, we're all big kids. You're either in, you know, let's talk about it or not. If you say no, that's fine to me, those are just the ultimate answer. Keen, I'm out,
Pete Mento 12:10
bringing full meals on a plane. Out. I agree, texting back to someone haha, or using the laughing emoji. Which one are you in on? Which one are you
Doug Draper 12:25
out on? I am in on emoji
Pete Mento 12:28
out on the word Okay, using your video phone or speaker phone in public. Oh, completely out rude, using the term we when describing a sports team. We won this week. We made it happen. We got the championship. Are you in or are you out? Oh, I'm in. Brunch out. Wow, breakfast for dinner out. Bottled water at dinner, in or out, or do you just take the tap?
Doug Draper 13:02
Oh, take the tap. I'm out on bottled water for dinner.
Pete Mento 13:05
Read Receipts on texts. You let people know you're reading them or that they've been read. Are you out?
Doug Draper 13:11
I'm out, but I don't even know if that's set on my phone. But you know, I'll read my text when I want to read it, not whenever. Yeah, I'm out
Pete Mento 13:19
having drinks with customers in or out. In, hmm, okay, group date nights where you and Mrs. Draper go out with another couple. Yeah, I'm in for that, yeah, okay, brutal honesty, in or out,
Doug Draper 13:41
I would say out,
Pete Mento 13:43
people who treat their dogs like children in or out, out, then mowing people for money you owe them when it's less than $10 in or out
Doug Draper 13:53
that's weak out,
Pete Mento 13:55
splitting the check at a restaurant.
Doug Draper 13:59
Yeah, I'm good with that, as long as we don't sit around and itemize who had the soda pop versus the beer. Just put it down the middle,
Pete Mento 14:06
clapping when a plane lands in or out out. Yeah, I'm the same way. But yeah, I'm really out on that one, and last one putting into into writing, this is a meeting that could have been an email in or out.
Doug Draper 14:27
Me writing that, yep, you bring people's attention. Yeah, I'm out. I'm out on that. I love
Pete Mento 14:34
pointing out when people have wasted my time. So I'm more than happy to say this was an unnecessary meeting. Keep that in mind next time you are deciding whether to send me an email as an update, or if you think that you need to spend time as 30 minutes I could have spent in front of a client. 30 minutes I could have spent in front of customs, dude. It was a waste of
Doug Draper 14:53
my time. Don't do it. Is your email actually that long what you just said? Or do you just keep it short? I'll just call them.
Pete Mento 15:00
Yeah, let's call talk to that. To me again. Please. Love it. All right, Doug, what's your halftime?
Doug Draper 15:06
All right? Well, I don't know if you knew, but Artemis two is getting ready to launch, and the window in which it opens is actually on April 1, which is an interesting funny, Yeah, funny. That doesn't mean it's going up April 1, but that's when the window opens and it's trip to the moon, or, I shouldn't say trip to the moon, around the moon, right? Four astronauts, 10 days living in a capsule, this whole thing, this whole flight. This isn't a Debbie Debbie Downer comment, right? It's basically like, okay, let's shoot some humans around the moon again. Let's make sure the spacecraft works, see how hot the panels will work when they reengage into the atmosphere, and let's bring them home safely before we try to do it again and land on the moon. I'm I'm good. You know, how many Apollo missions were there before we set ourselves on, put our feet, boots on the ground, so to speak. So my question to you is, would you go to space in this and I'm not talking about, let me back up. Would you be one of those four astronauts for 10 days living in a capsule, circling around. I'm not talking about a billionaire four minute, you know, float in space. Kenny Perry, type of engagement, but, but a real deal. 10 days you're one of the astronauts living at capsule. Would you do it?
Pete Mento 16:37
Hell yes. Doug, are you crazy? There's a great line from Kennedy. Frontiers are where you find them. Frontiers, where you find them. And the best of us as human beings, in my opinion, is our constant need to push the envelope to find out what's next, whether that's Lewis and Clark, whether that's, you know, our ancestors who left the relatively comfort confines of the East Coast and made their way west to find something better for themselves. It's Felix Baumgartner going up in a space capsule and parachuting from space. There's things to be learned. There are, there are so many beautiful, wonderful things that come from exploration and sailor, I want to find the edge of the earth. I'd be I would when I was a little boy, Doug, I thought about all day long, how can I get to space? And I still feel that way as an old man,
Doug Draper 17:28
yeah, you're not well, I'm not disparaging the mission. I think it needs to happen. All the things you spoke about are valid, but me as an individual, to be in a capsule for 10 days. Just send me a picture too. I kind of get it, and we'll let everybody else do the heavy lifting on that one.
Pete Mento 17:43
That would be the greatest profile picture for a dating website ever. You just sitting there in the classic astronaut pose with the helmet in your hand, with the American flag behind you. It's like, I don't care how brave you think you are. I went to space. Shut it. I tell a story all the time. I was on a I was on a hotel shuttle going from Houston airport to to the hotel, and there were two moms sitting across from each other, and in this lady said, What are you in town for? And she said, Well, my my daughter is going to go to the Olympics, and we're here to and that that felt like a trump card. She's like, No one can beat that. My daughter is an Olympian. She said, What are you hear for business? No, my daughter is an astronaut. In your face. Oh, your kid's a gymnast. So that's really nice. Mine's going to defy gravity. Shut it. Yeah, that would be the ultimate, the ultimate shutdown. I think, I don't know what it is, but I'm sure it's an impossibly low number, the number of human beings that have broken free of Earth's gravity and gone to gravity and gone to space Don't be a preposterous I think it would be fascinating to
Doug Draper 18:47
be counted. All right, good. Well, we learned a lot about each other on this go around today. Pete, appreciate it. Yeah, I'm crazy
Pete Mento 18:55
and you're not. I think it's when it comes down you make a lot less bad decisions with your safety. All right. Well, thanks cap logistics as always, for supporting us and for the mediocre job that Keenan does week in and week out. And with that, Doug, what's your second topic, buddy?
Doug Draper 19:11
All right. Well, something that happened in Houston late last week, it was, I'm gonna this is, this is super important. It was the and I'm reading this here, the new dynamics of North America trade, the review of the usmca 2026 I caught that one on my click. I got to figure out what this is all about. It was a conference where Katharina Ty right, Tia, pretty sure I pronounce that right. She's the former US Trade Representative. I talked about her in the past.
Pete Mento 19:46
You know her. I've met her many times. I wouldn't say that I
Doug Draper 19:50
know her connection there, yeah, very
Pete Mento 19:52
impressively, yeah.
Doug Draper 19:55
So anyway, they had this meeting, and it was put together by a think tank condition on my. Well, what is this? Is this something that's official? Did I miss something? And it was kind of a think tank discussion. Was at Rice University, so down in Texas, and then I started learning more about it, and then they're really starting to politic, to talk about the M in usmca, because Pete, I have to admit, I learn all the time that we're coming up on the six year review, right? I didn't know that there was like a six year review after the signing. So that happened way back in 2020, 2020, every six years, officially, it sits down and we review it and make sure things are going smoothly. That official review, believe it or not, is July 1 of 2026, three months, right? And so this little conference, which was put on by a think tank at a university, so it seems really formal and important, part of that was talking about all the successes that companies have had with developing supply chains to move product in and out Mexico, and so I didn't realize that three months from now, we're going to be doing a six year reset of what's going on. So I think we're going to hear a lot more about usmca. There may be some more conferences that are going to positioning themselves one but this had nothing to do with Canada. This wasn't the CA of the usmca. This was specifically the M and politicking for that. So the way I understand it, Pete in on the six year review, they're either going to extend it, amendment or tweak it, which could be, you know, all the all the above, it depends, but there's gonna be a lot more talk. I didn't realize this was happening so quickly and that it was in a formal review process here. So anyway, it caught my attention. I'm sure we'll hear a lot more about about this topic as we draw closer to July 1.
Pete Mento 21:58
The M in usmca is an incredibly important country, right? So depending on whose numbers you look at, they're either the 12th largest economy by GDP or by by by export volume, the number eight. They're going to surpass Germany this year be the number seven. Wow. And I'm old enough to remember when we lived in Texas, we go to Mexico because it was cheap and, you know, it wasn't looked at as the industrialized country that it is. Now. Mexico has taken its place amongst the pantheon of great global economies and growing every day, growing every day, from support by the US, by China, by Europe, they're taking the rightful place as a manufacturing and exporting nation. The usmca being renegotiated. It was supposed to be happening now, but it's not that review is really being held up by the current trade war, and the US has said that they're more than happy to walk away from usmca and just try to pursue bilaterals, which would be bad for everybody. The global trade works the best when there's deep collaboration, and rules about that collaboration and consequences. And right now, the consequence appears to be, we're going to walk away. That's not a meaningful consequence. A meaningful consequence. It's not a meaningful way to put together such an important piece of global trade infrastructure, Mexico is collaborating with Canada directly to negotiate against the United States because their two economies together are just too quiet to be, are too loud to be quietly, ignored any longer. And I'm glad, I'm glad that they're standing up for themselves. They deserve it. They've they've absolutely benefited more than any other country from the old NAFTA and the USMC usmca, and the amount of jobs that it's created and the strength that it's given them as a global superpower for exporting not just to Canada and Mexico. So I'm glad they are these types of third party think tanky trade powwows are wonderful, but if they don't affect the policy, what's the point? All it's really doing is bringing light and attention, you know, to it's like, you know, the pink ribbon stuff on breast cancer, a lot of that money is about awareness, right? We it's about awareness of the fact that this is such a debilitating issue for so many people. I think we're all well aware of it. I think we need to move past the awareness cycle of why Mexico and Canada in the US and our strategic partnership is so important, and move on to the execution and Betterment phase of it, researching ways to make it better every day. I think that's something that has to have a lot more focus on it, the people being aware of, right? How? Of what would happen if it went wrong.
Doug Draper 24:26
Yeah, interesting. I appreciate your commentary. Why don't you bring us home, my friend, what
Pete Mento 24:30
you got? Yeah, man, the last topic is one. I've been noodling around a lot lately. What's the next big merger? What's the next big merger? You know, I left DSV, and probably I would say more the back end of the of the acquisition of DB Shanker. I was there for that. A lot of work, certainly, but a lot of opportunity to a lot of positive that comes from that kind of thing for for the acquiring company. And it's got me thinking, well, what's the next big acquisition? And when you look at the law. Largest. And I'm only looking at the large the large forwarders. If you look at the large ones, I'm starting to think that the the opportunity for a big acquisition, it's getting harder and harder to to handicap. If you were to look at a company like expediters, who has never been for sale, never going to be for sale, right? Everything's for sale eventually. Who would want to buy them? And certainly DSV would be on that list. But what are you getting for that? You know, you're getting incredible service, culture, all kinds of great things. You're mostly getting customers. And I don't know if the the idea of growing a business would be more appealing than laying out all that cash. Well, that really got my attention is Keenan ago, kuenango had been number one forever. In order for them to get sort of an unsurpassable lead, you could talk about DHL and Kuna together. The problem with that is they're both German companies, and the likelihood that the German government would allow them to do that just doesn't feel very likely there will be something coming Doug. It always is in this industry. I just think we might be running out of dance partners to make a meaningful change to some of these larger force.
Doug Draper 26:08
Yeah, interesting. Do you think that there would be cross Tylenol colonization, where, okay, it's not a porter, it's a, you know, a domestic rail partner or something else, yeah? Yeah.
Pete Mento 26:22
I think that the forwarders have learned over the years that the deeper they get into assets, the harder it is for them to control their own destiny. It's possible, possible, but, you know, we reported it all the time. Such and such, such and such transportation company is getting rid of its asset based piece because they bit off more than they can chew. The market volatility is something they don't want to be a part of. Freight forwarding is a very agile business, because what you're really doing is selling space somebody else owns. When you begin to buy your own space, it gets harder. It gets harder, much harder. So possible, but I don't know if it would be as easy to sell to the people with the money as just buying another middleman. Yeah.
Doug Draper 26:59
Yeah. Valid, you know, I think the layer land, air and sea, and I kind of put tech in there, right. As far as movement that, you know, during covid, it was a horrific time in our history, but our industry benefited from it, right? And the the amount of money that tech people realize, like, what? What is logistics? I've never heard of that. Or, you know, I always joke at cocktail parties, nobody really understood what you did, or even cared about it, until covid, and then people were like, Oh my gosh. What about this? What about this? What am I going to get the shoes I just ordered? As mundane as that sounds, but I think tech exploded during covid. A lot of money wasted, lot of good money made, and then it kind of simmered down, right? And some of that Tech has either gone away or it has matured, and now we're kind of resetting. And to say, All right, well, logistics is still a liable investment, and I think that the tech play is going to be in there a little bit more so I can see some acquisitions on the tech side as well. Of size, that would be front page type of news. Yeah, it'll be interesting to see. There's been some big acquisitions coming.
Pete Mento 28:16
I I'm always happy to recommend a company like extraditers. Think they do excellent work. And one of the things about working there that I've never forgotten was there was a creed, right? There was there was a mission statement, but it was more of a creed, and they had a mission statement. All of us had to be able to just say on cue, much like being in the military. But to them, it was all about people process and technology. People process and technology. Process and technology. Can we make a process that we think is best in class? Can we man it with people that we think have the talent to do it better than anyone else? And then, can we create a technology that melds those two things to make it, make it repeatable, sustainable, profitable, and constantly improve those three things? Or people are processing our technology, I think that every freight forwarder is thinking that. I think that there are a select number of them that actually live by it, and the ones that live by it are the ones that will benefit the most from technology. They've got great people, they have fantastic processes. And when you put a layer of technology on top of that, you reap wonderful financial results. So I agree with you, Doug. I think if I were one of these companies, I would look at a meaningful way for me to digitize the great things that I do, to allow me to bring more shareholder value, make me more efficient and make me more appealing to the client base, who is being replaced, right? While people of our generation, the Gen X types, are beginning to retire, out and phase out of that industry. The younger people are much more comfortable, much more confident in technology, and they see its benefit. So I would not be at all surprised if that's the next thing that happened. People just started buying up technology to take something great and make
Doug Draper 29:55
it better. Yeah, yeah. Well, a good way to end the show. I appreciate. You being on as usual, even with your leg, I would hate to have you turn your camera around and see what your big paw is doing there, elevated there on your couch. But regardless, I appreciate you being here, and I appreciate all of our listeners every single week, listening to our rants, our comments, and we always appreciate your feedback. And as Pete says, if it's happening in global trade, we will be talking about it every single week on global trade this week. Thanks for joining us today, Pete. Take care, my friend. Thanks, buddy. Yep.
Transcribed by https://otter.ai