YouSaid · the spoken record

Sal Mercogliano

lines on the record: 105
first: 2022-08-25
most recent: 2022-08-25
sittings or episodes: 1
sources: podcast

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“Lot of investment over the past 10 years in Savannah, Houston, New York, New Jersey, Dredge raised the Bayonne Bridge, new facilities so you can bring these larger vessels in.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Cargo, but more importantly, you're bringing the cargo closer to the population because what was eating you if you're offloading in LA and Long Beach was the constraints, the time, and then you had to get on rail largely and get it from LA Long Beach to Dallas, to St. Louis, to Kansas City. And so that was, especially with the rail lines killing you, now you can bring it right into Savannah where the southwest population is, or to Houston, the southern population or New York, New Jersey, the Mid Atlantic, New England, and get it directly to them. But this also involves a lot of investment by companies in warehousing and storage areas, but it gets them out of LA and Long Beach, which they just see as a black hole in some cases. You got to remember, LA and Long Beach was handling 40% of all the containers coming in, and it was only growing. And now these new ports are really competing with them. And that's why you saw.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Gargantuan compared to these other guys. And they can basically control this. So you're going to see these companies be much smarter in their operations. They're going to get rid of this tonnage. They're going to bring in more fuel efficient vessels, vessels that they can swing between routes better. So for example, one of the biggest ships we're seeing built right now are these Neopanx vessels. These ships that can go through the new lane of the Panama Canal that opened in 2016 and you can bypass LA and Long Beach and go directly to the East Coast from Asia and still carry 15,000 boxes. You know, the old lanes, you can only fit 5,000 box ships. Now you're bringing 15,000, 16,000 box ships. And now you don't go to one port, LA. You go to four ports on the East Coast. You go to Savannah, you go to Norfolk, you go to New York, New Jersey, you go to Houston. Which means you're only offloading 20-30% of your...”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“So there are companies like CU lines, SM lines. These were typically smaller feeder companies, express lines. They were doing a lot of services, you know, maybe run a few thousand miles between ports. They would bring containers from smaller ports to bigger ports to load on the bigger vessels, or vice versa. What happened in 2020 was all of a sudden some of these ships said, well, I'll get your cargo from Shanghai to LA, and I'll pack 500 containers on here for you, and I'll move this ship off, and I'll get it over there. And so all of a sudden, all these new companies came in and you heard Gene Siroka and Mario Cadero, the heads of the ports of LA and Long Beach, talking about, oh, we've diversified. We've got a lot more new players in, but small percentages, small percentages they were bringing in, the big, you know, the Maresk, the Mediterranean shipping companies, the hop hogs, you know, these are the ones that are behemoths. I mean, they are just.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Able to control the amount of space on ships moving across. You hear a lot about, well, there's other, you know, there's new players in the market. They're really, really small. They're providing niche services here and there. They're nowhere near the size of the big companies. And so the big companies.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“I think in terms of the container companies, again, they're much more concentrated in the hands of smaller, of larger companies, but less of them. And so they're more able to control the rates now than they've ever been in the past. So again, they can just lay ships up. And this is going to happen, by the way. Let me be clear. Container companies are going to scrap vessels like crazy once this market begins to dry up. Everyone's worried about the overbuilding in the container companies. My argument is, listen, they're running ships that shouldn't be running anymore. They're at the end of their lifespan. They would be very uneconomical ships to run any other time but right now because the freight rates are so high. So what you're going to see is a mass exodus of ships heading to the beaches in Pakistan, India, Turkey and Bangladesh to be recycled. And so they're going to weed themselves of this tonnage. And so they're going to be able to...”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“And eventually, if that dries up, then you got to restock. And that may be a moment where we see shipping kick back up. So I think we're more at a midpoint here, but it's a midpoint. I think we're going to see a normally you would see just one dip. I think we're going to see two. We're seeing the dip right now from COVID. I think we're going to see another dip down. And then conceivably, we'll see it spring back up in 2023. And then maybe... Level will be. But again, I go back to the issue with the ocean shipping companies. They are much smarter today than they were five years ago. And they've got a taste of profits. They know how to manipulate the system a little bit now. And they realize what they need to do to keep their rates up at a high level.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“So, I think we're really at that inflection point if we see a crash in freight. It's going to be December into March, where we would see it happen. But I think it's really driven by the overall economy. If we hit that recession and people realize they have less money in their hands, then we're going to see it. And the other problem you have, too, and it's a really important one, is that so many goods have piled up within the supply chain from the ports to the consumer that they got to clear that backlog. They've got to clear that backlog. And so what they keep doing is lowering the price of goods. And people are like, I got to buy it. It's too cheap. I'm going to keep buying it.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“They've been record high. I mean, they've been just ridiculously high. And I think we're going to still see high freight rates. I think, again, consumers have shifted their buying patterns. People are buying and ordering things more than ever before. And I think, you know, whether it's the grocery store picking up your bags of food or ordering online and having stuff shipped right to your house, you've seen that. So I think the ocean freight rate, you know, a lot of people want to talk about onshoring technologies and goods As long as it's cheaper to move goods across the ocean and even though a freight rate may be five times higher than it was you know if an ocean container cost 1500 a ship announced 10,000 how much is that if you spread it across an ocean container full of phones for example you know it goes from what a penny to two pennies maybe or five pennies it's not a lot some goods will change obviously”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Money in their hands are dangerous. They're either going to do something very smart or very stupid. And shipping companies are flush with cash right now. And a lot of them are investing in this new technology. I think one of the things you're going to see is increase in ship costs just to build ships because we're changing technologies. We've seen it right now with transportation costs. One of the underlying currents no one ever wants to talk about is the increased cost of fuel oil right now. It's through the roof. I mean, it's just really expensive to bunker a ship and that gets passed on to the shipper and turned onto the consumer. I think The big moment is going to be the end of this year or the beginning of next year. There's always typically January to March is when freight drops. I mean, just the amount of ocean freight typically drops. You've got the end of the holiday season in Europe and North America. You have Golden Week and Lunar New Year in China. And so March has historically been like the low point. But if you look at the past two Marches,”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“What has driven this before, and Martin Stopford, who wrote Maritime Economics, talks about shipping cycles. And I think he has it all the way back to the 1700s, where he tracks literally like every shipping cycle that has ever existed. There's a couple of things that throw off shipping cycles. One is technology. Technology has been the introduction of the Clipper ship, the introduction of steam power, the introduction of the submarine cable, which all of a sudden linked the world together so that you can route ships better came in. Most people don't then think about communications that way, but it was a really big thing instead of sailing to a port to see if you can sell a cargo. Now you're getting information where to go with your cargo to sell it is better. So technology has always been that big issue. And I think that's one of the big things we're watching right now. Shipping companies have got a lot of cash in their hands. And I make a joke that sailors would.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Over a year now, waiting to get the permission from the maritime administration to open up. So, I mean, we're seeing the potential for growth, but until those permits come out, you know, you've got a lot of LNG bottled up in the United States that can't get out as fast as it needs to.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Liquefied natural gas up in the Arctic. And so they had been a big carrier of it. Now they've invested a lot of their fleet. They're trying to play a bit of a shell game right now in getting those ships under different companies and different flags so they can operate. But yeah, I think Flex LNG is one of the big ones to watch in my opinion. I think you definitely see them. We've had a series of incidents, but again, I mentioned Freeport. There was another one in Oklahoma recently. Again, I think demand has increased so quickly that in some cases not all the necessary safety precautions are probably being taken. I'm a little worried that you're going to see a backlash of that in the U.S., that they may really try to restrict that. We've seen the slowdown in getting new LNG ports built in Texas. There are three in Texas, one in Louisiana that have been”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“To do it. And so one of the things you're seeing is these vessels, these basically these intermediaries between the LNG tankers and shoreside facilities coming in where they're pumping to. And so Europe is developing it. And Europe is fast tracking this. This is going to be a fast track for Europe for them to be able to do it. They can't wean themselves off Russia as fast as they want. I know we hear about sanctions against Russia all the time, but they can't wean themselves off as fast as they like to say. I mean, you're not talking about until Christmas 2022 some of these sanctions even kicking in. And so the demand in Europe is spiking. At the same time, you still have that massive demand in Japan, South Korea, and China for it. China is the biggest one right now. And again, they're getting it from Australia. They're getting it from Qatar. And so this market has been really good. And understand the Russian fleet was a big carrier of it too because they were making...”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Right. And those are two of the big ones, I would argue to watch. And again, the U.S. has seen, you know, since 2016, remember, LNG was not an issue at all in the United States. It's pre-fracking this was not anything. We export almost no LNG at all. And when you look at EIA's reports on this and you just see this growth, I mean, just it's phenomenal amount of growth in this coming in, it has been a huge demand. LNG tankers, however, are the most expensive ships to build because of the technology involved. You have to get the temperature down negative 200 Celsius. So, I mean, it's a lot of technology involved in it. And plus, you need the transfer facilities to be able to offload it. It's not like pulling up to a dock and offload this. You need the facilities. That's been the big issue in Europe right now is because they were getting so much liquefied natural gas by pipeline. They didn't have the facilities ashore.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“The cost, I think, of natural gas in Europe is something like five times higher than the cost of natural gas in the US. The problem is you have to liquefy that natural gas and then put it on a trans oceanic ship. What is the capacity like that for in that in the US? And then I know what are the sort of companies that do that? I know there's Flex LNG, FLNG is the ticker, and then also a huge company, Chenier LNG. Most of their operations are producing like-weight-defined natural gas, but they also ship it, right?”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“They can control a lot of the market in some ways. And the technology side on ship propulsion is, I would argue, the one thing that's holding everyone back, or else we'd see a huge shipbuilding spree right now. I think that's the issue that's got everybody really nervous.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“In early 2020, you made a tremendous amount of money very quickly because all of a sudden it happened. Usually it's very much locational hurricane comes rolling into the Gulf of Mexico. If you happen to have tankers in the right area, you make a lot of money all of a sudden. This is a global phenomenon. And that's the thing. When we have global issues, that's what really pushes the tanker market a lot. And we're seeing that. And I think, for example, LNG is the one to watch a lot right now because it's a cleaner burning fuel. There's huge demand. Remember, our biggest exporters of LNG has been China, Japan, and South Korea, but now Europe is demanding huge amounts of LNG. And so the question is, can we meet that demand going in? The Freeport explosion slowed that down. Qatar is in a really good position because they don't just produce it. They also have the ships to carry it.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Look at a Euronav or a TK, for example, that's crude. That's moving crude oil around. Much different than refined products. So if you start looking at refined products, then you're looking at DHT. You're looking at OSG, and you see that market, how they react a lot differently. And again, you see where the demand kicks up. Again, the issue with Russia and Ukraine has been the overarching issue along with the change in demand of fuel. As COVID has worn off and now people are traveling again, we're seeing that uptick in the amount. And again, it's been hard to explain why tankers have been so low for so long. Because, again, they should be kicking back up and they just have not done it for a long time. And I think a lot of people get afraid of it because they invest in it and then they don't see that all of a sudden that huge mass of windfall that people talk about. But again, when it happens, it happens quick. You know, if you were in town.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Right. Well, you know, I think where you see that is in the bulk market, actually. So, you know, when you saw the market take the tumble it did last month and everything tumbled down. And if you look at stocks, a lot of the shipping stocks tumble down. The dry bulk tumble down, which made no sense. Let me be clear. It made no sense for it to tumble because they were in a good position. They were, again, with a shutdown of grain coming out of Ukraine, the sanctions against Russia. We saw a dry bulk really tick up in huge numbers. I mean, they were moving food. There was a huge demand for them. And I think a lot of people are getting involved in shipping, you know, who are new to it. And again, it's following the market in some ways. But what you saw just recently is the correction. I mean, all of a sudden it's back up again. And we're seeing that with dry bulk. All of a sudden takes this huge kickback up all of a sudden. And tankers are very much that same way. Again, people think tankers are in some cases generic and they're not. They're very particular.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“It sounds like there's a little bit of a disconnect between the price of tankers and the future supply of tankers based on what you just said and the current spot rates for carrying them. If you figure if a house is worth X, ideally it would generate like 5% in rent. And those two things ideally should be correlated. The carrier rates have gone up so much for tankers why are the ships themselves still relatively cheap?”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“You can operate. And so a lot of companies are waiting for what's going to be the next thing. Plus, you got to have availability of that fuel. You have to have bunkering capacity. It's not like you just pull up to a pump and you flow hydrogen or liquefied natural gas. You've got to have all that facilities in place and you've got to have the supply for it coming in. So there's a lot of logistics involved in this. And so ship companies are slowly introducing new technology into vessels, but no one wants to jump in and be saddled with a ship that may be obsolete in five to ten years because the new technology appears and we can't change it.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, it's no unsure what the new technology is going to be. It's going to be what's the next technology. For example, build a liquefied natural gas ship that runs purely on a liquefied natural gas, well, you need a huge amount of it on a ship where you see those ships right now are really in what's called the feeder service. They operate short runs, smaller vessels. So, for example, Hawaii to West Coast or West Coast to Alaska, or very small. Transoceanic is a big problem because that's a lot. What you see with LNG ships right now is smaller tanks on bigger ships. They just burn it when they come within the coastal waters of a country. LA talking about going zero emission from Shanghai to LA by 2030? That's eight years. You know, that's a crazy number to come to. But they're talking about creating these green corridors.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“So, is it just that the clean vessels, they're not able to be built yet, that the vessels that the shipping companies know that they need, they don't know exactly what they are, and no one's capable of building them yet? Or is it just something else? Yeah.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Is going to be liquefied natural gas. It's going to be ammonia. It's going to be hybrid. Nobody knows. And the reason containers are being built right now is because there's a market for it and there's a demand for it and therefore they're going to build them.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Has an international component to it. I think you're about to see that happen. But again, we're building containers because of demand. Demand is up on that. But the other thing you have is a big regulatory issue. We're in 2022. There's new regulations coming in about ship fuel and emissions. And the big goal is to reduce emissions in ships by 50% by 2050. That's put out there by the UN's International Maritime Organization. Lifetime of a ship is about 20 to 25 years. So you've got to think if you're buying a ship today. That ship has got to be compliant with reductions in emissions over because it's phased. It's not all of a sudden 2050 or down 50%. So you got to put an engine plan or the ability to update a vessel at time. And so a lot of ocean carriers are putting off building anything right now because of that because they don't know what the new fuel source is.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Well, there's a couple of reasons. Number one, the demand has been down. Tankers have been at the lowest level they've ever been. And what we're starting to see is the tick up now in tankers. Tankers are finally coming up. Everyone's been predicting a rise in tankers for years. And it just, it's one of those markets that are just pendulate. But one of the things we're starting to see now, and again, Russia, Ukraine has been a big influence of this, is that now all of a sudden the movement of oil, of refined products, of LNG is in up demand, and therefore we're starting to see that. So when you look at companies like Scorpio and Ardmore and Nurnav and DHT and OSG overseas shipping, which is, I think, one of the big companies out there that's ready for a boom, there was an attempted takeover of it last year that kind of failed because it came in too low. But here's a company that operates in that protected trade of the United States, but also”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Ships are not a problem. We got plenty of ships and we're building more ships. And so, you know, when you look at the building market, this is another element that's really important. What we're building right now is container ships. That's what's being built. Dry bulk and tankers are not being built”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“On the demand side, COVID changed everything, but on the supply side, what are the bottlenecks? Is there not enough ships or is there not enough ports? What is the reason that supply is not coming to meet this awesome demand?”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Last year is not happening. There's not 100 ships off LA and Long Beach. There's 15 off LA and Long Beach. But there's 40 off Savannah now. Because what ocean shippers have realized in working with freight forwarders and the people who move cargo is we can't put everything through LA and Long Beach instead. We're going to use these new vessels and haul our cargo from Asia to Europe and then smaller vessels across the Atlantic or we're going to use the new lane of the Panama Canal opened in 2016 with these large Neopanx vessels and we're going to sail directly to the East Coast of the United States. We're going to bypass LA and Long Beach. We're going to come right here to a port like Savannah that is open for business, just dredged, plenty of land to buy to build warehouses, and we're seeing a big shift in where goods come in and out of this country.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Is on the horizon. It's going to be the end of 2022 into 2023 where we're going to see those things happen. That's the natural moment when freight comes down. We didn't see it this year because we were still operating in a covet. I know everyone forgets, but we're still in a COVID environment. And I would argue that the economy hasn't quite figured out yet what the consumers want because now we've got people shifting to work from home. There's still a lot of flux in the economy right now. And again, the recession or the looming potential of a recession has people changing their buying patterns, but shipping doesn't change very quick when it comes to buying patterns. Again, you've got to be 120, 180 days in advance. And we still see record volumes coming in. And one of the other things we're seeing is the shipping companies are being very adaptive. They are changing things. The logjam at LA and Long Beach, for example, that everybody saw.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“If you're going to IPO a container liner, Zim had the time. They definitely were on the right moment at the right time to do that. And again, shipping companies were one of those stocks that it's very interesting to follow. Because again, there was only a few people following them, and they tended to be very niche, not a lot of people looked at it. And what you saw was all of a sudden everyone saw, well, this is great. I'm going to make money in shipping. It's the way to go. But you've got to be very careful because when it takes that downturn, it takes the downturn fast. So, for example, in container shipping right now, you know, everybody was forecasting, okay, we're going to see freight rates plummet off and therefore stocks are going to plummet. That's not happened yet. And what we saw was the second quarter coming in for all these companies is record profits still coming in. Now, you need to be aware that this is going to happen.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, just to give an example for the audience of how profitable these companies are, yes, they had a very bad decade. Over the past decade, but I think Zim, the company you mentioned, a charter company out of Israel, they paid a dividend in the first quarter of 2022. And that dividend was more than the stock IPO'd at in 2021.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Bought out, but they start operating with other companies, and so they start working in a sharing agreement with them so that they won't compete against those companies and they'll make sure they get a share of the route to them.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“For example, operates in the coastal protected route of the US. They control the Hawaii to US trade, whereas ZIM's a global contender, they operate on the world scale as an independent, but probably going to see them fold into an alliance fairly soon. And so, you know,”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“The top 10 companies carried 50% of the containers. Today the top 10 companies carry 85% of the containers. And so what you saw were companies like Hanjin Marine, which was a Korean company in 2017 go under because basically a group of container companies ganged up on it and basically ran it out of business. These alliances now are coming under a lot of scrutiny in the United States, the passage of the Ocean Shipping Reform Act, and even in the EU, the consortium that allows us to happen is being analyzed. So right now there's a lot of money to be made in containers. Everybody's seeing that. They're seeing the profitability of them. They're seeing cash dividends from companies like Zim and Matz and Matson had a great second quarter, just fantastic. They're making money great. The question is, what happens with it? And you got to be very careful because they're not interchangeable, a lot of these container companies. They operate in very unique routes.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“If you watch the market close enough and you can read kind of the tea leaves a bit, you can invest at the right time, make a lot of money and dump back out and get out. The rest of the time, you got to be in a kind of for the long haul. And one of the things we saw with containers in the 2010s was just, I would argue that the companies that were involved at the time were doing a lot of things to run their competition out. So they were very predatory against each other. So they were building these big new ships. Again, they thought economy of scale. I'm going to get my freight rates, my cost down because we're operating in low freight environments. So the way I make money is by hauling a lot of containers cheaply. Well, when demand goes down and everybody's doing that, you run in the problems with that. And then the other option is to slow the ships down because you're not burning as much fuel. And so what you saw was a lot of cutthroat elements there. You saw a lot of container liners go down. Again, go back 15 years ago.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Right. Well, you know, shipping historically has been a long term. It's a long term investment. You're in it for the long term. You're not going to see quick runs. But one of the things that's very unique about shipping, and we usually saw it in the tanker market. This is where you saw it more than anything else was in the tanker market, where if you were in at the right time, at the right moment, you make all your money. You make all your money at one moment if you're investing in stocks. If you're shipping companies, you would make money in one quarter sometimes because all of a sudden the rates would happen or you were in an advantageous position to be in where all of a sudden you were in good. So, you know, for the tankers in 2020, when all of a sudden everybody stopped driving, all of a sudden there was all this gas and diesel being made that wasn't being consumed. And so if you had a tanker, you made a fortune just having your tanker sit there loading fuel and not going anywhere. It was great. It was just literally you're renting out your tanker as a storage facility. And so one of the things we've seen historically in shipping.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“This is just a correction that's taking place in the overall market, not in the industry itself. So I think ocean shipping is in a pretty good position.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Which is really completely independent of what's going on with shipping because what shipping is doing in many ways is in the forefront. It's already have accounted for it so that when you look at commodities being hauled on dry bulk vessels or fuel, you already know what's happening. Smart person sits there with Russia, Ukraine, and sits there and says, dry bulk market's going up, tankers are going to go up. They may not go up immediately, but they're going to go up just because of the disruption this is going to cause. And then the other issue I think really with the market is when to get out, because again, unless you're watching it very closely, it's hard to tell when to get out because things are going to go bad. I just watch the market take this huge tumble and everyone's like, sell, sell, sell, sell, sell, sell sell. It's like, nope, don't sell a thing. It's going to tumble down. It's going to look terrible, but it's going to spring back up because.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“The variable here, too, I will also argue is the amount of people who are getting into these stocks. Again, who don't understand the stocks, who will sell and buy based on what the Dow Jones does, what the S&P does.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“I think ocean shipping is pretty strong right now. I still think everyone is talking about, well, we're coming off that peak. Still pretty high up. I mean, it's still at a pretty commanding level that we're at. I think the ocean carriers are much smarter than they have been in the past. I always got to get worried about the greed because once that kicks in, will they start going against each other? Will they start trying to run each other out? I think that's always lingering on it. But I think the taste of profitability they saw, and like you said, you know, you look at those graphs of, you know, what the top nine container companies were making in 2010 and then you throw 2021, 2022 on there. And you're talking about 50, 60 million billion, excuse me, $50, $60 billion worth of profits. More profitable than Facebook, Amazon, Netflix and Google. You know, it's just crazy amount of money.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Because they want to keep those freight rates high. You got to remember in 2021, the ocean carriers, those top nine companies made as much profits in a single year as they did in the entire decade of the twenty tens. It's just record profits. And ocean carriers want to get back to that. And they're going to do what they can to kind of manipulate the system as much as they can by controlling the supply of ships and containers to keep freight rates, not at the tremendous level they were, but at a much higher than they were. You got to remember, pre-COVID, you were talking about moving containers for 1,500 to $2,000. At the height of COVID, you're talking about $25,000. Right now, we're talking about anywhere between $6,000 and $10,000 depending on the route.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Some people call a cartel. The president called it that in a state of the union speech, but they get into these sharing agreements. And these three big alliances basically divvy up among themselves about a third of the route among each of them. So if you're going from Asia to the west coast of the United States or East Coast or to Europe, you basically see these large ocean carriers, these nine big companies that control 85% of all the containers afloat, they are basically controlling that movement. And what we're seeing happen now as rates begin to fall and as cargo volumes begin to fall. It's still high. We're still at, you know, everyone's comparing everything to last year. And last year is the abnormal year. It was just a crazy year. But if you look at where we were pre-COVID, for example, we're way above where we were. And one of the things the ocean carriers are going to start doing is controlling the voyage of vessels. They're going to start cutting voyage.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Cube the volume of the vessel, which means you can carry more. And one of the things we saw was container rates went to this huge level that we'd never seen before. Now they're down. Now they're coming down off that. But a lot of people were talking about it falling off a cliff. I don't think we're falling off a cliff. I think we've kind of plateaued. We're still high coming off the backside of Mount Everest, it's still dangerous. You got to be careful. You're only halfway down the tallest mountain in the world, so you can still die. And what we see here too is the container companies are a lot different than they were a few years ago. One of the things that's happened beyond the new build ships is since 2016, these container companies, especially the top nine, are in these three large alliances.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Right. I think the biggest one you see falls in is containers because containers were at Mount Everest. I mean, they were at the highest we've ever seen. Even if you go back to pre-2008, because that was the big level. I mean, pre-2008 recession, containers were at this huge super level. But what happened after 2008, beyond the recession, was, again, overbuilding. The ocean carriers got into this shipbuilding race, where the container companies started building these mega ships. You know, if you go back 15 years ago, the biggest ships carrying containers out there were maybe about 8,000 boxes. MSC just lost Mediterranean shipping company, the largest container carrier in the world, just launched a ship capable of carrying 24,000 boxes. So, you know, the scope and scale of these vessels is incredible. Think ever given in the Suez. And it's all economy of scale. Again, if you build a ship longer, wider, and deeper, you...”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“And you can move it across the earth in these mobile carriers. The tanker market has been turned on its end because of what happened in Russia and Ukraine. All of a sudden, you don't have gas and oil coming out of Russia. You don't have liquefied natural gas coming out of Russia. And so you have to make up for that. So, for example, early in 2022, the US became the largest exporter of LNG in the world. We surpassed Australia and Qatar. But then you had the Freeport explosion down at the LNG facility that knocked the US off that precipice, but were slated to get back up again when that facility resumes back to full production later in the year.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“It in an attacker is a dirty tanker. You can't really put clean products in it. Clean tankers are, or product tankers are gas, diesel, any sort of refined gasoline. They tend to be smaller, but this is where we saw, for example, the issue with diesel shortages in the northeast. One of the things I'd be very careful of telling people is if you remember when diesel and gasoline was short in the northeast, it really wasn't. What you had was a lot of speculation going on where gas and diesel was being pulled out of the northeast and sailed across to Europe because it was much more profitable to sell that in Europe than it was to sell it in the northeast of the United States. And then the last element you have in here is the liquefied natural gas. Liquefied natural gas and also liquefied petroleum gas is the other one. These are special carriers that refrigerate basically a gas down to a liquid.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“Is true in the tanker trade, which we'll talk about in a second, is how the tanker trade changes in terms of volume of not just the amount of cargo, but the distance it covers. So if you have a ship that's doing normally six voyages a year, but now all of a sudden because of a closure of a port or because of a demand, it now has to travel twice that distance. It's only getting three voyages in a year, which means it has to raise its rates to make up that offset cost. And so that if you're the purchaser of that grain or ore or whatever it happens to be, you're paying more for it. In the tanker market, again, you have kind of three subsets. You have what's called the crude sector or the dirty sector. Crude oil is exactly that. This is oil that needs to be taken from where it's basically taken out of the ground, either ashore or at sea, and then brought to refineries to be done. And crude oil, once you...”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT
“And material rare earth minerals and iron coming in. And so we're literally picking pieces of the earth up, putting them into large volumous ships and moving them around. And this is in different elements of trade. So when you start talking about bulk iron, for example, and coal, those tend to be very large vessels. And these are vessels that sail pretty much transcendic voyages, you know, from Western Australia to China, from Brazil around the Cape of Good Hope to Asia. Those tend to be the big ones. And then the medium size, to the smaller ones, tend to be the grain ships. These are the ships that provide food, wheat, corn, sunflower seeds. You name it. And those are the ones that provide the food commodities. And the really important thing in the bulk trade to watch is not just tonnage, but also the voyages, the ton miles.”
2022-08-25 · Forward Guidance · The Global Shipping Crisis Is Not Over | Sal Mercogliano · IDENTIFIED FROM THE TRANSCRIPT