Houthis Step Up Attacks on Ships in Red Sea

A lot of people talking about where we are in the inflation cycle and they suggest that some of the supply chain issues have been resolved post pandemic. How much have they not been resolved post pandemic due to some of the conflicts that we've seen, particularly in the Red Sea. Hey, it's great to be here. Well, it, it seemed like we got things resolved last year in in 2023, but ever since these Hootie's started disrupting shipping as you're just talking about through the Red Sea, it is really dramatically lengthen the time to deliver cargo, which is a reduction of supply of shipping capacity. And that has led to huge price increases. Right now if you want to ship a container from call it China to here in the UK where I am right now, it's it's cost you about $10,000 unless you have a contract. And by the way, most of those contracts that were signed at lower prices are not being honoured. They're adding extra charges to them. So yeah, we're right back almost where we were in the peak COVID situation. Hold on a second pause. That's actually pretty profound. We're almost where we were at peak COVID. Are you saying that we have not yet seen the bulk of some of the price increases on goods tied to supply chain disruptions akin to what we saw back then? Because people haven't really maybe internalized some of the delays. Well, I'm not making a prediction about the future. I don't know if it's going to keep going up. And, and during COVID, we got where we are now. And then it just kept going and going and going. Right now, there's a lot of extra ships in the order books. These ocean carriers on the container shipping side ordered just a ton of more container ships. We've seen about a 30% increase in the shipping capacity, the container shipping capacity for the world. And that's going to come online throughout the balance of this year, next year and into 2026. So because there's so much more supply, people feel like, hey, after the next few months, we get through this current demand surge, then there's going to be enough supply and prices will come back down. We didn't have that in COVID, but we're kind of in those early days of COVID. I mean, $10,000 containers is something that we never saw until COVID for the last really since the invention of the shipping container. How concerned is the shipping world with the Red Sea right now? Oh, I mean, it's on everybody's mind. It's, it's causing delays and getting cargo delivered in addition to the price And, and delays mean you lose sales, you miss holiday season or you miss some planning. And not just the Christmas holiday season, but we have Mother's Day. There's all these other holidays. And if your cargo doesn't arrive on time, you may not sell it. You've got seasonal goods or just customers waiting for an order and you might lose that. You might lose that order to someone else who did a better job planning or understood better. And that's where technology can come in is give people visibility. When is stuff going to arrive? How do you plan it? How do you coordinate it? When you see a morning like today and you see a coal carrier being sunk in the Red Sea and you see rates going higher, can you project how much higher they're going to go? I, I can't we, if you could, you probably working Wall Street in a hedge fund doing something else. We try to be ready for whatever the world throws at us. It's crazy to see the video footage of that, of that ship getting sunk. Most of the container shipping lines are going around the Cape of Good Hope. They're not braving the Red Sea as as that ship did. So we sort of have a little bit more predictability about when stuff's going to arrive and and what's going to happen. But it's just very hard to know. You're talking about demand and supply, and there's a lot of factors pulling demand forward. People buying more stuff now to get it in before tariffs hit. We've got a potential strike on the East Coast of the United States and companies are trying to get cargo in before that hits. And then just if prices are going up, you should try to ship stuff as soon as you can, which leads to a cycle, which causes prices to go up. So there's a lot of compound factors that make prediction really, really hard. But as you say, Ryan, I mean, we're nearing some of the levels we saw during COVID. What scars do we still have from that. Is there anything that shippers, importers, what have you learned that's changed behaviour this time around in a time of tension? Yeah. You know, during COVID, it was it was really unprecedented, never happened before. And people were not prepared when price went way up and carriers said, hey, I'm not honoring this contract. The price has gone way up. You have to pay this higher price. People got very emotional, very upset. If the same thing happens now, they just remember, oh, that's how this works. The other thing that happened is a lot of ocean carriers signed long term deals during COVID. Long term, meaning two or three years at a price somewhere in the middle, like the market price was 15,000, normal price is 2. They said, hey, I'll do it for you for five, but you have to agree to pay that for 2-3 years. Almost no company in year 2 continued to pay. They all came back and said no, we want to go back down to the lower market price. And so these carriers remember that too. So it's a two way St. and ocean carriers are saying, hey, you didn't pay the higher, you know, you weren't willing to pay above market price. So now you have to pay at the market price. I'm not giving you a discount. And I think that's fair, actually. So, OK, some of that still ongoing then from COVID. But I can't help but wonder, Ryan, you talk about the other disruptions that shippers are trying to get ahead of, labour issues, strikes, tariffs. I know you're likely to tell us you're not in the business of making predictions, but I want you to try should those things come to fruition, Should we get continued Red Sea attacks plus tariffs plus labour disruptions? How bad could it get? Yeah, I mean, the the biggest, the one that can get really bad is the ILA. That's the union that operates the ports on the East Coast of the United States. Their their contract ends September 31st. So if they were to not strike a deal and just a couple of weeks ago, they called off negotiations trying to learn more about the automation strategies of these port terminals and ocean carriers. They don't want to see robotic ports. They they don't want to have their jobs impacted. If they were to go on strike and you couldn't import a container through the East Coast, it, it would definitely create massive chaos. You'd have to move all cargo into the US through the West Coast. It's not just the East Coast, by the way, the Gulf Coast as well that the ILA operates on. You'd have to move all the cargo through the West Coast. Those ports would be congested. Those ships would all be full. By the way, you can't just reroute a ship from the East Coast to the West Coast. The West Coast Union won't unload a ship that was meant to go to the East Coast out of solidarity. So you would see prices probably exceeding what you saw during COVID and and supply chain transit times be even worse. So that's that's probably the that the big outlier. Worst case scenario, hopefully, you know, the, the September 31st is what, 30 days before the election, 34 days or something. So I hopefully the government and Biden administration kind of at least hold would want to hold it off until after the election. It seems like it could be a real problem for them. The other things, tariffs, etcetera. We've seen a lot of that before. Might actually, you know, reduce demand, which would cause price of shipping to come down bad for the economy. I'm not sure it'd be bad for the price of shipping. Would probably help companies that that are moving goods, especially if their goods aren't hit by these tariffs.