00:00Let's turn back to Trey. The war in Iran, weighing on shipping as the U.S. blockade of the Strait
00:04of Hormuz enters day two.
00:06The Port of Los Angeles Executive Director Gene Soroka writing, it will take months to untangle global supply chains.
00:12The economic ripple effects are real. They are growing. Gene joins us now for more.
00:17Gene, a good friend of this show and thanks for making time for us this morning, sir.
00:21Let's start with the economic effects, the ripples you're seeing. Where do they start?
00:25How have they started and where are they going from here?
00:28Good morning, John. An adage in our port industry is that for every one day of service disruption, it takes
00:36about three days to catch up.
00:39Now we're looking at about four and a half months with respect to the Strait of Hormuz to get all
00:45these ships, container, tanker, bulk back into normal rotations.
00:50Now, there may be some fits and starts and some quick answers that could be delivered.
00:56But once the Strait is open, there is a lot of work to do in the supply chain.
01:01We're seeing right now where vessel fuel prices have doubled over the last month and a half.
01:07And that carry-on effect to importers and exporters right here in the U.S. is happening today.
01:13They probably will simply pass on these costs to the American consumer and buyer.
01:19So, Gene, fuel costs are going up. The length and duration of the trips is getting longer because they've had
01:24to reroute a lot of this stuff.
01:26We've seen diversions pop up in different places as well.
01:29From your perspective, you're expecting congestion as well.
01:32How lumpy are some of these arrivals going to be and how complicated does that make life for you?
01:37Each trade, John, is a little bit different.
01:40For now the 45th, 46th day, you're not seeing a lot of traffic move from Asia to the Arabian Gulf.
01:47Red Sea and East Africa also disrupted.
01:50In the Trans-Pacific trade, the ship transits are fairly normal.
01:56We're seeing the regular departures and arrivals from Asia, but it's the ports that we share with those Middle East
02:03destinations that are becoming somewhat worrisome.
02:07Singapore, Kaohsiung, Shanghai, Korea, and then Japan ports.
02:12If this cargo continues to pile up at these locations, it may just simply get in the way of cargo
02:18that's more fluid like that coming to and from the United States.
02:21I must say, though, with calls over the weekend and last night, the Asia ports are doing a fantastic job
02:27of keeping that cargo separated.
02:29So the fluidity of the trades that continue to move remains intact.
02:34Gene, when you see individuals having to change basically some of their supply chain routes because of what is going
02:40on,
02:41do you see any of this sticking even if the strait opens?
02:43We have a little bit more of a structural changes going forward.
02:47Anne-Marie, this is always an outcome of disruption.
02:50Once cargo finds its way to a cleaner or smoother path, it tends to stay in that way for some
02:57time.
02:58We've had troubles over the past years with drought conditions in the Panama Canal,
03:03the Red Sea security issues leading to drops in Suez crossings by up to 80 percent,
03:09more cargo now moving towards the west coast of the United States in that trans-Pacific trade,
03:15where previously it had alternative routes and those that were quite lucrative for shippers going through those canals.
03:22More than likely, what we'll see is a reset at some point because that consuming public in the Middle East
03:29is very strong.
03:30Albeit only 10 percent of worldwide container trade,
03:33the buying power for furniture, footwear, perishable commodities and other retail goods
03:40will continue to be a primary market for those serving the Middle East.
03:44I know there will be a delay even when the strait opens,
03:47but we haven't even seen the Red Sea get back to normal levels given what took place in the previous
03:53years with the Houthis.
03:54When do you think the Schrader for Moose will actually get back to normal levels after there is a more
03:59lasting ceasefire?
04:01That's the biggest question, and I don't think it's going to be a straight line, Anne-Marie.
04:05One day we're going to get a message that says all clear.
04:08I think this is going to be an iterative process.
04:11We're hoping that both sides can get back to the negotiating table to find a way towards some semblance of
04:17a truce
04:18and then start having a conversation about the commercial implications and how we restart this engine.
04:24Right now, this blockade is for negotiating purposes to try to put some pressure on the system,
04:32and especially with the price of oil over $100 a barrel, this is a huge revenue pop for some,
04:38and it could be a tremendous cost implication for those that can't get their oil and energy products to market.
04:47Probably at the same time, there's some mind-sweeping going on in preparation for the day.
04:53We can see that straight open up a little bit, but when we've gone from basically 110 ships a day
04:59down to just a trickle,
05:01it will take some time to get these products moving in and out.
Comments