SIMON WARD (expert) | Shipping. And is Chinese Shipping a Risk to Global Trade?

Privileged Discussions is now Global Trade Deciphered, a sharper reflection of our focus on global trade and business. Same expert insights, new name. Global Trade Deciphered is a Privileged Discussions Productions podcast. Thanks for joining us!

Episode Description

Justin Hayden Miller (Global Trade & Customs lawyer) invites Simon Ward (shipping expert, broker and Professor of Shipping).  They discuss global shipping and whether Chinese shipping represents a risk to the United States and world trade, as well as issues such as the Panama Canal.

In particular, the episode addresses:

-  Why shipping is important.

-  How the shipping industry operates.

-  The decline of British and US shipbuilding. Port of Liverpool, LFC, The Titanic, White Star Line; liner trades

-  Present shipbuilding. China, South Korea and Japan

-  Whether the Chinese practice unfair competition in shipbuilding against the United States

-  The US' potential to industrialize using shipbuilding; Japanese shipbuilding, demographic pressures

-  Global Shipping Disruptions. Disruption created by Covid; Putin; Ukraine; Suez Canal closure because of Houthi rebels and the Panama Canal: the effects

-  Chinese shipping dominance and influence

-  The Panama Canal Its significance; global shipping routes

-  TBaltimore and the Francis Scott Key Bridge collapse; US infrastructure concerns, and re the Panama Canal

-  Globalisation and protectionism

-  Suez Crisis 1956

-  Shipping and inflation, container pricing

-  Tariffs and the consequences for the shipping industry 

-  Predictions concerning China; Taiwan; demographic considerations

Artistic references: Titanic (1997 film) Directed by James Cameron and starring Leonardo DiCaprio & Kate Winslet. Paramount Pictures, 20th Century Fox

CONTACT DETAILS:

Justin Hayden Miller’s contact details:

Twitter: @JustinHaydenM

LinkedIn: https://www.linkedin.com/in/justin-hayden-miller-7b2a695/

Email: PrivilegedDiscussions@gmail.com

Simon Ward’s contact information:

- Blog : https://ursashipbrokers.gr/

- LinkedIn profile: https://www.linkedin.com/in/simon-ward-ursa/

- email: smw@ursa.gr

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Chapters

• 0:00 Intro
• 2:03 Importance of Shipping / How the Industry Operates
• 9:08 The Decline of British and US shipbuilding
• 14:55 Present shipbuilding
• 19:41 China and Geopolitical Shipping Disruptions
• 26:09 Perfect Competition in Shipping
• 28:36 The Panama Canal
• 34:19 Shipping and Inflation
• 36:40 China and Predictions for the Future

Transcript

SPEAKER_01: 0:00

Today on the show we have a shipping expert, Simon Ward, a maritime specialist, ship broker, and professor of shipping at the University of Perez in Greece. We'll be explaining some basics of shipping before analysing some very key important topical issues that will interest professionals as well, including whether Chinese shipping poses a threat to the US and to world trade. Here's a taster.

SPEAKER_00: 0:33

China is.

SPEAKER_01: 0:36

Welcome to Global Trade Deciphered. I'm your host, Justin Hayden Miller, a global trade lawyer with a leading European firm, decoding the policies shaping global trade and emerging trends. Simon Ward is a ship sale and purchase broker. He began his career in shipping in Liverpool and for many years was a ship broker for HSBC shipping services in London and then in Greece. He is currently Director of Sale and Purchase at Ursa at URSA, Fellow of the Institute of Chartered Shipbrokers, supporting member of the London Maritime Arbitrators Association, Prize winner in legal principles of shipping. Simon, you are also clinical professor of the Department of Maritime Studies at the University of Piraeus and winner of the Ted Renshaw Prize for your contributions to professional maritime education. Simon Ward, welcome to Privileged Discussions.

SPEAKER_00: 1:40

Very happy to be here.

SPEAKER_01: 1:42

Well, we're very pleased to have you here as well, and uh I'm convinced that our listeners will find what you have to say on this subject extremely interesting. I certainly am. And I also feel that you know the the undoubtedly ties with current world events, which we'll sh surely probably get on to discussing. I suppose that the first question I have, Simon, is why is shipping so important and why should we even care about the subject?

SPEAKER_00: 2:10

Well, shipping is the means uh by which world trade happens. And effectively whatever comes to us in whatever country we are from abroad, eighty per cent of the global movement of world trade in goods travels by sea, miscarried by sea. So it's a hugely important and efficient way of moving stuff around. Shipping is efficient, it works, and we know it works because unless there is a problem, it basically goes unnoticed by the rest of the world.

SPEAKER_01: 2:46

And I suppose a l a lot of our listeners will be listening to this podcast on their telephone and iPhones, and essentially without shipping, they might not actually have those telephones and iPhones to listen to us on.

SPEAKER_00: 2:58

No, absolutely. And it's not just uh iPhones, it's almost anything, electronic white goods, clothing, food, everything uh that's moved around is moved around efficiently by ships and at very little cost to the end price to the consumer. So as I say, I mean it's uh it's almost invisible, which is good sometimes, but not so good when it isn't. So I it it doesn't feature that much in in many of the the business and trade discussions because it works well.

SPEAKER_01: 3:31

Well, you say it's invisible, and I I agree with you. In certain terms, it's taken for granted. And in my introductory episode to the series, I I mentioned that one of the purposes of the series is to bring out things that we uh enjoyed throughout our daily lives, but we do take them for granted. Can can you explain to us a little about how the the shipping industry operates?

SPEAKER_00: 3:55

Well, uh yeah, okay. We we we haven't got long, have we? We haven't got days or this, so uh let me try and bring it down. Ba basically, the demand for shipping is derived from the demand for trade. And Justin, you're dealing at a very high level with many trade issues on from a legal point of view commercially and so on. But basically, if trade doesn't exist, shipping doesn't exist. So shipping is reacting to the demand of buying and selling over space and time, some physical goods. However, there's two really distinct sectors of it, and we can divide that into liner and tramp. Liner business uh in shipping is basically container shipping, uh, the moving around of consumer goods, finished goods, refrigerated food, and so on and so forth in containers that we see everywhere. And that works basically on on a scheduled basis. So containers are moved from one place to the other with a lot of other containers and also moved around by rail and truck and lorries and so on, and they're very much part of the global supply chain logistics system. Uh the services are scheduled to uh facilitate just-in-time logistic chains. It also the the cost is more or less fixed because there's lots of boxes in some of these ships that have 25,000 boxes on them, space for them. So there's lots of different boxes going from different destinations and different places. So that's one side, the liner part of the industry. The the other side is the tramp market. And the tramp market is basically the moving of all bulk commodities around the world. And by this bulk commodities, it's liquid, it's solid, um, liquefied gas as well. So we're including crude oil, we're including petroleum products, we're including liquefied natural gas or liquefied petroleum gas, but also all the solid stuff, and it's not just iron ore and coal, of which a lot is still being moved around, but foodstuffs like grain, wheat, corn, soybeans, and so on, and other minerals. The reason why it's called the tramp trade is because it's works on the spot market basis. There are no schedules, the the the market is very volatile uh and ships are employed on a voyage basis.

SPEAKER_01: 6:20

I've heard on numerous occasions when you've spoken, you've made an analogy between uh the underground and the metro. Can you can you explain that to us a little bit?

SPEAKER_00: 6:27

Well, okay, so I like to think of the uh of liner trays, container market as being like the metro. I'm in Greece. I I thank God I don't use the tube anymore. Um basically, if you can imagine a line on a metro that starts off at one place and then finishes on off on another, you are paying for the distance that you go and the amount of space basically you take up on that. And you have the choice to get on and off the station, but it runs uh anytime you like, and there's other people getting on and off at the same time. But you know in advance how much you're gonna pay, you know what the timing is gonna be and how long it's going to take. I would say that the uh the the tramp market is a bit more like Uber, it responds and costs more when demand is high and supply is low. So people that use Uber in cities they know that if there's a you know if things are busy or it's raining or there's a popular event taking place or something, getting hold of an Uber taxi or whatever of the forms there are is is expensive and it's tight and you have to pay up if you want to get from one place to another. But if there's if it's a lovely warm late morning, uh you can uh you can get an Uber for much less money. And so the tramp market is reacting to the supply of ships and the demand for moving cargoes around on an hourly basis, effectively. And uh the business that I'm involved in here, although I'm director of Ship Send and Purchase, which is actually buying and selling the ships, we have a large dry cargo chartering, which is trading on spot on a daily basis, trying to get cargoes on board ships or get ships to carry cargoes. And it can and it can move the market moves very, very quickly.

SPEAKER_01: 8:18

Well, I love that analogy between explaining the line of trade rather like the the Metro pre-prand voyage, as it were, specific leaving time, going somewhere at a specific time, and your analogy of the Uber for the tramp market, essentially a bespoke specific ride for the supply of goods.

SPEAKER_00: 8:35

So you but but the thing the thing on that is that you are the important thing at that point, depending on the supply and demand of ships, will depend at any particular point, and it's about location as well as timing. It's also about the distance that you're going, and some very popular routes will cost more than going on a less popular route, for example. And and the price is negotiated for the carriage of those goods just before the ship starts loading. So it's a very, you know, immediate market.

SPEAKER_01: 9:06

Well, it's a nice explanation that you've given there. So we we both started out in Liverpool, you because you began your career there, and me because of it's my hometown. And apart from football and the Beatles, Liverpool of course made its history by being a principal world port, the gateway to the United States. And I see the beginning of the decline of shipbuilding as having started probably around the beginning of the 1900s, the the 20th century. And the Titanic, of course, was famously registered in Liverpool as the famous James Cameron film where the Titanic is sinking and you see Liverpool in huge letters written on the bow, as you see the boat beginning to plunge into the depths. And when I watch that scene, I wonder whether it's uh an analogy in a certain way, not only of the plunging of the of the Titanic, but the the decline of shipping and uh certainly shipbuilding in the West, in the United States and the UK. W what are your thoughts?

SPEAKER_00: 10:09

Well, I I know the scene that you mean, and uh I've been as a lifelong Liverpool football club supporter. Uh I have thought that that was about my team at certain situations, but let's move on from that. Um not when Jurgen Klopp was there, surely, no. Well, sometimes, yes. Ever so close. Anyway, but I you know, I anyway, I I have lifelong Liverpool supporter, the ups and downs, through the rind and wet rain, as we say. Anyway, the I think it's a nice image to have, but I think it's a little bit more complicated than that. The you again, going back to what I was saying earlier, you cannot take shipping independently as just being an industry of you know building ships or owning ships or operating them. They're connected to the whole system. And obviously, one could argue that the decline in shipping over a period of time was related to the decline as of Britain as a as a trading nation, of the colonial empire, in effect. The liner trades that the United Kingdom had pre-aviation included ships. So there was a demand for building ships, there was a demand for the operating and owning and running of ships because there was a demand of moving people and goods around the world. Now most of this stuff was actually moved around by British ships and British flagships. Titanic was built in Haaland and Wolf in in Belfast and then registered in Liverpool with was it White Star Line? I can't remember.

SPEAKER_01: 11:47

Indeed, yeah.

SPEAKER_00: 11:48

Uh, who were based in Liverpool and and you've still got, as you know, Justin, the Cunard building on the pier head as uh as being one of the great examples of mercantile architecture of the late 19th century, early 20th century.

SPEAKER_01: 12:01

So this having said that though, I mean the United States, there's a significant decline in shipbuilding, at least in the United States, but y it still remains the number one economy in the world.

SPEAKER_00: 12:11

Well, I think uh it's okay, I th I the United States they were never really, however, a shipping nation, because they were never really a trading nation. The United States trades with itself primarily. It's only fairly recently in the late 18th century that they actually were became important as far as trade is concerned, and that only happened really towards the end of the 19th century and the twent early 20th century, when uh they were at the forefront in of industrial manufacturing. Uh the British were complaining about industrial espionage by the Americans at that particular point, in just the same way that uh that Europe and the United States complains about China. Americans were never really, as a state, were never really strong on commercial shipping. They did have interest, you know, regionally, if you like, in in the West, in the around the North American continent in particular, but they weren't they were doing that for their own business and for their own trades. It is significant that uh talking about the Titanic, the biggest transatlantic liners and the liner companies at the time were either British, French, German, Dutch, Italian. They were the big players in the line of trades, and for a greater part because they had a colonial empire to serve it, uh, in a way that America never really did. The US never really exported ships for other buyers. It was a European business, certainly up until the Second World War, to say that America was a proud shipping nation. I think militarily, certainly, and it still maintains that, but in terms of a ship owning and a trading nation, most of the money involved in shipping in the United States and the expertise came from from Europe. E even at that period, around, should we say, between the first and the second world war.

SPEAKER_01: 14:15

And and what's the situation today then?

SPEAKER_00: 14:17

Well, the situation today, I mean, just to bring you up to date, it's fairly recent that the UK was still the largest shipbuilder in the world, and that was up until the sixties. However, today China has the largest shipbuilding capacity in the world, followed by South Korea and Japan. And let's be clear, despite what people have been saying and legislation that's going through Congress at the moment in the United States, the United States has had no commercial shipbuilding activity to speak of for export since at least the early 70s. So China has overtaken South Korea and Japan to have a majority of new building capacity in the world, and they are now seen to be building very good ships. Certainly I've done new buildings in Japan and South Korea and uh in China. In the space of the last 20 years, the technology and the expertise and the quality of ships coming out of China makes them more or less comparable to the Japanese and Korean built ships.

SPEAKER_01: 15:25

Am I right in thinking that the US nevertheless sees unfair competition from the Chinese? Uh I noticed that the uh US is stating that Beijing's targeted dominance of these sectors undermines fair market-oriented competition, increases security risks, etc. etc. Do you do you think there's any truth in that?

SPEAKER_00: 15:45

Absolutely not. I think it's risable, frankly. The um China China developed its shipbuilding industry to develop itself. In fact, most of the time, up until about, let's say, 2000, or in 2001, in effect, when China ascended to the World Trade Organization, um, China was not building for export, although it was building some fairly poor quality ships, but had already started developing its own shipbuilding industry from the early nineties. So I I I think you know the argument is that American shipbuilding went out of business because Chinese have been undercutting it is is is frankly ridiculous because the Americans didn't have any interest to do that. In any case, they couldn't compete. Uh they didn't have So what are you saying?

SPEAKER_01: 16:35

Uh that the US has been asleep at the wheel, or should I say a asleep at the the helm on the issue?

SPEAKER_00: 16:42

Well, absolutely. I mean I think it's um America, as as I've said, has no commercial shipping expertise or pricing power in the markets, in in my working life, and certainly way beyond that. You know, shipbuilding is fairly complicated, labour intensive, and doesn't make money every year. So it's not an ideal uh business for the way that Anglo-Saxon economies work, short-term profit-driven markets that the American business like to have.

SPEAKER_01: 17:17

I find I find that quite a little bit surprising. I find it uh surprising in the present circumstances because it shipbuilding is is nevertheless an it's an iconic activity, isn't it? And it's associated with industrialization. As you say yourself, Simon, it's very labor intensive. It can be strategic, and in a world where the United States is seeking to industrialize and to have labour-intensive industries within active industries within the United States, I would have thought, well, you know, shipbuilding would want to be one of those industries that would cater to those objectives.

SPEAKER_00: 17:50

Well yes, but no. Um in I was I was in Japan last year, and it's quite striking that the Japanese shipbuilding industry is uh reducing its capacity. Japanese shipyards build very good ships to very exact specifications and they're very reliable on delivery times. But there's a place in in Fukuyama district in towards the south of Japan where they've a big shipbuilder has stopped building ships for export because they can't get the labour. People don't want to work outside, people don't want to work in in all weathers, they don't want to work with heavy equipment. There is a I think they opened up a semiconductor factory nearby, and most of the labour, which is in in Japan, as you know, is uh suffering from demographic pressures. People want to go in a nice warm air condition or air-conditioned factory rather than welding blocks of steel together and and in the freezing cold or the scorching sun. Is that at all problematic? Well, I'm I'm based in Greece, which has the largest private um privately owned fleet in the world, and Greece has never suffered uh as a seafaring nation and a ship-owning nation by not building ships here. You know, it it's like trying to say to the British, for example, that they're they're you know, they're not really wine lovers because they can't grow much wine in the UK. People, and this is true in America, of the the Democrats and the Republicans, they're looking for things that used to exist that no longer exist anymore, or probably never even existed, and said, Well, they've got them, they've stolen it from us. When in fact, in the case of shipbuilding in particular, it was given away, there was no interest.

SPEAKER_01: 19:39

Do do you see any other major major subjects and issues in the shipping uh in the shipping arena at the moment?

SPEAKER_00: 19:47

Absolutely. I I think China as a whole and geopolitics generally speaking is you know, from mar from our point of view in shipping, is is an extremely important thing. Uh and by the way, geopolitics and counterintuitively is actually quite good for the health of the economy of ship owners and elsewhere. Uh in 2021, the global fleet in terms of dead weight, the amount of weight that ships carry in 2001, as China was ascending into the World Trade Organization, is a third of the size of the fleet it is today.

SPEAKER_01: 20:22

So it is it's multiplied by three, that's what you're saying.

SPEAKER_00: 20:25

Yeah, exactly. And even more alarmingly for me, from the same period of time, the amount of container capacity that can be moved around by ships at sea has increased by six times. And this is because China has become was was first of all a huge importer of raw materials around the world, particularly iron ore, coal, but certainly also oil and liquefied natural gas, but also agricultural products like grain, I mean corn, soybeans, and so on and so forth, as the country grew internally. Part of the engine of that growth was the manufacturing of consumer goods and other finished goods, like iPhones, as you said, but now moving up to electric vehicles and everything else. These things have to be moved, imports and exports by sea. So China is very prevalent, and and this is something that I bring back to you, Justin, what you said before. You know, America is the largest economy in the world and it's hugely important, but it ain't for shipping. China is, because China is exporting stuff and importing stuff on a far greater scale uh than the United States is in you know, in physical stuff. So what happens in China is very important to shipping. But what we also have found in the last, let's say, five years or so is that the geopolitical shocks, economic shocks, like Covid, for example, have proven to be very good for shipping. The closure of the Suez Canal due to the Houthi rebels against the annexation of the uh of the Gaza Strip has basically given container ship owners the another strong market. The demand for goods shipped by containers during the pandemic was huge. Now that there is a if you want a a traffic jam, if you or at least people are avoiding using the Suez Canal for very good reasons, the shipping markets are are very strong.

SPEAKER_01: 22:27

So so all the d dis disruption because of sewers or Panama or anywhere else you're saying is actually good for the industry.

SPEAKER_00: 22:34

Absolutely. I mean Putin invading Ukraine was excellent for the tanker market, whether it was crude oil, petroleum products, or liquefied natural gas. You turn off the pipes from Russia into Europe, you have to get the gas from somewhere else. How does the gas get there? By ships.

SPEAKER_01: 22:51

LNG, yeah.

SPEAKER_00: 22:53

Exactly. And and and Europe was completely unprepared to start importing gas by ship, and now the US has become the biggest exporter into Europe for LNG, although Qatar and other places are very important too. So every time that you disrupt, if you want the roads, because of these inefficiencies, because of these disruptions, you end up getting ships out of place, and you have to pay more for your Uber or for your taxi or for your um metro, even if all the trains are busy, all the taxis are busy. And this has been a very good period in the last five years for the shipping market.

SPEAKER_01: 23:33

So we have so we have so we have China, as you mentioned at the beginning, which is basically the uh dominant force in its shipbuilding. Am I correct in thinking that China's influence is beyond that as well?

SPEAKER_00: 23:46

I mean in terms of interest in ports in terms of uh Well, I think first of all, the largest fleet in the world is Chinese, but it is not a private fleet. There is the state-owned companies like Costco Shipping and Sinopec and uh other companies which move containers and oil and bulk carriers around and bulk cargoes around. But the line between the state and privately owned is fairly blurred anyway. It's something like as soon as you get a company which is of a fairly medium size, you have to have a party, a communist party representative on the board of the company. So the line between private and public is is very is is very blurred, let's say. I'm looking out at the moment for my window in Perez in Greece at um the the port here, which is owned by Costco, which is a Chinese state-owned company. And they have invested heavily in ports around the world. And now they're trying to basically bit by bit take over the South China Sea within their infamous nine-lines. It's in their economic interest to do so, but obviously the for now at least the freedom and navigation is in their interest as well, because they don't have enough of the raw materials that they need to keep their economy going, just within China, or with in China related or friendly countries, or even they rely on the global market, as do most people and the international nature of shipping. I think ironically China is reaching out at the moment more as a trading nation as the United States withdraws and back into its shell almost.

SPEAKER_01: 25:32

Well as you seem to be saying, Simon, is that China is the manufacturing nation of shipping. So it's controlling the the means of production, as it were, in in in terms of in terms of the shipping. Also, it it's owning and controlling more and more ports. And not only potentially simply the logistics system, it seems to me that you are indicating that it is the number one player of the entire system. It's uh a production plus ports, entry points and logistics uh across the board.

SPEAKER_00: 26:07

Well look, let me think it's really important to remember as far as shipping is concerned, and particularly tramp shipping, we're in the world of perfect competition. And and the theory of perfect competition, which is an economic theory that goes back quite a while, is basically saying that no party, no company, no player can get into a position of monopoly where they can influence the market by themselves. Now China as a state, through its economic policies and so on and so forth, has a great deal of influence about cargo flows and so on in the world, but it cannot control everything. And it's still very far away from controlling everything. To use an analogy, back in the 60s and the early 70s, the oil majors used to be the biggest tanker owners in the world, but they found it to be inefficient because if you were Shell, for example, and you had all these tankers that you owned, you would only move Shell cargoes around. And it was very expensive when you had too many cargoes or no cargoes to move around. It wasn't it reacted to the uh supply and demand of the cargo itself and various energy crises and so on. And it would be the same, and so Shell couldn't move AMCO's stuff around, it couldn't move Total stuff around. They're all so the actual international growth in independent tanker owning came about because the market had to become more efficient, and so oil majors and other companies could act and traders could use independent ship owners to move their cargoes around. Now, if you think about that in terms of China at the moment, China has the biggest fleet in the world, but it's doing its own cargoes and it's not efficient.

SPEAKER_01: 27:48

Very interesting.

SPEAKER_00: 27:49

And the rest of the world that it's trading with, both in imports and exports, use independent ships. So I I think that China is a very big player. Uh, and I think China influences our market a great deal. Don't get me wrong, if there was a recession in China, it would be a disaster for shipping.

SPEAKER_01: 28:08

Certainly.

SPEAKER_00: 28:08

Uh and the because the demand for the cargoes themselves would be greatly reduced, and it has a dominant role to play in in the demand for shipping itself. But in terms of actually controlling the shipping market, I I think it's the market is a lot more sophisticated and a lot more interconnected and efficient, therefore, than than China would like sometimes. But China is not the world, so thankfully.

SPEAKER_01: 28:34

And also Panama, I mean President Trump saying that he wishes to take over control of the Panama Canal. Of course, uh the Panama Canal is extremely important in shipping because it's strategic, and if ships moving from the US to Asia, if they don't take the Panama Canal, I understand, have to sail an extra 6,000 miles. What what's what's your take on all that?

SPEAKER_00: 28:58

I I think first of all, strategically it's not that big a deal. The I think, and without making too many comments, comments about Donald Trump in particular, but it's America was one great once a great nation, then it started giving stuff away. Okay, well the Americans were great once, they built the Panama Canal. And it it is a very important waterway that's used, but it's not that big a deal because there's not that much trade moving through the Panama Canal.

SPEAKER_01: 29:27

And certainly about five percent of that, yeah.

SPEAKER_00: 29:31

And and it's actually easy to the and the good things about ships is that they can change course because they've got the oceans to go, they can take any number of detours, it's not it's not restricted to one waterway or another. In 23 and 24, because of a lack of rainfall in the area, they had to reduce passages through the Panama Canal because it uses a lock system. And and that kind of basically started the world thinking about living without the Panama Canal. And the the problem is, as we saw with Ukraine. And as we saw with sewers and as we s see in other places as well, once you divert ships to other routes, they get used to them. And they work out the economies of scale and they move different sizes in here and there. And they say, Well, you know what? It's a it it's a delay getting through the Panama Canal, it's too expensive, and so on. Unless it's absolutely urgent, we'll go the long way around. You know, as far as Donald Trump wanting to take back the Panama Canal because the Chinese are controlling it, well, it's not true. And the Panamanian authorities, the canal authorities, has done a really good job because in 2016 they actually expanded the Panama Canal so that larger ships could get through. And I think ownership of a canal isn't actually that big a deal. I think it's just one of these we used to be great and we're not great anymore, so we want to take it back. I I have doubts whether or not, considering the accident in Baltimore and the general state of American infrastructure.

SPEAKER_01: 31:00

Baltimore, that was the situation where the ship went into the into the bridge.

SPEAKER_00: 31:07

Which um through obviously the ship gets blamed and you know the ship lost power and so on. But uh if you look at the damage to the ship as opposed to the damage to the bridge, I I would suggest the ship came off better. My point is, however, that I'm I'm nervous about having American control these days of the Panama Canal because I don't think they'd be do a very good job of maintaining it and keeping it functioning because they haven't had a great record on infrastructure generally recently. And what's happening within the United States administration at the moment with Elon Musk and so on suggests that they're looking to cut costs rather than invest in the future. So I I I don't think it's compatible with the Panama.

SPEAKER_01: 31:45

I think there's a s a a certain irony in respect of the the Panama Canal, because it correct me if I'm wrong, but in many senses I I see it as a bridge between the United States and Asia. It was a it was a means of of of promoting trade between the two continents. And it's the present position of the United States that due to globalisations from two thousand the nineteen nineties and two thousands and whatever, that globalization trade between the United States and China has been detrimental to the United States. So th that the gateway between the United States and China could perhaps be seen as cause of the miscontent of the the present US administration.

SPEAKER_00: 32:29

I think I think you're right. I mean I think th th you know that the protectionist isolationist attitude uh is is prevalent, but I think and I think this is certainly, if you want, it's the zeitgeist of the administration, and they're looking at these things. But the Panama Canal in itself is not actually that important to US Asia trade. And the the majority of trade between the United States and Asia takes place on the Pacific coast. There's very little that actually passes through the Panama Canal. Panama Canal is is mostly used for West Coast, East Coast, North and South America trades rather than the global stuff. It I think it's symbolic, certainly, of that how the rest of the world has been ripping us off, say the States, and it's about time we took control of it all again. Missing the point that you need to have these waterways open and functioning for the the global economy to actually work. And I think there's another analogy too. Uh again, I mean I don't mind if they shut the Panama Canal, it's good for shipping. I mean it's not really a problem. But the first Suez crisis of 1956, remember the British and the French jointly owned the Suez Canal. And it basically, when Colonel NASA nationalised it and took control over it, the British and the French sent an expeditionary force in there to take it back, which the United States did not back, because they didn't want the British, all the French, or their competitors in the global economy, to have an advantage, strategic advantage over there. Nothing has changed. The only thing that happens when these waterways get restricted or blocked is that marginally speaking, the end price of goods increases a little bit, but because of the economies of scales, it's very marginal, uh, and certainly not inflationary, what despite what other people say.

SPEAKER_01: 34:36

So what you're saying is the price of shipping does not affect the end price to the consumer in in any significant manner.

SPEAKER_00: 34:42

Yeah, well, I I I think there's a proportion, but somebody told me that during the biggest container boom shipping boom of my life and my career certainly, which was between 2020 and 2023, the price of a pair of Nike trainers sneakers increased to the end consumer, even though the container shipping market was making billions of dollars. The price of an average pair of Nike sneakers uh went up by ninety cents, which is hardly inflationary. And I think that's extremely important to see how what how efficient and what good value shipping is.

SPEAKER_01: 35:27

But if tariffs eventually create a significant recession, everyone, including the shipping industry. Agreed?

SPEAKER_00: 35:37

Absolutely. I mean it i it kind of goes back to my original point. In the short term, disruptions and efficiencies are good because ships have to go on longer distances to do the same business and that reduces the supply of available shipping at that particular time. But in the medium term, yeah, it's problematic because uh if there is a crunch somewhere in economies and they find that by high tariffs their economy starts to suffer, uh they become inflationary, which is a real issue, I think, then obviously the demand of economies to import and export stuff decreases, and it causes a problem for trade, and therefore the demand for shipping was full as well. In in the long term, as Keene said, we're all dead anyway, so it doesn't really matter, but it the sh you know, but certainly medium term I see that as a significant issue. You know, the United States really should be very careful for themselves that they are cutting themselves off from the world and cutting themselves off from the party because the party will keep on going out.

SPEAKER_01: 36:39

What do you predict for the future, Simon? And how how is that gonna in shipping and how is that potentially going to affect us?

SPEAKER_00: 36:46

I I'm I'm very reluctant to make predictions because I work in a capitally intense uh capital intensive, very volatile and cyclical industry. Um so any forecast or predictions that I make is that we have to pay you for, that's what that's what you're saying. Yeah, I Well that well you no, you will have to invest in, I think, is perhaps even more the even more expensive. No, I I I I think that China is fairly predictable. The economy will grow, but it is having it's having that struggle to grow to a mature economy, to or it's having those growth pains to get up to a consumer economy. But I think that China will continue in influence and in size and growing. I I think that it will absorb Taiwan in the next five years and there won't be actually that much bother made about it. I I think the problem for China and Japan and South Korea and East Asia is the democratic crisis that they're facing, and I think that South Asia will be more significant uh in terms of economic growth and political influence geopolitically as time goes on.

SPEAKER_01: 38:03

Well, that's certainly food for thought. Uh Simon, I am really grateful for for you making yourself available for the discussion. I think it's really, really interesting. I knew it would be interesting. Just before we go, your your blog is fantastic. I l I love the articles you write. If you just give our listeners just a little bit of information on where to find your blog if they want to follow you in the future.

SPEAKER_00: 38:24

You can find it free of charge on LinkedIn, which is where I publish it most weekends. It's a blog sometimes to do with shipping, sometimes to do with the world of work, sometimes to do with nothing at all. But it's basically my way of downloading my brain at the end of a week. Or indeed, if you want to buy and sell a ship, I'm very happy to receive inquiries.

SPEAKER_01: 38:44

I'll have to start saving up, Simon. Uh anyone wants to access it, they're they're they'll more than happy to look in the show notes and they'll find you in your details to contact you if necessary, if they've got any ships to purchase or buy or fleets or whatever. Yeah. Simon Wood, thank you for joining the show. Thank you very much for having me. If you're listening to this, then thank you for having listened to the podcast from beginning to end. The content of this podcast is intended only to provide an information resource of interest, and does not constitute legal, tax, business, or financial advice of any kind. Should you require advice, then you should engage an appropriately qualified person to provide you specific advisory services in the field. The views, thoughts, and opinions expressed in this podcast are my own, and do not necessarily represent the views, thoughts, or opinions of any law firm, nor that of any third party, other person, company, or organization. Stay tuned for the next episode.