[00:00:00] Lori Boyer: Welcome to Unboxing Logistics. I’m your host, Lori Boyer. Today, if you have ever wondered about how your packages you’re shipping are getting across the ocean, or packages you’re buying we have the perfect guest for you. We have on our show today the one and only Sal Mercogliano. He is a maritime historian.
I love history, so I’m really excited about that. He has worked on ships. He is the host of the amazing YouTube channel, huge shout out, love this channel, What’s Going on with Shipping? Basically, Sal is the guru at taking really crazy what’s happening out on the oceans into our understanding as kind of more small, not quite as well understood individuals.
And right now with everything going on in the Middle East, it has never been a bigger, more important time to hear what is happening on our oceans. Sal, welcome. Can you tell our guests, can you tell our audience anything more about you? Tell us a little bit about your background more than I already did.
[00:01:09] Sal Mercogliano: No, you did a great job, Lori. Again I, a former merchant mariner turned historian, turned maritime analyst. And, and about five years ago, almost five years ago this month, matter of fact, I started the YouTube channel when the Ever Given, got stuck in the Suez. And so I started commenting on Ever Given.
And then somebody said, well, there’s other ships, start talking about that. So I figured I’d put a video out, maybe once a week, talk about shipping. There’d be nothing to talk about in shipping because it’s ships. Nothing ever happens with ships. And, and here I am five years later and, and I, I’ve spent this entire past week, every morning getting up and doing an update on the Strait of Hormuz and, and, and global shipping around the world.
And it has become just a, a, a facet of my life more than anything else I ever imagined.
[00:01:53] Lori Boyer: It’s crazy and Sal has hundreds of thousands of followers. He is got millions of views on his videos. I love the comments that I see where people say things like, I never thought I’d be interested in a shipping channel, but here I am.
And it is because Sal just makes it fun and easy to understand. So let’s jump into it. You mentioned the Strait of Hormuz. I think we don’t think oceans that often until something breaks, and that’s kind of what we’ve got going on. Can you share a little bit about maybe background for people who don’t know.
What is the Strait of Hormuz? Why is it important and what’s going on right now?
[00:02:27] Sal Mercogliano: Sure. So I mean, what you have around the ocean are things called choke points. These are narrow little areas where kind of traffic funnels together. Imagine your, you know, busy intersection in your local town, or where two highways cross, that’s a classic kind of choke point where all of a sudden everything comes together.
And one of the biggest ones in the world is this Strait of Hormuz. This is the strait where the Persian Gulf dumps out into the Indian Ocean. And what makes the strait so significant is it, it’s about 20 miles wide at the navigable part, but what makes it unique is about 20% of global oil and liquified natural gas come out of this.
So, I mean, a fifth of really the major energy comes out and what we’ve had happen since the United States and Israel struck Iran, is that shipping has stopped going through. It’s not, the Iranians are blocked it by any means. It’s just that shipping has basically looked at each side and sat there and said, it’s a little dangerous.
We’re gonna hunker down and wait for everything to calm down. It’s, it’s very akin to what happened when the Ever Given went sideways in the Suez and we, for six days watch ships pile up on each side. And one of the reasons I think I started my channel was because to explain to people not so much however Ever Given got stuck.
We did that and we talked about the ship, which was interesting, but then we started talking about how does this impact me? Why is it a ship stuck in Egypt impact me. Why is it a conflict in, in, in Iran going to impact me? And it is. ‘Cause the next time you go get your gas at the pump, it’s affecting you right now because we’ve just seen record value for oil shipped outta the Gulf Coast of the United States over to Asia.
Record number. It’s the highest it’s ever been. And that translates to higher cost for us.
[00:04:08] Lori Boyer: Okay. So I would love to say there’s so much I wanna unpack here, but let’s start with the, the strait itself and the ship. So what you’re saying is we’re getting the ships piling up on the outskirts of the strait.
Right. What, how long, I guess, can they be there? Are they no longer starting to come from their original destinations? Are are countries halting, you know, the departure of these ships. What’s gonna happen when it becomes too congested there?
[00:04:35] Sal Mercogliano: This is where logistics comes into it. So the ships inside the strait, you know, inside the Persian Gulf and the cul-de-sac in there are starting to be filled up with oil and gas.
So they’re starting to fill up, they’re, they’re going to facilities all the way from Kuwait down to the United Arab Emirates. And they’re filling up. Now when they eventually all fill up, that’s a problem because then those facilities ashore don’t have enough fac storage areas. They gotta bring new ships in.
So we’re, what we’re watching is kind of the gauge go up as ships fill up, and that’s telling us, okay, ships are gonna have to come in soon. At the same time, marketplaces, particularly Asian art marketplaces, ’cause that’s where a lot of this oil goes to is Asia, India all the way over to China. They’re pulling from a fleet of anchored vessels off of Singapore and Malaysia that sit there.
They normally do. They sit there and they wait to find out where’s the best place to go sell my oil, where, where can I sell my oil for the best money? And they’re being pulled now. And as they start going down in level, we’re gonna need to pull oil out. And so empty tankers are heading to the Persian Gulf.
Filled tankers are coming to the end of the per Persian Gulf, and sooner or later that band’s gonna snap. And everyone’s gonna go. And the driving force here is insurance. It’s all about money and insurance. And, and everyone in logistics knows this, that insurance is the key. And, and once you know, what they’re gonna weigh is risk.
Do I wanna risk my ship right now? I can wait a few days. I can wait a few days. Maybe I’ll get a little bit more from my ship later on. So everybody’s waiting, but once it goes, it’s gonna go. And what we’ll see is, is the marketplace go. And that will trigger ships going. Now we may have attacks, we may have vessel damages, and that could potentially cause disruptions.
And we’re seeing some small scale attacks on ships right now.
[00:06:16] Lori Boyer: Yeah, we have seen, I was looking at the numbers. There are some ships that have been hit and damaged. Correct? When talking about insurance, so we had, insurance prices typically go up anytime that there’s kind of a more dangerous area, just as insurance does.
Is insurance getting pulled yet? How? How is the insurance situation kind of evolving?
[00:06:36] Sal Mercogliano: Shipping is is very unique. It’s the oldest transportation system in the world. And shipping insurance is actually done in these, what are called clubs, which aren’t clubs. I mean, it’s not like you go someplace and have a great time.
These are, these are clubs that are formed by the ship owners. And there’s a dozen of them, literally 12 of them, that form what’s called the international P&I Club. It is a protection indemnity. So it’s the ship owners that insure their own ships, but like every other type of insurance, you have insurance on the insurance, what’s called reinsurance.
And so what basically happens here is the ship owners realize, okay, the danger is the val, the the, the cost may be so much that we don’t have enough insurance on the ships. That’s why they stop sailing. It’s like, okay. We were paying danger insurance, but now we may need more danger insurance. So to give you the idea of the numbers, sailing through the Strait of Hormuz cost about 0.2% the value of the shipping cargo.
So for a hundred million dollars tanker, it was costing you $200,000, and that was a money that you factored in that was spread across the oil that was being shipped. Well, now it’s jumped to 2%. That’s $2 million. So now all of a sudden you gotta spread it across. It’s why the big container ships, when the Houthis started attacking ships in the Red Sea, sat there and said, we’re not gonna go through the Red Sea, because a, a 1% war risk on a billion dollar ship is $10 million.
And it’s like.
[00:08:05] Lori Boyer: A lot more than I have.
[00:08:06] Sal Mercogliano: Right. It’s cheaper to go around because there was an alternative. You can go around the Cape of Good Hope, you can go around the southern tip of Africa. There’s no shortcut here. There’s no, hey, I got a better idea. Let’s go around the, the Persian Gulf. You can’t. You’ve gotta go through the strait and, and so that’s what’s causing the crisis right now.
[00:08:22] Lori Boyer: How many ships are actually going through right now?
[00:08:25] Sal Mercogliano: So on March fourth, two ships went through. One got hit by a drone and the other one made it through. So, I mean, you’re getting the idea here. It’s very small numbers, however.
[00:08:36] Lori Boyer: So a 50 50 risk.
[00:08:38] Sal Mercogliano: Right. So, but we, we are starting to see ships run through. And like, I, I literally have a map up here of, of ships sailing right now, and we’re seeing a couple of ships start venturing that way.
So what, what we’ll eventually see is when it’s economical and the risk is outweighed by the benefit, ships are gonna start going in and, and it’s only a matter of time till it happens.
[00:08:59] Lori Boyer: So how long does it typically take when things clog up? You know, let’s see, before businesses or consumers, we as Americans, I guess when, when do we really start to feel the impacts?
[00:09:10] Sal Mercogliano: Well, we were actually feeling this beforehand because there’s a thing out there with, you may have heard of called the Dark Fleet, which is a fleet of commercial ships out there that are moving Russian oil, Venezuelan oil, Iranian oil. And the US had started to sanction that fleet and which meant that you were taking those tankers out of the pool.
It, it’s like having, you know, a thousand tractor trailers and now all of a sudden you have 600. And that’s going to all of a sudden raise the cost to use those 600 ’cause you can’t use the other ones. So we were already seeing that happen. And with, due to futures markets and the way the oil industry works, we’re already seeing it.
We’re, we’re seeing, I, I mean, because when you’re booking a cargo on an oil tanker, you’re actually paying for the next load coming, not so much the load you’re getting. So you’re seeing those costs go up. I’ll give you the idea here. A very large crude carrier, this is the big super tankers. This is a thousand long, a thousand foot long ship can carry a million to 2 million barrels.
A barrel is 42 gallons of oil. I’m talking about a massive vessel. That vessel about two months ago to charter it, to rent it for the day to go to your, you know, U-Haul of tankers and rent that day, ship for a day cost you $50,000. They just booked one yesterday for $440,000. So this is, this is the markup.
Now the, the price of the ship hasn’t changed. They paid for that ship. It’s paid, the crews paid, the oil, you know, the fuel for it is basically the same. What’s changing is the demand and demand is just through the roof.
[00:10:44] Lori Boyer: So what do you anticipate happening? I, let’s take timeframes, you know, I mean, obviously it’s easy to say, let’s wait two or three days.
If this drags on and, you know, conflict continues, I guess, what are sort of the recourses for ships here?
[00:11:01] Sal Mercogliano: Well, one of the things you, you’ll start seeing happen is ships will go to other places to draw oil from. So we’ll see ships come to the United States. You’re gonna start seeing the Gulf Coast get busy.
You’ll see other areas that have oil. Nigeria, Venezuela is a good potential here. Venezuela now all of a sudden could start doing it if, if the sanctions are listed on them. So. You’ll see other que other countries do it. The problem is we’re not just, you know, shutting off the Persian Gulf, but we’ve shut Russia off ’cause of the Russian invasion of Ukraine.
So it becomes a big commodity issue. One of the biggest things that comes outta the Persian Gulf is liquified natural gas. The four biggest producers of that is, Qatar in the Persian Gulf, which can’t get its gas out. Russia, which is under sanctions. And then the United States and Australia. But there’s a finite number of what’s called liquified natural gas carriers.
You, you have to take natural gas and liquefy it, which means you put it into a ship by cooling it. Super cool it. So there’s only a finite number of those ships. And you know, if, if now you get a sail from the United States to China, to Japan, to Korea, to Europe, well, you know, Qatar in the Middle East is really close to Europe, but now it’s not.
And now you have to go further distances and there’s set amount you can ship because there’s finite, you know, pools available. That’s just gonna drive prices up. We’re already seeing, for example, in India gas rationing going to take place because they’re not getting the gas they need.
[00:12:26] Lori Boyer: Already.
[00:12:27] Sal Mercogliano: Already. Yeah. ’cause they’re worried. They’re worried about, because you know what happens is, what happens always is people hear about this. It’s like, oh, I gotta panic.
[00:12:33] Lori Boyer: The go of a toilet paper incident. That’s what I’m hearing here, Sal.
[00:12:37] Sal Mercogliano: Right? The mi, the minute the Colonial pipeline shuts in the Eastern part of the United States, Southeastern part of the United States.
When a hurricane comes in, what do people do? I live in North Carolina. Everybody runs to the gas station and fills up every cup they have with gas. Even though we have days worth of fuel, prepositioned in tanks all along the pipeline, you can’t tell people that they’re gonna panic because you just don’t know.
[00:12:58] Lori Boyer: Yeah, absolutely. Okay. Sal, one thing I really love about you is that I feel like you’re really understand the human element of things. I think especially maybe ’cause you’ve worked on ships, you’re a merchant marine. So I guess gimme some perspective maybe understanding of what the crew members might be going through.
[00:13:17] Sal Mercogliano: So I’ll, I’ll say this from the crew perspective, they, most of ’em have no idea what’s going on. They really don’t. They’re, they’re fixated on doing their job. They’re kind of, Hey, I gotta get the shit from point A to point B. I don’t know what’s going on geopolitically. I, I, I, and that’s the way I was really, it was just, it was really, it was a fascinating thing when I came ashore from shipping to go into the, the business side of it and then to look at it historically and analytically, it’s a lot different. It’s much like a truck driver has, you know, very narrow view of the job in front of them versus the kind of the corporate. On the ship side, it’s been really challenging for ocean shippers for roughly about six years now.
I’ll say, since COVID. COVID, we’ve all talked about how important logistics is, and how it’s really the unsung, it kept everything moving during COVID. Well magnify that by ocean shipping. There’s about 1.5 million mariners who sail ships around the world. And those 1.5 million largely come from pretty poor countries around the world.
Philippines, India, Indonesia, China, Ukraine, Russia. And what happened during COVID was if they were on the ship, they were stuck on the ship. And, and, and, and I mean, stuck. And understand working on a ship is, is Groundhog’s Day. Every day is Monday. It’s the same thing. You don’t have weekends because every day you work, you work at least eight hours a day.
There’s no, you know, you don’t go home. You, you live on the ship. You just, you literally walk up and down flights of stairs and you’re, you doing the same job and, and. Some of these people were on ships for over a year. They couldn’t get off. I mean, because they couldn’t fly out because of COVID. And so, and then the people who were coming out to relieve them couldn’t fly out because you weren’t allowed to because of COVID.
And what we saw was a huge attrition in the fleet in terms of mariners out there. And, and that’s still an impact today. It’s a real big problem out there because now we’ve lost a lot of trained crews out there. And so we’re, we’re, we’re trying to find crews from other places. Like any a company in the world, hey, I wanna get the best mariner I can, but at the cheapest price, where can I find that cheap mariner?
Because the minimum wage to work on a ship is like $666 a month, so 20 bucks a day. You know, where can I go? And, and, and, and right now they’re pulling from Africa. They’re pulling from Central America. And the problem you have is very inexperienced crews out there, crews that have big language barriers for, for example, and we’re making ships much more sophisticated and complicated than ever before.
So it’s a real difficult thing. You know, the idea of, you know, hey, I’m gonna work on a ship and I’m gonna pull into a port and I’m gonna go ashore and enjoy life ashore for a day or two. That doesn’t happen. When you pull into an ocean terminal and a container ship, they’re throwing lines out, the cranes are coming out, and you are outta port as soon as they, they move that last box.
Because as a ship owner, I don’t make money when you’re in port, I make money when you’re moving. And then I want you out ’cause you’re costing me dock fees. You’re, you’re, you’re, you know, impacting my schedule. I need you moving. And it’s a really, really tough life.
I, I make it akin to long haul truckers. You know, it’s very much that type of, of environment where it’s, it’s the, it’s the trudge. It’s the gruel. And it’s a really tough one.
[00:16:25] Lori Boyer: So. As we zoom out a little bit and kind of look at the macro, maybe what’s going on with the industry as a whole, it seems like labor’s kind of a little bit of a challenge right now.
What? What are some of the other kind of just general challenges, not specifically related to what’s going on in the Middle East?
[00:16:42] Sal Mercogliano: Sure. So if you look at the US for example, let’s talk about the, the ports and the infrastructure there. So, I mean, obviously we just came out of two, a couple of years of big negotiations with the longshoremen on the West coast and on the East coast.
And then this got a lot of attention last year when on the East Coast the the union went on strike garnered a lot of attention. Three days in October of 2024 we saw that shut down take place. And you know, one of the big issues is automation. How do I make this, this flow of goods from, from the dock side into the terminal and then out the gate more efficient. And you know, a lot of people were pointing at the longshoremen. Man, the longshoremen are working backwards. They’re, they’re archaic. They, they don’t wanna advance. And I would argue that’s not the case at all. It really isn’t. I, I, I, if you look at some of our terminals, especially on the West coast, look at the APM terminal in Long Beach.
Look at the LBCT terminal in Long Beach LBCT in Long Beach. The APM in LA. Very sophisticated, very modernized, where we’re definitely seeing that. And so it, it’s really that integration that has changed. One of the things that I think that everyone should have noticed, and I know I did, when we had the supply chain crisis, we had 21, 22, 2021, 2022.
We saw the system get overloaded. I mean, it just clogged up. And it wasn’t because of a shortage of ships. We had 109 off LA and Long Beach. There was no shortage of ships. What we did was jam eight lanes of traffic into two. And the system clogged. What I noticed when the tariffs hit last year, when President Trump initiated the tariffs, a lot of smart shippers learn lessons from the supply chain crises.
Hey, I’m not gonna put everything, a hundred percent through LA because I saw what happened when LA clogged up. I’m gonna work with a 3PL or I’m gonna work with a a, a freight forwarder or an NV and I’m gonna have some flexibility. I’m gonna be able to swing my cargo, maybe not through LA but through the new lane of the Panama Canal, and I’m gonna land in Savannah or Charleston or Jacksonville or, or you know, one of the other Virginia, you know, I’m gonna be able to do that.
And what you see is a lot of nimble work right now. Hey, it may cost me a little more to go that longer distance on the ship, but it’s gonna pay off because if I land in LA I’m gonna have to deal with warehousing, I’m gonna have to deal with class one railways. I’m, I, I got a lot of issues there. I’m gonna pay a little more, but my reliability goes through the roof and, and, and it’s, it’s much more flexible.
And I think a lot of freight forwarders and a lot of people are looking at that now. A lot. If you are still getting your cargo through that one port, through that one operator, you, you are asking for disaster at some point. Because we saw that happen with Dolly in Baltimore. When Dolly took out the bridge in Baltimore.
You shut a medium-sized port, maybe the 11th, 12th, biggest port in the United States for two months. And if you are a hundred percent into the port of Baltimore, you got hurt. You got hurt really bad.
[00:19:34] Lori Boyer: Oh, that was crazy, Sal. That was some crazy, I wish we could have had an episode just talking about that, but I just do wanna say like diversification.
We work with big ecommerce shippers and even with carriers, and it’s not. In 2026, we’re not in the kind of era where we need to have all our eggs in one basket. We really need to be spreading that risk around a little bit. And being, I love how you said, more nimble and being able to pivot when geopolitical things happen, which are happening all the time. Or anything.
Accidents, you know, weather issues, all of that kind of stuff. So.
[00:20:07] Sal Mercogliano: Exactly right, Lori. ’cause I, I know, like for example, when, when the Red Sea happened and the Houthis started attacking ships, I was doing videos on that and I had a, I had a, a, a shipping guy contact me and said, hey, I watched your video. And man, I, I immediately shifted my cargo that was routing through the Suez onto ships going across to the Pacific.
I didn’t wanna go toLAbut you know what? LA was open and like, I’m gonna route to LA and do it. And, and so, you know, you, you, you have to be able to do it. And I’m not saying that everyone needs to be a geopolitical expert and watch everything in the news, but again, and, and the problem is it costs money.
And this is always the issue. It’s like, where can I cut my budget? Where, you know, yeah, I, I can consolidate. I love consolidation. Consolidation is great. I can just put everything in here and I don’t have to worry about it. But it, it comes back and, and like I said, if, if you have that flexibility to do that, then you, you gotta be doing it.
Maybe not every load, but maybe once in a while you’re doing it so that you have a network and contacts developed.
[00:21:02] Lori Boyer: Oh, absolutely. Great, great point. Because relationships in our industry are so critical and developing that they help you pivot more quickly. So really good point about finding, creating those relationships, getting some contact points and, and a little bit of experience with using some different ports and, and diversifying a little bit.
[00:21:21] Sal Mercogliano: I think real quick, this is the most like advanced business in the world, but at the same time, it is the oldest business in the world that uses personalities and fax machines. So I mean, you have to build that up.
[00:21:31] Lori Boyer: Okay. So I love you. I feel like that too, like this is a complicated, highly technical, automated, but at the same time, so relationship based.
It’s really crazy. I love that. Okay, let’s talk a little bit back. So going back to what’s going on in the Middle East, are we gonna see, do you feel like, you know, you mentioned the clogging up and how that happened in the ports here in the US it. Even if things get moving, I mean, aren’t we seeing kind of a big clogging there?
Like how is that, I guess give me best case scenario here that it gets worked out. Worst case scenario, what? What do you see that we’re gonna do there?
[00:22:06] Sal Mercogliano: Even, you know, right now, everything stops, straits open up, everything’s flowing, you know, magically. We’re still gonna have disruptions. Because the minute you clog, you create the kind of, again, it it, it’s driving down the highway and all of a sudden traffic comes to a stop for some reason, you don’t know why, because there was an accident there an hour ago and it just hasn’t cleared up yet.
And, and that’s what we’re seeing. We’re gonna see it’s gonna, you know, for almost every day of a, of an incident, it takes three to four to clear it out. Jeremy Nixon, the CEO of ONE, Ocean Network Express was talking at the TPM conference in Long Beach. And he said 10% of of the container market is tied up in this.
And, and I, I questioned that for a minute. I was like, well, hang on a second. There’s not 10% of the container ships in there, but what he’s talking about is 10% of the routing of the, of, of, of ships that even touch that area are going to be affected by this. And as he said, if I can’t get my ships into the Middle East, I can’t get into the Persian Gulf.
That cargo goes somewhere. And when does it go? It piles up in the terminals and, and as the terminals clog up, it’s the big Jenga set or the big Tetris, it starts filling up and it becomes more inefficient in the ports. And you know, I gotta get this cargo off, so I gotta dump it into a port. And now if I’m routing cargo, I gotta route it over multiple places.
The, the I, I always use it. It’s, it’s the musical chairs of, of container shipping. The minute you pull a chair out or you occupy a chair, you cause a disruption. And, and that’s what we see. It’s the accordion effect. And, and, and that’s exactly what we’re gonna see. It doesn’t matter what sector we talk about, if we talk about containers and we talk about bulk, if we talk about you know, oil, if we talk about gas, we talk about passenger liners. There’s six passenger ships stuck in the, in the, in the area. That’s upsetting schedules for other ships that, that are doing that. And it just has this kind of knockdown effect. And if, you know, if it affects you in a small business where you have six employees and one doesn’t show up, imagine what this does when you take one sixth or you know, 10% of the ships out of the sequence. It, it creates a massive disruption on a global scale.
[00:24:03] Lori Boyer: Wow. That is crazy. So. Are we thinking, would you anticipate, you know, is this gonna be a multiple quarters kind of disruption? I mean, obviously you dunno what’s gonna happen in the conflict there, but should our shippers be thinking longer term? I guess what advice do you give them for the next few months even?
[00:24:23] Sal Mercogliano: So, I, I, I just, you know, end of the year you do those forecasts and so I was reflecting back on 2025 and I’m reading everyone’s, you know, predictions for 2026 and I’m reading the ocean carriers, the big ocean carriers like, oh, 2026 is gonna be bad.
It’s gonna be, you know, it’s gonna be, you know, we’ve got over capacity. We, we, we, we have too many ships and, and the, the Red Sea’s gonna open up and rates are coming down and, and you know, the ocean carriers were, woe is me. I’m not gonna be making, you know, the billions I was making a few years ago, and I literally just read a story today.
It’s like, oh, we don’t have enough ships for the ocean carriers. I’m like, are you kidding me? It’s like, it’s like, it, it’s like you were just complaining that you had too many ships. You’re blank sailing like crazy. And, and I think that’s the, that’s the element right there. It, it’s going to be, disruptions. Again, what I found during the tariff, for example, is, is alright, if you look at 2025 versus 2024, we shipped almost the same amount of goods in those two years.
I mean, grant, there wasn’t a raise. We didn’t, we didn’t grow. It was about stable what we did. But if I remember reading the, the, the forecast for 2025, it’s like, oh, this is gonna be horrible. This is gonna be, you know, you know, I was listening to the port of LA talking about a, a one third reduction. In the amount of cargo coming into the port of Valley.
They’re the third best year ever. I mean, third best year they’ve ever had. And, and when I looked at those numbers and I said this and I had people say, you’re crazy, Sal. It’s like, no, because shippers learned, what do we do? We front loaded the first quarter of last year, May and June was down, which normally it isn’t, you know, it’s usually a, peak, but man, we had a big dip in there.
And then what happened, August through the roof. And even in the fourth quarter, we went big ’cause we knew this was gonna be a l really late New Year over there. A Chinese New Year. It was gonna be late. And I, I think again, we’re going to see this kind of adaptability. I think you have to see it. I think the ocean shippers see an opportunity here. And let me be clear, I’m, I’m very hard on ocean shippers. They will do everything they can to orchestrate the system to make sure they’re making rates. They don’t coordinate, they don’t work together, but man, they’re gonna cancel shippers and they’re gonna make sure.
So I think that’s one of the reasons why, for example, out of TPM right now, you’re not hearing a lot of contracts being signed, because everybody’s waiting and waiting and waiting. Because everybody knows those long-term rates. What they want to do is wait until those rates are as high as they can get ’em and lock ’em in.
The spot rates are always the big mis giver. ’cause you know, spot rates are, are 30% in the marketplace. People are jumping on those because they can’t commit the long term or they don’t have enough volume to commit the long term. So I, I, I think. You have to be really careful and, and watch what you’re doing.
And, and we’ve had some changes in the ocean carriers, Maersk and Hop Hog and this Gemini corporation are, are, are trying this new spoken hub system. They touted a ridiculous reliability. I, I don’t know if I buy the 90% reliability. But then you have Mediterranean Shipping, which is just in the behemoth. I mean, just a monster of, of, of an entity out there. And they seem to be doing good.
We’ve got Zim who’s playing a game here that maybe bought up, so there’s a lot going on. I’m not sure I got back to your question, Lori. There’s so much there. I apologize.
[00:27:24] Lori Boyer: I, I know that we could talk forever and I know we’re running a little bit low on time, so I wanted to jump into, any signal that you’re looking for, any, you know, anything that our shippers should be keeping their eye on right now that you recommend?
Just in our current situation?
[00:27:39] Sal Mercogliano: Yeah. I, I, I would be watching, you know, the, the fed, you know, puts together some charts, which are really interesting about, you know congestion in ports, especially in East Asia. To me, that is always the thing I’m looking at. I’m always looking at when the East Asia ports start getting congested because that’s a good indication for me, number one, rates are gonna start going up. There’s gonna be some difficulties coming in, and what you start seeing is the unexpected surges in the port.
What throws everything off in the ports is, is when everything’s flowing nicely, that’s great. When it’s a nice level of flow and, and, and ships are coming in, it’s expected, everything’s great. It’s when you have these pulses come in, that causes a lot of disruption because if you know US ports, we’re not gonna work that third shift. We’re not gonna work weekends typically. And so things will start backing up, piling up, and it gets a little bit difficult out there.
So I, I watch that a lot. The other thing that, you know, that was really incredible, I think. We, we learned so many lessons from the supply chain. I, I, I always never buy this idea that people don’t learn. They did. I mean, we’ve got better management, for example, of warehouse space in the United States than ever before.
A lot of components out there that can give you, you know, hey, you don’t have to store everything in, in, in the Inland Empire. You can go out along a class one railway and find a spot in Phoenix, in El Paso in, in Topeka. And, and a lot of available availability out there. A lot of fight between the ports right now to try to get business.
It’s, it’s cutthroat. It’s, it’s, there’s a lot of offers coming in about that. I think some of the mid-range ports offer a lot of flexibility you don’t get in the big ports in some ways. You know, I was just down in the port of Jacksonville. I watch what Charleston is doing. I watch what the Port of Virginia is doing is really incredible.
And then some ports outside the United States too. Vancouver, really interesting. If you’re in the Midwest, Vancouver is a really interesting aspect to come in because you’ve got that railway connection between the Canadian Pacific and the Kansas City. I, I. I’m always leery of the Mexican ports because you get so much trouble coming across that southern border.
That border is, is is always a, a danger in some ways. Pacific Northwest, Seattle, Tacoma, developing really nice they’re working a lot to get that in there. So yeah, those are the kind of the big things I watch and every time, you know, anything ticks on a global scale, it’s good to take a moment and, you know, just peruse the major news sources. You know, I look at G Captain, I look at Lloyd’s List, Digital Commerce. You know, understand some of them have a perspective they’re trying to talk about. Always un always know. I’m a historian, I always tell people no biases, you know, so always be, be aware of that, but, you know, be, be aware of that and get into networks.
The other thing I talk about all the time is, is, is, is groups and, and trade networks and trade associations, which communicate like-minded people experiencing the same things. That’s really, really important, you know. And, and things you do at your podcast, for example, is a good thing about that too. I would tout my own channel, but that’s really self-serving, so I don’t like to do.
[00:30:28] Lori Boyer: I I’m gonna tout it for you.
What’s Going on With Shipping? Completely keeps you in the loop of what’s going on with shipping. And I, I actually love that point, Sal, as we close out here, this is an, an industry heavily based on relationships, but that’s great. I mean. What it means is that go out there, there are people who are experts and you don’t have to become an expert.
You can listen to them and you can get your information. You don’t have to spend 10 hours a day like Sal probably does keeping up with what’s going on. You can just check in, find out what, what the latest news is and, and keep yourself abreast of situations. Fortunately, we’re early enough in the year.
Year, we’re a little, you know, ahead of all the peak season and craziness where a lot of our shippers are trying to move goods across the ocean. So, stay abreast of what’s going on is, is my recommendation. Any final recommendations from you, Sal?
[00:31:16] Sal Mercogliano: The only other one I’d add, Lori, too is social media is, is you do not, I know people have this fear of social media and, and you do not need to be tweeting and posting all the time, but if you follow some really key people, I, I’ll say this, you know, when I started this, I knew shipping, I knew ocean shipping.
I knew it. I, I understand rail, I understand trucking now, and that is because I made some great connections on some people on, on that. So, you know, if I have an issue about trucking, I know who to look at, I what are they saying about this? I got a rail issue. I know who to look at. And, and again, you know, it, it’s not like I have to tweet and say anything to them or follow them on LinkedIn.
You know, there’s a couple of key follows on LinkedIn I follow all the time and, and there’s so much information out there. There literally is. The question is what, and this is a, a thing I do as a history teacher for my students is the problem today is not lack of information, it’s too much information.
You have to figure out what’s good information, how do you sort through the chaff out there and find this is the nugget I need to pull and, and follow and, and that’s why you follow good people. You really do that. And I think for your businesses too. You need to be on social media. You need to be out there doing that, especially when it comes to looking for workforce employees, why your job is cool.
I I, I get so many students come up to me now who find, follow my channel and they sit there and go, how do I get into the supply chain? Because again, nobody knew what supply chain was. Been around forever, yet now everyone is like, hey, what do you do? You do something with supply chain. I, I, I literally run into people all the time, ask me this question because it’s interesting and, and as you well know, there is a myriad of jobs within supply chain you can morph into.
Maybe you’re, you start to hear, I don’t like this as much, but I really love this. If you love solving problems, I got a career for you. It’s called supply chain because you’ll do it on a consistent basis.
[00:32:57] Lori Boyer: Absolutely. I echo that a hundred million thousand percent and I love history as you do, so I love studying, you know, ancient Roman supply chain and all of the different aspects.
It has, it’s been around forever.
[00:33:10] Sal Mercogliano: The Romans won because they were great at logistics.
[00:33:14] Lori Boyer: That’s exactly right, Sal. So thank you so much for being here. I know your day’s super busy and you’ve been having spring break and everything and it has just been great.
Our, our Unboxing Logistics family are really gonna enjoy hearing from you.
[00:33:26] Sal Mercogliano: Lori, I appreciate the offer. Thank you so much for having me.
[00:33:29] Lori Boyer: Uhhuh. We’ll see you all next time.
