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Biden administration backs lifting vaccine patent protections

Our CEO Tony Nash recently guested at the BBC Business Matters to share his thoughts on the lifting of the vaccine patent protections to help in manufacturing more vaccines faster. Is that fair specially in this time of need? Also discussed are the special case of Facebook and Twitter’s suspension of Donald Trump’s social media accounts, college football, and the growing industry of recycled furniture.

 

This podcast was published on May 6, 2021 and the original source can be found at https://www.bbc.co.uk/sounds/play/w172xvq9r0rsxwz.

 

 

BBC Business Matters Description:

 

The US government has backed a temporary suspension of intellectual property rights for Covid-19 vaccines in a move likely to enrage the pharmaceutical industry, which strongly opposes a so-called waiver. Shares of the major coronavirus vaccine companies were hit by the announcement but is it just an empty gesture? We speak to Jorge Contreras, Chair of the Open Covid Pledge, a group that is lobbying organisations to share their patents and copyrights in relation to vaccine efforts. We also hear from Thomas Cueni, of the International Federation of Pharmaceutical Manufacturers & Associations. And there’s no status update for Donald Trump anytime soon; Facebook decides to uphold it’s ban of the former US president. We speak to Issie Lapowsky, Senior Reporter at tech site Protocol. Also in the programme, college sports in the United States are a big business, but the athletes taking part have typically been compensated through scholarships rather than salaries. But could that change? The BBC’s Will Bain reports. Plus, the Swedish furniture retailer Ikea has launched a scheme in the UK to buy unwanted furniture back from its customers, in a bid to save items from going to landfill. Hege Saebjornsen is the company’s sustainability manager for the UK and Ireland explains how it works. And we’re joined throughout the programme by Tony Nash, chief economist at Complete Intelligence in Texas and the writer, Rachel Cartland in Hong Kong.

 

Show Notes

 

VS: Tony, do you think, people in Texas will be as upbeat as George, our first speaker?

 

TN: Yeah, absolutely, I think people here are pretty happy about that. A couple of weeks ago, there was an uproar in India over Americans not sharing vaccines with India. Houston has a very large Indian community. And so we were very supportive of everything that could be done to help get vaccine components and vaccine intellectual property to India. So this is a positive development in every way.

 

VS: And so in terms of an anxiety of giving vaccines away before the population is fully inoculated, does that not exist in your experience?

 

TN: I don’t think so. There’s plenty of capacity, at least in Texas, if you want a vaccine today, you can sign up to get it. So it’s not really an issue here. I think India has the manufacturing capacity and the know how to do very good vaccines in India. So once the licensing is clear and the components are there, they can manufacture for India and for many parts of Asia, Middle East and Africa.

 

VS: Tony, what does this actually mean for Donald Trump? He’s not allowed to use social media at the moment.

 

TN: There are other social media channels, but I think it’s bigger than that. I think the real issue here is around what’s called section 230 in the U.S. government, which allows websites to not be considered publishers. And under Section 230, they are supposed to provide unrestricted access to posting content unless it’s a rules based system. This is clearly a personal deal. Whether you like Trump or not, this is this is making special rules for an individual. I think the bigger issue is around whether Facebook and Twitter and the other social platforms are abiding by Section 230 or whether they should be considered publishers. The BBC is a publisher there and certain things that the BBC has to adhere to that Facebook doesn’t. And so if Facebook was a publisher, they would have to adhere to the rules that the BBC abides by. So if they’re going to restrict postings like this, they should be a publisher. Otherwise, they need to have rules that they enforced regardless of the individual, regardless of the political party, regardless of the country someone from. I think they need to be applied consistently.

 

VS: So this idea of this board is a way of sort of perhaps circumventing that.

 

TN: But nobody does. I mean, nobody if you ask anybody in America, nobody actually believes this is an unbiased board. It’s just a fallacy so…

 

VS: Wide ranging from all around the world, different types of backgrounds. So you can kind of argue that they are a mixed background with lots of different worldviews.

 

TN: I run an artificial intelligence company. Nobody in the technology community, hand on heart. I actually believe this is an unbiased view. I’m sorry. It’s just not true. And it’s a big pretend game to act like this is unbiased. I’m not on Trump’s side here necessarily. But if you’re going to make rules personal, that really companies lose credibility as a result of that. And all I’m saying is that Facebook should be considered a publisher and they should abide by the rules that publishers like the BBC abide by.

 

VS: I’m sure it’s not going to last that we’re going to hear from this issue. And for those of us outside the United States, we don’t understand the significance of college football in everyday American life. Tony, you’re in Texas. Can you paint us a picture of that?

 

TN: Yeah, so college football is not professional and it’s kind of professionalizing, but by professional, I mean paid, right. So this California bill starts to professionalize college football. I think part of the problem with that step is that we have students who come out of high school effectively 17 or 18 year olds who have really raw talent. They’re not necessarily trained to play professionally. They typically spend time with high caliber coaches in universities to develop their skills in their craft over three to four years. Many of them go out early to try to go pro, but it’s over three to four years and then they’ll go into the professional leagues and make money.

 

So there is a very large investment that universities are making into those athletes. And what happens at the university level is,  when students come to a university, they do get a scholarship. The athletic dorms are not normal dorms. They are first class dorms. The food they eat is first class food. I’ve been in their cafeterias. It’s amazing. So they are not treated like normal students. So they do get a lot of advantages above a scholarship, but there’s this huge investment in their skill. And so, the other side of this is if students want to get paid when they leave high school, they’re welcome to try to go pro after their senior year in high school when they’re 18 years old.

 

And so if there’s a problem with them getting paid, they’re welcome to to try to join the draft and go through that process. They can do it at any time. They could go pro at 18 years old. I doubt many of them, if any of them, at least in football, would would qualify, would get drafted by a team.

 

VS: As you say and say presumably then, sports is encouraged at quite a young age, given how lucrative it can can be.

 

TN: Sure. And so they can try to do that, LeBron James actually went into the NBA out of high school, he never went to university. So there are kind of phenoms who can do that and, more power to those guys. They’re welcome to do it. But university, so the school where I went, where I did my undergrad is Texas A&M University. It has the largest revenue sports program of any university in the United States, very large. But the facilities that Texas A&M has for their student athletes are amazing. They rival any pro facility. And so what’s happened over probably the past 20 years, I would say, is a dramatic kind of upskilling and a dramatic improvement of not just the facilities, but the coaches.

 

And so there are coaches who go from college level to pro and back because the skills that they impart on the students are are amazing. So, the path to getting paid for your sport is one that is always there. They can always go pro straight out of high school. LeBron James did it, other athletes to it. But it’s a very, very, extremely rare process, I think, paying student athletes. Part of the reason I like college football, I prefer college football to pro because you root for a team in college football, you don’t root for an individual in pro football, really. It’s rooting for individuals. And it’s not really a team sport as much as it is at the college level. So I think a lot would change. I really do think a lot would change.

 

VS: When we heard that about Rachel’s lockdown project. Lack of. And are you cycling anything?

 

TN: Always, you know, so we just moved back to the U.S. about three years ago, so we’re not recycling much, but when we lived in Asia, we would regularly recycle as my kids grew up, as we worked through furniture, we would regularly, regularly recycle in Singapore.

 

There’s a guy named the current goony man in every neighborhood who would come and take your recycled materials. And so we would work with with him and he would donate it or something like that. So, you know, every community has its own way of dealing with these things.

 

VS: Do you sell on furniture that you don’t know because of these websites these days? You can do that well now.

 

TN: We do that as well. And it’s pretty common. I mean, there are loads of websites where we can do that. So it’s pretty common. We don’t really throw away much big stuff there. We had my son, my son’s bunk bed here. We just sold it on one of those sites about six months ago. So, yes, it’s very common.

 

VS: Costly to these sites around. Don’t say I wonder if if a company or a retailer decides that they’re going to buy back things. They’ve actually got quite a bit of competition, haven’t they?

 

TN: Yeah, I mean, I think they’ve probably done that calculation, it’s a pretty crowded market, so, you know, people will dispose of it in a pretty economic way and make money where they can. So I don’t know that everything will be coming back to them.

 

That’s probably just a small, small fraction that will actually.

 

VS: Thank you very much, Rachel and Tony, for joining me today.

 

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Visual (Videos)

Oracle for Startups Featuring Complete Intelligence

Complete Intelligence is in partnership with Oracle for Startups, and here’s a Youtube interview featuring our CEO and founder, Tony Nash, where he explained what the company does and for whom. Get to know the technology behind the superforecasting for manufacturing firms and learn how CI helps them be more profitable specially in a highly volatile market like in the Covid pandemic. There’s also a section on how CI uses the Oracle Cloud Infrastructure to better serve its clients around the world.

 

The video above is published by Oracle.

 

❗️ Besides Oracle, Complete Intelligence is also in partnership with Bloomberg, Refinitiv, and Microsoft. Learn more about our Partnership program here.

❗️ Discover how CI can help your company in future cost projections, revenue forecasting, budgeting, and more. Book a demo here for your agile budgeting and forecasting.

 

Show Notes

 

WD: Can you tell me a little bit about what Complete Intelligence does and for who?

 

TN: We work with global manufacturers and we help them better understand their cost and revenue environment. We’ll work directly with their ERP data. Work with IT in the cloud and help them understand the forecast for their costs and for their revenues. So, they’re using their exact data in their exact environment to make great decisions for their clients.

 

WD: I’ve heard what you do referred to as super forecasting, which sounds so cool. Which industries
are best served by the super forecasting that Complete Intelligence offers?

 

TN: It’s mostly manufacturers. We work with chemicals firms, mining firms, electronics manufacturers, industrial manufacturers. So people who make stuff or people who work with firms who make stuff have to know how much that stuff’s gonna sell for, how much it’s gonna cost. Anybody who has risk associated with the future cost or future price, would need what we do to really help them de-risk their future decisions and their proactive planning processes.

 

WD: How are the forecasts that you provide impacted by volatility caused by unprecedented global events, say a pandemic?

 

TN: When Covid came around, when markets were hit dramatically in February, March and into April, we increased the frequency with which we update our forecast to our clients. But we also folded in a lot more volatility-specific algorithms, so that clients would understand what the path back would be like. In a normal year, let’s say the cost forecasts for a major manufacturing firm can be off by up to 30 percent. In some cases even more. So, if you’re planning those expenses and those budgets. You have a huge variance that you’ve got to pad in your budgets.

 

On average, we’re looking at a four to seven percent error rate. We’re helping people in a dramatic way to really de-risk their future outlook on the cost side. What we’re doing is a fully automated process. That guesswork of people sitting around the table saying, “let’s push this number up, let’s take this number down,” that’s a long budgeting process for people. And we really put that in the cloud. We have the machines learn and work through the data and calibrate and reduce that error for clients.

 

WD: Working with global markets and currencies, you must have massive data sets. Increasing the frequency of running those data sets probably requires quite a bit of computational power. How does Complete Intelligence manage that?

 

TN: Wee do that with cloud solutions. We work with OCI and the current generation of OCI to expand our computing capability. Many companies work across clouds. They work across on-perm and cloud and so we’re flexible with all of that. The frequency of those updates, the frequency with which clients want an updated view of the future for different companies changes. You have really fast moving companies who want that on a really high frequency basis. You have slower moving companies who are looking at it maybe monthly. That’s fine. We adjust to all of them.

 

WD: So, flexibility and multi-cloud are two really interesting considerations for dealing with enterprise customers like you do. What are some of the other unique challenges that face startups, like yours right now?

 

TN: With the pandemic, we’ve seen clients be very, very risk-averse. The the risk of taking on a new small company as a vendor is a problem for major companies. They’re trying to figure out how to adjust their business to an uncertain environment. For us, partnering with Oracle has helped to de-risk that decision for major companies. Oracle says Complete Intelligence has a viable solution, let’s talk about how we can help you. And the credibility that Oracle has when we go into a client is really really important for that situation.

 

WD: Aligning with a credible brand that’s been around for 40 years like Oracle is absolutely something that a startup can use to hack their growth. I’m curious about your use of Oracle Cloud and solutions that are open source Cloud native like Kubernetes. Can you talk a little bit about how you work with those Cloud Native Solutions?

 

TN: Kubernetes is a great one where our solution is containerized. We throw it onto Oracle Cloud and we can use it with clients. So, whether it’s the database we use, whether it’s the scheduling languages we use, whether it’s containerization, all of that is flexible on Oracle Cloud. And we can use the open source infrastructure that we have within our specific configuration on Oracle Cloud.

 

Over the last year, OCI has changed a lot in terms of enabling some of the very specific solutions that we’ve had. And very kind of high performance computing solutions that we’ve needed. Accommodation has really given us a lot of confidence with OCI.

 

WD: Your startup has had a pretty unique trajectory. You started the company in Asia and now you’re based in Houston, Texas. What inspired such a significant change?

 

TN: I guess the biggest thought behind there, is this is where the customers are. And to be honest this is where the talent is. The people who are doing the leading edge work in what we’re focused on are here. And the context around manufacturing and the need to automate some of the decisions around manufacturing really are happening in the U.S. and Europe, in a big way.

 

Of course that’s happening in Asia but it’s different in Asia. I spent 15 years in Asia. We conceived of and started Complete Intelligence there but we really utilized as much as we could there. And I came to a point where we just had to move the company to the U.S. to find the resources we need to build the company.

 

It’s been great moving to Texas, has been great. It’s a fantastic business environment. The manufacturing clients here are fantastic. Oil and gas is seeing a lot of headwinds right now which is a real opportunity for us.

 

WD: So the forecast is looking bright for Complete Intelligence?

 

TN: Oh absolutely. Again, with the right partners, we can move into the right clients and any startup trying to go it alone today is going to have a really hard time. It’s possible and it’s probable with the right amount of work put in, but building the right partnerships like our partnership with Oracle has been huge in helping us to accelerate our commercialization and our presence in the market.

 

WD: Absolutely and I know that if startups want to learn more about working with Oracle they can go to oracle.com/startup. If they want to learn more about the exciting work that Complete Intelligence is doing, where should they go?

 

TN: They can go to completeintel.com. We’ve got all of the resources there. We have a weekly newsletter. We have regular video interviews with industry experts, similar to what you’re doing. There are a lot of resources. Our twitter feed is complete_intel as well, there’s a lot there.

 

WD: Great, any secret market intelligence you want to share with our viewers?

 

TN: The changes we’ve seen over 2020 and the risk and volatility we’ve seen over 2020, unfortunately we don’t see a return to normal soon. The challenges that we’ve faced as startups and the challenges that our customers have faced in 2020 aren’t necessarily going away. This type of up and down environments and the persistence that we’ve had to have as startups, 2021 is not going to bring a normal back. We’ll see a little bit more, but as startups we’re going to have to continue to push very, very hard to get the mindshare within those endpoints.

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Visual (Videos)

CNA Asia First: How the US Foreign Trade Policies will Change after the US Election

Founder and CEO of Complete Intelligence, Tony Nash joins CNA Asia First to give insights around the 2020 US Elections and how the possible turnout will affect US’s foreign policies, economy, and trade. Was the delay in stimulus affected the voters’ decisions? Can oil companies be greener without causing a lot of disruptions? And did Trump’s trade strategies yield results?

 

This video segment was published on November 5, 2020 and is originally from Channel News Asia’s videos on demand, which can be found at https://www.channelnewsasia.com/news/video-on-demand/asia-first

 

Show Notes

 

CNA: Now for more on the markets, the US elections, and economy including trade policy from whoever takes place in the White House going forward, Tony Nash founder and CEO at Complete Intelligence joins us from Houston, Texas.

 

So Tony, it’s been a very divisive election and I don’t know at this point is it worth looking back at how there was gridlock and was difficult for congress to push forward any form of stimulus leaving a lot of Americans out in the cold. I don’t know if there’s weight on the minds of voters that maybe the whole of congress was complicit in this issue. But where do you think paving the way forward for the American economy needs to start.

 

TN: It really depends on where in America you are. There are parts of America that just can’t wait to get out and work and there are restrictions. There are other parts of America where people want to stay in under restrictions and generally that’s the red-blue divide in the US.

 

What we’ve seen is more people wanting to push out demonstrations and say California and other places where people just want to get out. The stimulus issues with congress, there were a number of windows where stimulus could have come out. But it didn’t. And that was a lever that was pulled largely by the house of representatives before the election. They wanted to hold off from it. Especially business owners, very frustrated by that. People who have been laid off, very frustrated by that. Certainly, some of this has been a part of the voting consideration.

 

CNA: Both sides red and blue are blaming each other on why stimulus was difficult and not being pushed forward before the election. But I want to get to the issue of the backbone of some of the sectors of the economy in this election. Climate change featured very heavily. You come from an oil state. The bigger question now going forward is because of this increasing climate consciousness, can these sectors actually pivot away from oil without causing huge disruption, political and economic?

 

TN: That’s fine in terms of climate change. The US actually performed very well in terms of emissions and efficiency. The bigger issue for these oil companies is actually the inefficiencies of their organizations and we’ve seen a lot of oil companies come out to say that they’d be laying off 16 percent of their global workforce. They’re realizing that with oil prices where they are and gas prices where they are,
they just can’t sustain the bloated workforces that they’ve had to date.

 

So, yes climate change is an issue and that’s a consideration. But with the fossil fuel companies, they’ve had bloated workforces that they’re having to contend with now that oil prices are lower.

 

CNA: As we look back at what the Trump administration set out to achieve with its very aggressive trade policy based on the metrics of leveling or gaining leverage to negotiate better terms for trade deals, do you think it has achieved this?

 

TN: What the current administration has been doing is a long game. It’s not something that is a short-term plan. To get factories to move, to get capital investment, to get say supply chains to move, that’s a three to five to ten-year process and can be even longer for industries that have super heavy capital investment. It’s making progress. If you look at investments say in electronic supply chains going into Mexico, I think both the aggressive nature toward China and the USMCA have really helped.

 

The electronics industry come back to Mexico and to the US. Those are some of the faster moving industries where we’re starting to see some real traction. But it is a long game. It’s something that if that’s dialed back now, you won’t necessarily see that continue or you may not see that continue.

 

CNA: The way that the Trump administration up and NAFTA, it does seem that it antagonizes some of its closest security partners including Canada. Is that counterproductive trying to form an alliance to counter the rise of China?

 

TN: There are two things with the USMCA, the kind of NAFTA part two. There was an agreement among the partners that it was a much better agreement. Getting them to the negotiating table was the first hurdle. But once they realized what the US wanted to do, what I understand is all sides were very happy especially Mexico. But in terms of getting a coalition against China together, I don’t think the US has necessarily tried to do that. The US has understood that where there are multilateral organizations or multilateral relationships countering China, that China will peel off one or two or three to create division. And so the US has taken China on one on one. This was a strategy from the very beginning and it’s yielded some of the results. But again, it’s a longer term strategy that they’ve tried to undertake.

Categories
News Articles

Time To Rotate

Tony Nash joins BFM 89.9 The Business Station for another look at the global markets particularly discussing the “Japanese equity market”. Is it the time to rotate into value or maybe it is a sign that the broader economy is recovering?

 

This podcast first appeared and originally published at https://www.bfm.my/podcast/morning-run/market-watch/time-to-rotate on August 26, 2020.


BFM Description

 

With technology stocks hitting all time highs, there has been some inflow into the finance and utilities sectors. We ask Tony Nash, CEO of Complete Intelligence if it is time to rotate into these names. We also ask his views on the Japanese equity market and if there is still money to be made with the change in leadership.

 

Produced by: Mike Gong

 

Presented by: Khoo Hsu Chuang, Wong Shou Ning

 

Show Notes

 

WSN: So far, deeper dive in global markets today. Joining us is Tony Nash, CEO of Complete Intelligence. Good morning, Tony. Now, last night, U.S. tech stocks will slump relatively while laggards like finance and utilities saw some inflows. So do you think this is the time to rotate into value and maybe a sign that the broader economy is recovering?

 

TN: I think it’s certainly a time to to that that that rotation is starting. I don’t necessarily think it’s in full swing yet, but but we’ve received signals for the past week or so that that rotation would start sort of seeing some of the techs off.

 

Today is not really all that surprising, given especially some of the Fed and Treasury statements over the past couple of weeks.

 

KHC: Yeah. So in terms of cyclical stocks, Tony, what is your point of view in terms of which sectors might benefit?

 

TN: Well, I think, you know, we’ve seen tech with companies like Nvidia, Tesla, and these guys have just had amazing gains over the past, say, four months. I think, you know, the rotation into some of the finance stocks, into some other more mainstream, broader market equities is likely. I think the indices are assuming that tech stays at elevated values. That rotation will only help the indices if tech comes off. Given the concentration of waiting within those stocks, it could really hurt some of the overall indices.

 

WSN: And, Tony, let’s focus on one of these, you know, super winners in the last few months. And it’s Tesla, right? They have a decision to sell five billion worth of shares. Is that smart or overly ambitious? Move now. And what more what kind of growth can we expect from this company?

 

TN: Well, the I think the the growth in the stock price is very different from the growth of the company, so Tesla’s trading at a PE ratio of almost 1200.

 

OK, the stock’s more than doubled since March. So, you know, the company itself isn’t doubling. You know, I think it has. I think what the management is doing is making a very smart decision to sell equity while they know the price is very high. So from a management perspective, I think that was a very smart decision. In terms of a buyers perspective, I’m not so sure it’s possible that Tesla stays at these elevated level. People have been trying to short Tesla for years and it just hasn’t worked.

 

So it’s possible there’s growth there and it’s possible they stay at these elevated levels.

 

WSN: So, Tony, are you a big fan of Tesla? This level…

 

TN: It’s hard not to be whether I’m a buyer, personally or not, I would hesitate here. But, gosh, you know, I think there are other places to look that are better value.

 

But it really, you know, part of it really all depends where the stimulus is going. So since the Treasury and Fed are intervening in markets, if they’re targeting specific equities or specific sectors, then you kind of have to follow that money.

 

And so it’s it all depends on how much further these things are going to run and where that stimulus is targeted.

 

KHC: OK, based on PMI data, most of Asia remains contractionary. But for China, of course. You know, Tony, in your opinion, why is recovery not yet forthcoming? And is there a main catalyst needed for manufacturing to take off?

 

TN: Yeah, I mean, look, in terms of manufacturing PMI, as you have Indonesia, Thailand, South Korea, Taiwan, you know, they’re all growing, which is great. Myanmar is actually growing faster than China.

 

But what we don’t have really is the demand pull. And that’s been a real problem. And, you know, we’ve been talking about that since February and we’ve been really worried about deflation. And, you know, what we see even in Southeast Asia is government intervention in markets is really what, propping up a lot of the activity. And I think, you know, the big question I have is, will we see steam come out of recovery in Asia in the same way we’ve started to see steam come out of recovery in the U.S.?

 

I think the answer is unfortunately, probably yes. And I think until the demand from both consumers and companies comes back and the fear of covid wanes, I think we’ve got some some volatility ahead.

 

We’re expecting some real trouble in September. I think it’s great that markets are doing well today, but we’re starting to see the the momentum really slow this month.

And without additional help from the Fed or PEOC or other folks, it really slows down. The problem is the efficacy of that support really deteriorates the more you add to the system.

 

WSN: And Tony, look at Japan, right?

 

I mean, are trading the equities. They are trading at a steep discount to their historical premiums. Do you see any value in yen based assets? After all, Warren Buffett himself just dipped his toes into it by six billion dollars worth of trading companies did. What do you think?

 

TN: Well, that’s the answer. I mean, it’s hard to it’s hard to bet against Buffett. He’s obviously seeing real value there. And I think the Japanese trading companies are really, really interesting because they’re you know, they’re a very good play right now. So is there a value? Sure. I think there’s value there. I think with Japan, a lot of the story is around productivity and automation. If if Japan can continue to raise its productivity through automation, I think it will be a very good play.

 

If that productivity and if the level of automation slows down, then it becomes questionable because everyone knows about the demographic story in Japan, but the economy continues to grow, which is really amazing.

 

WSN: So it seems like you’re quite a believer in that this can overcome some of the structural issues. But what about the fact that Abe has resigned for health reasons? Does it change at all the economic and monetary policies in Japan that might change your decision?

 

TN: Yeah, I think when someone like Abe steps down,  there’s always momentum. So it last for several months. The real question is, how long should the next leadership last? And is there enough structural stability to continue the momentum in Japan, meaning it’s not growing leaps and bounds, but it’s stable growth and it’s healthy growth. So I like Japan a lot. We have had reform under Abe. We have had structural reform under Abe. I think it’s much more healthy today than it was in 2011 or 2010. A lot’s been done.

 

Japan has the capability to continue to improve, but it all really depends. There are regional dynamics and there are domestic dynamics. But again, I think if demand regionally and globally doesn’t return, which is likely COVID induced, then I think Japan, like everywhere else, will have issues.

 

WSN: All right. Thank you for your time. That was Tony Nash of Complete Intelligence, speaking to us from Houston, Texas.

Categories
QuickHit Visual (Videos)

QuickHit: China is not going to stop being China

Panama Canal Authority’s Silvia Fernandez de Marucci joins us for this week’s QuickHit, where explains why China is not going to stop being China. She also shares first-hand observation on the global trade trends — is it declining and by how much, what’s happening in cruises and cargo vessels, where do gas and oil shipments are redirecting, why June was worse than May, and what about July? She also shares the “star” in this pandemic and whether there’s a noticeable regionalization changes from Asia to Europe, and when can we see it happening? Also, what does Panama Canal do to be up-to-date with technology and to adapt the new normal?

 

Silvia is the Canal’s manager of market analysis and customer relations. She has 20 years of experience studying all the markets for them and is responsible for their pricing strategy, their forecasting of traffic and customer relations.

 

Panama Canal opened in 1914 with annual traffic of 14,702 vessels in 2008. By 2012, more than 815,000 vessels had passed through the canal. It takes 11.38 hours to pass through it. The American Society of Civil Engineers has ranked the Panama Canal one of the seven wonders of the modern world.

 

***This video was recorded on July 30, 2020 CDT.

 

The views and opinions expressed in this QuickHit episode are those of the guests and do not necessarily reflect the official policy or position of Complete Intelligence. Any content provided by our guests are of their opinion and are not intended to malign any political party, religion, ethnic group, club, organization, company, individual or anyone or anything.

 

Show Notes

 

 

TN: Recently, the CPB of the Netherlands came out and said that world trade was down by double digits for the first five months of the year. Obviously that’s related to COVID. Can you tell us a little bit about what you’ve seen at the Canal and really what you guys have been doing? Everyone’s been in reactionary mode. So what have you seen happening in the market?

 

SM: There are some trends that had been present before COVID like the movement of production from China to Eastern Asia and we think this is going to be accelerated by this pandemia. But I don’t think that China is going to stop being China. It will keep the relevance and the importance in global trade as they have today.

 

We think that probably, yes, we will see more regionalization. We saw the signing of the renewal of the NAFTA trade between Canada, the US, and Mexico. So we think that there may be something happening in that area. However, we don’t see that trade is going to stop. I mean trade is going to continue growing after this pandemic.

 

This is something that I would say very different from anything that we have experienced before because once it is solved, I don’t know if the vaccine appears and people start going back to the new normal, there will be changes probably to the way we do things and the consumer is going to be very careful and probably will change his habits in order to prevent contagion. But I think trade is going to continue.

 

We see some of these trends becoming more and more important or at a faster pace. It is not an economic crisis per se. Once the people are going back to work, the industry will restart their operations, people are going to be rehired. The economy should start recovering faster. We are not sure because there is no certainty with this situation.

 

We first heard about it early in the year with the cases in China. But then, it looked so far away. It was happening to China. It was happening to Italy. We didn’t think about it as something that was so important or so relevant. The first casualty was the passenger vessels. The whole season for cruise ships at the Canal was cut short in March and Panama went to a total lockdown on March 25.

 

It really started for us when we received the news of a cruise ship arriving in Panama with influenza-like disease on board that wanted to cross, which was the Zaandam, and the first one that we had with the COVID patients on board.

 

TN: And how much of your traffic is cruise ships?

 

SM: It’s very small, to be honest. It’s less than two percent of our traffic. But still, we see it as an important segment, not only because of the traffic through the Canal, but also because of what it does to the local economy. We have a lot of visitors, a lot of tourism, and that is a good injection of cash coming to Panama. It was the probably the end of the season but it was shorter than what we would have wanted.

 

TN: When we saw the first wave of COVID go through Asia, did you see a a sharp decline in vessel traffic in say Feb, March? Or was it pretty even? Did we not see that much? Because I’ve spoken to people in air freight and they said it was dramatic, the fall off they saw. I would imagine in sea freight, it’s not as dramatic but did you see a fall off?

 

SM: It started in January, which is the very low season for containers, which is the most important market segments in terms of contribution to tolls. When we saw that there was this COVID happening in Chinese New Year, everything was closed. We were in a slow season. So we didn’t see much of an impact.

 

And for the Canal, there is a lagging effect because we are 23 days away in voyage terms. So whatever happens in China, we feel it probably one month later. We expected January and February to be slow because of the normal seasonality of the trade. But then after March, I would say that April was probably the worst month for us. We were hit April then May was worse than April and then June that was even worse than than May.

 

TN: June was worse than May? Okay.

 

SM: June was worse than May. We‘ve seen four percent, ten percent, fourteen or sixteen percent decline each month. It was like, “Oh wow! This is really thick. This is really getting worse.” We had reviewed our forecast in April. And I think so far, it is behaving as we expected back then. But there’s nothing written about COVID. We are learning as we go.

 

I would say that container vessels were also affected these three months of the year. We have LNG vessels that were supposed to deliver natural gas to Japan, Korea, and China. And LNG had been behaving very badly all year. That is kind of a peak season for LNG and LNG has been having a hard time because the market were supplied and the prices were very low, so many shipments that were supposed to end up in Asia, ended up in Europe or other destinations that were more profitable for the owners. But when the price of oil collapsed and went negative, the prices of LNG were affected in the Middle East and became more competitive than the US prices.

 

We saw a harsher decline in LNG shipments. We see, for example, 30 percent less than we expected to see and by COVID in April, it was probably 50 percent below what we were expecting. It was major and Iguess it’s a matter of demand because since the whole Asia was locked down, there was no demand.

 

TN: When industry stops, you don’t need energy. It’s terrible.

SM: Exactly. It’s really terrible. It was terrible. But we had some stars in our trade that supported the situation like LPG, the cooking gas and obviously people were cooking more at home so the demand was high and we saw an increase in trade for LPG. It’s a good market for us, for the neopanamax locks, so in a way we are grateful that our trade has not suffered as much as we have seen in other areas.

 

TN: You said you declined into June. How have things been in in July, so far?

 

SM: July seems promising. We came from a from a very bad June that was closed probably 16 percent below what we expected to have. But July is about maybe seven percent below our expectation. But we are very concerned about a potential W-shape recovery because of the new cases that we have seen in the US.

 

TN: When we saw factories close across Asia in the first quarter and in some cases stay until the second quarter, did you see some of the folks who were shipping through the Canal start to pivot their production to North America?

 

SM: It’s probably too early to say. We will see the effects of COVID probably in terms of near shoring maybe in two years. I don’t think that the companies or the factories are so quick as to move the production especially during this period in which everybody is still trying to cope with the situation.

 

TN: And manage their risks, right?

 

SM: Yes. So I don’t see that happening anytime soon. But it’s probably something that the factories and the companies are going to start speeding up and diversifying their production.

 

TN: And as you said earlier, China’s still going to be there. China’s not going to disappear as an origin, right? What I’ve been saying to people is it’s incremental manufacturing that may move. It’s not the mainstay of Chinese manufacturing that’s going to move or regionalize. They’re still going to do much of the commoditized manufacturing there because the infrastructure is there.The sunk cost is there, and they need to earn out the value of those factories. I like your timeline of two years before you really start to see an impact because we may see some incremental movement and maybe some very high value, high tech stuff or something like that move first but the volume of things probably won’t happen for at least two years. Is that fair to say?

 

SM: I would say so and I would add that we have seen these shifts to Vietnam and Malaysia and other countries in Asia, but we still see containerized cargo shipping from China. The volumes are still not high enough to be shipping directly from those countries. The container may come from Vietnam and or from Malaysia and they come to Shanghai or to another port in China. They consolidate the vessel there and the vessel departs from those ports. So in terms of Canal, for us that is good news. And I would say that probably Korea is trying to attract that tradition as well. So the long voyage will start in China or in Korea or in Japan instead of these other countries that are further away from our area of relevance.

 

TN: That makes a lot of sense. Just one last question. How do you see transit changing over the next five to ten years? What are you seeing from the Canal perspective in the way your operations will change?

 

SM: We are still adjusting to what is happening. We have always been very regulated in the best way. What I mean is that we have always had our protocols and codes for attending every situation. We have our protocol for infectious diseases that was the basis to start working with COVID. We think that at the canal probably, what we will see in the future is more technology to improve the operation. I’m not sure exactly how, but definitely there are machine learning and artificial intelligence that may help us be more accurate in our forecasts and probably organize our traffic in a way that is faster or we make better use of the assets. The canal is 106 years old. We have been adjusting every time to the new ways of the world, and we’ll continue to do so as a trade enabler.

 

TN: That’s right. Silvia, thank you so much for your time. This has been very insightful. I really do hope that we can connect again in some time and and just see how trade recovers and what we look like maybe going into 2021 or something like that. Okay. Thank you so much.

 

SM: Thanks to you.

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News Articles

United States ups the ante in China rivalry with Asia Reassurance Initiative Act

05 January 2019
The China-US rivalry in Asia – especially in the South China Sea – will intensify with the passage of American legislation underlining Washington’s commitment to the region, analysts said.
Read the rest of the story in South China Morning Post