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Economies are sputtering, which means trade war will intensify

Here’s another guesting of our founder and CEO Tony Nash in BFM Malaysia, talking about trade war between US and China. Can these two countries actually decouple? Or is the current supply chain too dependent to do that? Can the economy have the V-shaped recovery that everyone is dreaming of, or is it just an illusion? What can the policymakers do to improve the economic outlook for this year? What can his firm Complete Intelligence see happening based on the algorithms and AI?

 

We also discussed regionalization of supply chain as a result of the Trade War in this QuickHitQuickHit episode with Chief Economist Chad Moutray of National Association of Manufacturers.

 

BFM Description:

The trade wars between the US, China and the Eurozone seem to be gaining momentum. Tony Nash, CEO, Complete Intelligence, offers some insights, while also discussing European industrial activity.

 

Produced by: Michael Gong

Presented by: Wong Shou Ning, Khoo Hsu Chuang

 

Listen to the “Economies are sputtering, which means trade war will intensify” podcast in BFM: The Business Station.

 

Show Notes

 

This is a download from BFM eighty nine point nine. So is the station. Good morning. This is BFM eighty nine point nine. I’m considering that I’m with one shotting bringing you all the way through the 10:00 o’clock in the morning and Rano 76. We are talking about markets, but well above 50 bucks sort of because of that with about 15 minutes time, we’re talking to call you. Ling was an independent panel, a political economist at Ciggy and I’m advisers will be discussing palm oil.

 

BFM: So last night in America, the stock market slumped. Investors are cautious, right How did the markets do?

 

Not so well, because there’s been clearly a resurgence in virus cases in multiple states, which puts into question the economic recovery. So, unsurprisingly, the Dow closed down three percent and S&P 500 closed down 2.6 percent, while the Nasdaq closed down 2.2 percent. Meanwhile, in Asia yesterday, only Shanghai was up, which was up 0.3 percent, while the Nikkei 225 closed down marginally by 0.07 per cent. Hang Seng was down 0.5 percent, Singapore down 0.2 percent, and KLCI was down 0.3 percent.

 

So for more clarity into the whys and wherefores of markets, we’ve got it on the line with us Tony Nash, who is the CEO of Complete Intelligence. Now, Tony, thanks for talking to us. Trump’s getting tough on China rhetoric highlights, well, obviously, the American’s concerns about being too reliant on China. And, of course, we can see that being manifested in the list of 20 companies, which is deems suspicious. In your opinion, can the two economies decouple or other interests in supply chains too heavily aligned?

 

TN: Well, I don’t think it’s possible to completely decouple from China. I think the administration are really being hard on each other. And I think the hard line from the US, you know, it’s relatively new. It’s a couple years old. But I don’t think it’s possible, regardless of the hard line for those economies to decouple and for the supply chain to decouple. We had some comments over the weekend out of the U.S. saying that they could decouple if they wanted to. But that’s just the hard line and unaware of the possibilities. We’ve been talking about, for some time, probably two and a half, three years, is regionalization of supply chains. And what we believe is happening is the US-China relations have just accelerated regionalization. It means manufacturing for North America, moving to North America. Not all of it, but some of it. And manufacturing for for Asia is largely centered in Asia. Manufacturing for Europe, some of it moving to Europe. And that’s the progression of the costs in China. And some of the risks are relative risks to supply chains highlighted by COVID} coming to the realization of manufacturers.

 

BFM: U.S. markets corrected sharply last night. So is the market actually now waking up to the reality that COVID 19 is going to be a problem for economic recovery? And this V-shaped that what many investors thought is probably a pipe dream?

 

TN: I think what markets are realizing is that it’s not a straight line. Well, we’ve been saying for a couple months is that end of Q2 or early Q3, we would see a lot of volatility. Then people started to understand how the virus would play out. Until we’ve had some certainty around the path, we will have days like today. And we’ll have a danger with an uptick as optimism comes back, what’s happening is markets are calibrating. People are trying to understand not only the path of COVID, but what those actors mean—the governments, the companies, the individuals—will do to respond, how quickly the markets come back. But what are people going to have to do? What mitigations that we’re going to have to take? What monetary and fiscal policies will governments take as well? We’re not done in that respect. So more of that’s to come, but we don’t know what’s to come there exactly. Markets have moved a lot on new case count. I don’t believe that it’s the case counts itself because a lot of these are are really mild cases. It’s just the uncertainty around how long it will last. The magnitude and the mitigation that people will take around it. There’s more of this volatility to come.

 

BFM: Tony, you might have seen the IMF‘s growth forecast, which was just announced a few hours ago. They’ve now said that global growth will shrink 4.9 percent for 2020. That’s nearly two percent worse than what they originally thought. And I think the U.S. also marked by an expectation of a negative 8 percent, down from negative 6o.1 percent. Do you think this might cause the policymakers to have an even more vigorous policy response and liquidity into the system?

 

TN: It might. I think the U.S. has shown that it’s not really afraid to be pretty aggressive. I think you may see more aggressive policy responses in other places. Obviously, Japan is very active on the monetary policy side. But we need to see more actual spending and more direct support of individuals and companies to make it through this. So, I do think that, obviously, IMF’s forecast concern people and get policymakers attention. I do think that they’re probably a little bit overblown to the downside, though. So I wouldn’t expect 8 percent decline. I wouldn’t expect a global decline as acute as they’ve stated today.

 

BFM: If you look at oil prices declined last night and I think this is on the back of U.S. crude inventories increasing. But is this also a function of COVID-19 fears in terms of how that may impact the economy’s going forward and consumption of oil again?

 

TN: Yeah, that’s interesting. The oil price is our… I think there are a number of things. The storage, of course, as you mentioned. But there’s also how much are people starting to drive again? What do traffic patterns look like? Also, how much are people starting to fly again? We really need to look at like Google Mobility data. We need to be looking at flight data. We need to be looking at looking to really understand where those indicators are headed. So when we compare a $40 a barrel of oil at $39 s barrel for WTI today, compared to where it was a month ago. The folks in oil and gas are really grateful to have that price right now. And it’s a real progress from where we were a month or two months ago. So I think what people are looking at today is the progress and then the expectation. They’re not even necessarily looking at the real market activity today. It’s all relative to a couple of months ago and it’s all expectations about a couple of months from now.

 

BFM: Last question on perhaps the data that your algorithms generated, Complete Intelligence. What kind of signs and indicators does our technology and the AI tell us about the direction the market’s going forward?

 

TN: Yeah, well, this is where we we pulled our assertion of volatility. We we really expected things to be pretty range traded for some time. So, you know, crude oil is a good example. We were saying back in February, March, the crude oil would end the quarter in the low 40s. This is WTI and here we are. So, with volatility, we’re not necessarily trying to capture the high highs and the low lows. We’re just recognizing that the markets are trying to find new prices. So it’s interesting when you look at things like the dollar. The dollar is a relative indicator for, say, emerging market‘s uncertainty and troubles as well. We did expect a dollar rise toward the end of Q1, early Q2, as we saw. But we haven’t expected the dollar to come back to strengthen until, say, September. So there are a number of indicators around trade or on currencies. And what we’re finding generally with our client base, for global manufacturers generally, are the algorithms… We’ve found that our average-based forecasting has an error rate that is about nine percent lower on average than consensus forecasts. So when we had all of the volatility of the last three, four months, consensus forecasts in many cases were 20 to 30 percent off. Ours were about nine percent better than that. Nobody expected the COVID slowdown. If we look at that from a few months ago, the bias that’s in normally of doing things, negotiating, procurement, supply chain, the revenue, that sort of thing. We take that out and this passionate… I would suggest that there is a lot of passion in the analysis from day to day when you look at three percent fall in markets today, but you can’t extrapolate today into forever. And what we can do with AI is taking emotion out of this, take a rational view of things. And really remove, not all of the error, of course, nobody can remove the error. There area a lot of the error from the outlooks in specific assets, currencies, commodities and so on.

 

BFM: All right, Tony, thanks so much for your time. And that was Tony Nash, chief executive for Complete Intelligence talking from Texas, USA. Interesting that this kind of stuff that he does at his business, tries to remove the emotional, the emotive side of the markets and give something a predictor over the future. But I think that sometimes you can’t discount too much of human emotion because it’s all driven by essentially two emotions, right? Greed and of fear.

 

But you know, basically his nugget is it’s going to be volatile. Right. Hang onto your seats. Right. Because we really don’t know. There’s too much uncertainty out there at the moment. This is a scene where it’s for oil prices or even for equity markets.

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QuickHit Visual (Videos)

QuickHit: Proactive companies use data to COVID-proof their supply chains

Supply chain expert and SAP SCM/IBP Architect Odell Smith of My Supply Chain Group joins this week’s QuickHit to talk about how proactive companies will survive, how data helps them decide quickly on supply chain solutions, and what we can do to be better prepared next time. After a quick 5-year stint in engineering, Odell has been doing supply chain technologies for over 30 years. His company does mostly SAP products and advisory services and implementing technologies for the supply chain.

 

Don’t forget to subscribe to our Youtube channel and hit the bell icon to be notified when a new QuickHit goes live. If you missed some of our episodes, here are some of the lastest ones you’ll enjoy watching:

 

Manufacturers are bouncing back, but…

We’re not going to normalize

How do we use up all the corn now?

How ready is the military to face COVID-19 and its challenges?

Oil companies will either shut-in or cut back, layoffs not done yet

 

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: How are your clients looking at their supply chains? How do they use their data to better understand and plan their supply chains even with all the craziness and volatility? Can you give us an example?

 

OS: Our clients have had a variety of different issues. There are companies that even inside the same company, they’ve had one business unit with a huge spike in demand and another business unit will just drop off. One of our clients is one of the largest beer producers in the world. Their keg business that supports restaurants just evaporated all of a sudden. But their bottled beer just went through the roof.

 

So these companies are trying to see these demand patterns as they come in, but also be able to quickly respond to those. Everybody’s used to the monthly demand patterns. But being able to see such a rapid volatile change in these demand patterns and being able to see that with data in the systems, then being able to simulate how you’re going to respond and make intelligent decisions based on that data, has been a real game-changer. If this had happened 20 years ago, it would have been a much more difficult scenario to recover from.

 

TN: What kind of data are people using to make these decisions? Because we really don’t know what’s coming from the outside. All the governments say macroeconomic data. This hasn’t come in obviously. So how are people taking data in to understand how to adjust their manufacturing patterns?

 

OS: The operation’s focus is about trying to estimate what that demand pattern is going to look like and then be able to adjust from that, if you have a constant supply. But if you have an irregular supply, it’s also a problem.

 

Another huge issue here is we’ve off-shored so much stuff in the last 15 to 20 years. An example is one of our customers that is a large paper supplier. They bring in pulp from other suppliers. Everybody’s familiar with the toilet paper issues that we’ve had. These guys had all kinds of issues come up. They bring in product and then they manufacture that product. As they do that, their supply chains were disrupted by not being able to get their suppliers’ product through the ports. Their port activity was blocked. They knew that was going to be the case, and so they had to redirect some of that stuff that was coming in to run their manufacturing.

 

They also worked proactively with the ports. They knew that the port was going to be closed and they had to redirect that. We put in some cost optimization for them to be able to evaluate simulations to estimate where it looked like the best place to bring this raw material. And then of course, their manufacturing process itself had to change, because there’s a lot more demand now for toilet paper than there was for paper towels.

 

Nobody expected that demand shift. Everybody was unprepared for that. But being able to use data to make smart, intelligent, short-term decisions about how to correct for that new demand was something that they were able to put in place fairly quickly. For scenario planning, we were using SAP IBP to be able to make those right decisions.

 

TN: I started my career in a freight forwarder, customs broker, and all the physical logistics around it. And it was always interesting to me early in my career to see when people had cost-sensitive, time-sensitive, quality-based decisions, and you’re balancing all three. The types of decisions they made sounded like they didn’t really have any history to go by. They were just looking at expectations, and you’re just playing it day-by-day or week-by-week.

 

OS: If you have the tools and you have the data, then you can do that. Now, a lot of this data was manufactured data themselves because it was based on estimates. What are my options here? I’ve got three other ports to use, and there’s different costs of transportation going through those ports, plus there’s a risk. Will I be able to get the stuff processed through and time to be able to make it? And if I don’t, then what’s the downstream impact to me in my subsequent manufacturing process?

 

TN: All to get a roll of toilet paper to your corner store. What would you say manufacturing companies need to be thinking about? How can people be better prepared the next time this happens?

 

OS: One thing that came out of this is that this data is changing so rapidly. [Companies that can] access that data can see what worked, and what didn’t work from the last situation. There are going to be some things when you’re making these snap decisions, and you’re just trying to keep your business afloat. There are going to be some things that you learn in hindsight that were not the best thing to do. As long as you plan for that, and you know that that’s going to be the case, and you review that after the fact, and are prepared for that risk, know where that risk is, then it always helps you be able to respond better next time. If you don’t learn from those things, shame on you.

 

TN: Do most major manufacturing firms today have a good base of data and well-organized data to make some of those decisions? Or is it still kind of iffy?

 

OS: It depends. There are some that have really good data. But it has to be a decision by the company. The company has to decide to put the resources in place and to have that vision, that strategy of knowing that that data is important and that the data needs to be reviewed, audited, and cleansed.

 

Some companies are very proactive. Some companies are completely reactive. And when you get in a situation like this with this craziness, these [reactive] companies won’t make it. Proactive companies will make it. So it’s really a business mindset and putting a value on that data that makes it helpful.

 

TN: These major manufacturers that you work with, I think there’s a perception out there that a manufacturing firm has one ERP system. Do you work with any firms that have kind of one ERP system or are they dealing with half a dozen or more typically?

 

OS: There are companies that have been able to maintain that single ERP situation. But more than not, you wind up with mergers and acquisitions. And these M&A activity is just brutal on IT organizations because very seldom do you acquire somebody who has the very same ERP system and they are on the same version that you’re on. And then, there’s a product rationalization and a customer rationalization that has to take place. Those are all very difficult things to get past.

 

TN: Pointing out, so just people understand. It’s not as if you’re just taking data out, putting it in a big machine and then putting it out the other end to help make a decision. You’re taking data in from a lot of different sources. And you’re making sure that it’s somewhat normalized or understandable in the output. And then those managers within those companies are also seeing data in a number of different formats to make those decisions. So this isn’t linear. This looks more like a bunch of weeds over here and a bunch of mangled tree roots over there and you’re trying to make it as linear as possible. The complexity of these decisions, the complexity of these data, say logistics activities, are just fascinating.

 

So last question here Odell. You’ve seen these companies through the first phase or two phases of this. Do you see these companies back on a path to normalization now? Are there manufacturing and supply chain processes normalizing now?

 

OS: There are some that are beginning to get back on the horse and there are some that are just still severely impacted. Some of our customers are in the pharma industry. They’re just going nuts and they’re going to continue to go nuts for a while. It’s really a mixed bag of things. A lot of our customers manufacture products that are related to home. Everybody has been doing a lot more of that lately. Demands for those have still been really strong even though supply may have been impacted by some of the situations.

 

One of our clients is a company that has multiple legacy systems. One of the great things about these new cloud solutions is the ability to do that normalization, to be able to take data from multiple different ERPs, disparate ERPs, and bring it in for a total view for the executive team to make these quick decisions. A lot of our customers are doing really well, and so it’s great to see them coming out of this. It’s been a slow couple of months for people just to wrap their arms around the thing, and try to just fight fires. And then now we’re coming out of some of that and into recovery mode that looks good and strong.

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QuickHit Visual (Videos)

QuickHit: Manufacturers are bouncing back, but…

In this QuickHit episode, we are talking with Chad Moutray of the National Association of Manufacturers (NAM). Chad is the Chief Economist for NAM, and he talks with manufacturers across the U.S. every day, to understand their issues and informs them of the the overall economic landscape. NAM has about 14,000 members that includes state manufacturing associations. Tony Nash discussed with Moutray the state of manufacturing especially in this time of the pandemic. What are they doing, thinking, and what are their plans? 

 

You can revisit our previous QuickHit episodes here:

 

We’re not going to normalize
How do we use up all the corn now?
How ready is the military to face COVID-19 and its challenges?

 

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: Can you walk us through some of the manufacturing firms that you’ve been interacting with and how do they’ve come to understand the environment? What have they been thinking about? What have their priorities been? Because I think it’s been confusing for everybody. But from a manufacturing perspective, what have you been seeing?

 

CM: I’ll go through a couple of things here. Number one, just that dearth of data that we had early on, everyone was asking me, “What is the current capacity utilization for manufacturing right now in the State of Pennsylvania?” I don’t know. How would I know, right?

 

There was a lack of information early on, and the abruptness and the severity of this downturn just caught a lot of people [off guard]. The numbers are so heartbreaking and jaw-dropping. We’re starting to get a sense now of what those numbers really are, and the drastic-ness of these figures in terms of being the worst ever, or the worst since the Great Recession. But there was a lack of information early on that really just caught people by surprise.

 

Companies don’t know what to do. This is not just a business conversation. It’s also a life and death conversation. Do you keep operating? Do you not keep operating? Are you operating in a state where you’re forced to close? Are you deemed essential? A lot of those things early on really dominated manufacturers’ time in terms of whether to operate, what happens if someone gets sick in your facility? What do you do? Do you close everything down? There was a scramble early on just to figure out operationally “What am I doing?”.

 

It moved from there to the conversation about PPE, Personal Protective Equipment, masks or ventilators or whatever else.

 

One thing that really has dominated that manufacturing conversation over the last month has been the National Association of Manufacturers work with the administration [to understand] whether it’s FEMA or DOD or the Vice President’s Office to say, “Okay. What do we need in order for everything to come back to normal? How many masks do we need? How many ventilators do we need?” And then helping to identify manufacturers that can produce that. That really has dominated a lot of time for the NAM over the last month or so–getting a handle on what are those needs.

 

That has gravitated into the new normal. Everyone is [asking] what does manufacturing look like three months from now, six months from now, a year from now? How do you get back to a sense of normal, whether there’s a vaccine or not a vaccine?

 

Answering those questions will dominate much of my time from a research perspective. We asked on a survey “Are you re-engineering in your process to have social distancing in mind,” or “Are you going to let people work from home?” That’s not always possible on the shop floor. But in some cases it may be, right? So those types of questions are first and foremost.

 

We’re talking to a series of tire manufacturers. They have a huge retail operation and retail is just going to change dramatically. They not only look at the manufacturing side, but how retail is going to change, and then how they can react. It shows you just how dynamic this particular moment in time is in terms of dramatically changing the sector.

 

TN: I know you’re still in the process of doing your research but what’s your feeling now? Do you get the sense that people want to get back to kind of a normal-ish environment quickly? I know “there” is relative. But do you think there’s a desire to get back and get relatively normal business activity back say in Q2 or Q3? Do you get the sense that it’s going to be longer? What’s the drag? How long will this drag effect impact companies and impact manufacturers?

 

CM: I do think that we’ve passed the worst of it. I do think that in that late March, early April, that’s when things just really hit bottom. You’ve started to see a sense, especially from some of the more recent data, that things, while they’re still bad, are not as bad as they were several weeks ago. I do get a sense that you’re starting to see that bounce back in the marketplace, which is good.

 

In general, there is what we’ll call “quarantine fatigue” not just for consumers but for businesses as well. There is a sense that activity is going to start resuming.

 

The difference here is that yes people are going to come back to it but there’s still going to be some hesitance there. We don’t have a vaccine. So coming back to work is not the same as it was before. That’s true at the NAM, that’s true in every workplace in the country. People’s willingness to go out to restaurants and bars and go to Disney World has all changed a little bit.

 

I do think that we are bouncing back already. But in this new environment, there is still a little bit of hesitance about getting out in crowds and the workplace change. Yes, I can go back to the office maybe, but am I going to? Am I going to continue working from home? How much separation is there for me between me and my co-worker on the shop floor? We’ve already started to see that rebound. But it’s in a different place than it was two months ago.

 

TN: A lot of questions. Let me shift gears a little bit and ask you about trade. With COVID-19 and initially when this was hitting China hard, we saw a lot of supply chains stall out and slow down. We’ve been talking about the regionalization of supply chains for a few years at Complete Intelligence. Is that something that you’re seeing, and I know you’re not necessarily advocating a position. So I don’t expect you to be doing that. But are you seeing that happen or is that concept not seeing a lot of traction on yet?

 

CM: We were starting to see people re-evaluating their supply chains as a result of the Trade War. Last year, we were seeing a lot of that. It doesn’t mean all of it’s coming back to the U.S., but it certainly means production might be moving out of China and other places. This exacerbates that even more. There’s been this realization that we can’t depend on one country and one source to get all of our stuff anymore given the extremeness of this disaster economically.

 

People are going to be re-evaluating the supply chain. From the NAM point of view, we want as much of that to come back to the U.S. as possible so we’ll be advocating policies on on-shoring. Look for that coming from us. But the reality is, companies are going to locate where they locate. There’s a lot of reasons why companies locate wherever they do, and it’s where the customers are, that’s where their other suppliers are, that’s where the intelligence is. And some of it’s going to go to Mexico, or to the rest of Southeast Asia. There is definitely this understanding that we’ve got to re-evaluate that supply chain process in terms of who we’re buying from, making sure there’s duplication, and I think that’s a conversation that every firm is having right now.

 

TN: Very good. Chad, thank you so much for your time. I’d love to have you back in a few months to revisit some of these questions. As the unknowns dissipate, it’ll be very interesting to to look back and see what people did right, what mistakes people can avoid next time this happens.

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QuickHit Visual (Videos)

QuickHit: Status of Global Supply Chain in Time of Coronavirus

In this week’s QuickHit episode, Tony Nash speaks with George Booth, the President of Secure Global Logistics. SGL is a complete logistics company with global and domestic services. We dig deeper into the status of global supply chains within this era of Coronavirus or COVID-19 and learn how companies move things across the globe, and what that is looking like right now.

 

Last week’s Quick Hit episode was about how SMEs are affected by the global pandemic and pieces of advice from an expert on the best course of action. Watch it here.

 

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: Hi, this is Tony Nash with Complete Intelligence. This is our weekly Quick Hit that we publish each week. We’ve got George Booth, President of Secure Global Logistics in Houston, Texas.

 

We’re really interested to understand George’s view on the impact of Coronavirus on global logistics, supply chains, and trade. And what the impact is on the volume, timing and magnitude of trade. George, first could you tell us just a real quick overview of SGL? Then let’s get into some of the topics.

 

GB: Yes, good morning, Tony. Good to be here. The SGL is a complete logistics company. We do a full suite of global and domestic logistics, including import, customs brokerage, exports by air and sea and domestic by air and road. We also do 3PL logistics, so full warehousing, packing and getting ready for export.

 

TN: Perfect. That’s great George. Thanks very much. And I really appreciate you taking the time to talk. I know there’s a lot going on as shippers and the other folks try to figure out how to get goods to destination with the disruption of the supply chain. Can you help us understand, what are you seeing in terms of volumes for your clients?

 

GB: Yeah. Well, interestingly, the volumes haven’t dropped off yet. We would expect that to happen almost immediately. Shut down hasn’t started to happen here. It hasn’t happened yet. I think we’ve been slightly helped with a buffer by China coming back online.

 

In January and February, we took a real hit from our customers that import from China. That’s when they just shut down and factories were closed. We saw nothing coming in, but that’s now picking back up.

 

For example, we have a customer who does a monthly freight out of China. That hadn’t happened in like two months, and this week we’re moving 21 ton of freight out of China. And he said, “Get it here fast.” They want to get the product on the market and sell it.

 

We haven’t seen a drop off yet. We’re also seeing a big spike in freight this past week, and even yesterday, as a lot of clients are preparing for a shutdown. So they’re trying to get that product moving and maybe converting from sea freight, ocean freight to air freight to get it moving and to get to the destination before the shutdown happens.

 

TN: OK. So volume has been pretty consistent. What about, you know, as we’ve seen, say, the crude price, because I understand some of your clients are big gas firms.  With the crude price declining as it happens, what impact has that had on shipping rates? And what is the typical relationship of crude price and shipping rates?

 

GB: Well, this is really interesting. I’ve been in the shipping industry for all of my career of about 25 years. And this is the first time we’re not seeing a direct correlation between lower oil price and low freight rates.

 

That’s been really challenging, our clients are suffering from a lower price, but we have had to present them with much higher rates from the carriers and particularly air freight.

 

The air freight in the past, when the oil price was down, the freight rates go down with it. And then when they go up, you see a big spike included fuel surcharges. But because of capacity issues, air freight has now become almost the highest bidder scenario.

 

Some airlines are selling to the highest bidder. We are seeing freight rates in some cases 10 times what they normally ask. Something would have paid a dollar fifty per kilo in the past, we’re now seeing going for up fifteen dollars.

 

I’ve seen a lot of lack of flexibility from the air freight carriers, as well. While in the past you might have booked it, and the factory wasn’t quite ready or it wasn’t ready to export. You’d still book it into the next day with no charge for lost slots.

 

If you don’t show up with your freight, they’ve been really clear, which, again, from a supply chain, you can understand, they’re not getting the same return. So they’re making it inflate.

 

I once had an airline say that the best deal for them is that the cabin, first-class cabin is full, economy empty, and the belly full of freight. Now, they don’t do first class. So they’re making all their money on the various freights.

 

TN: Are you seeing sea freight come down or stay the same or what’s happening with sea freights?

 

GB: Well, sea freights have been very interesting as well, because the distribution of liner and equipment, shipping containers, there’s a backlog in China because China hasn’t been moving.

 

A lot of equipment is stuck in China. The past few weeks, we’ve started to see competitive, very competitive sea freight rates coming out of China as China tries to boost the economy, get freight moving. And also as liners are trying to get the equipment back in the right places.

 

Conversely, trying to export from Europe or from the US. We’re seeing much higher rates because there’s a lack of capacity and a real demand for liner and equipment. So that’s proven a challenge. So it depends where your ship has been from and to, based on the allocation and relocation of liner and equipment.

 

TN: Okay. It is interesting from your perspective to see China’s actually back online.  We’re actually seeing the physical goods coming and you’re seeing the volumes come in. I think that’s very interesting.

 

So what is the biggest kind of concern that your clients have right now in terms of logistics and some supply chains? What do you hear from them as their biggest concern?

 

GB: Yeah. I mean, a lot of our clients are tied to oil and gas. They operate as a squeeze-in. And as it squeezes, it comes all the way down. And I always say the fate of logistics is at the end of the food chain.

 

We get the squeeze all the way down. Some of our clients are being asked to take 40 percent reductions in the rates. And now squeezing that back down to all that supply.

 

At times in, well, of course, we want to work with you. But we’re also presented with air freight that is 10 times what used to be. It’s proven very challenging commercially for our customers, and for us to keep those relationships. They want to continue to be a partner at a time when they want us to share the bin with the promise of sharing the prize when it comes back.

 

But the oil and gas industry, as you know, has been depleted since 2015. So we’ve all been sharing the bin for a long time. So there’s not much left in the market for starters being distribution goes.

 

TN: OK. And George, I don’t know if you can answer this question, but how long do you expect this to last? What do you expect, what do your clients expect? Are they expecting this next month or two months or six months or a couple of weeks? How long do you think this will last in the US?

 

GB: Yeah, I think China’s a good indicator of the length of time they needed to end it and start to come out of it. So we have been planning for the same length, 120 days.

 

I mean, based on the president’s comments yesterday, it seems like there’s a real bullish approach to not going into this too long. I don’t know if that’s keeping with health advisory or not. But it seems that America wants to get back to business sooner rather than later.

 

I think we’ll see that big spike as we have this past week and this week as people try and get product moving before very they put it in shutdown. And then we’ll see the wall. And then there’ll be a backlog and people will start and try and get goods moving again.

 

So we were making our plans 90 to 120 days. And we’re hopeful, obviously, that it comes back.

 

But, our industry has also led the charge in health and safety, so we’ve been talking about our safety language for many years, even decades. And this is a time to prove that we care for our people, care for our supply chains and for our communities.

 

And we’re thinking very much the safety of our employees at our every week touch points, literally and figuratively speaking. Even four weeks ago, we had a memo out to our staff saying to be ready to work from home. And that this is coming. And we saw it coming because we were in daily contact with our partners in China and Italy and in Europe. So we could see what was happening there.

 

So, and we’ve been preparing for this. We operate from the cloud. So a lot of our people are operating from home. I’ve got so much scale and staff, and we rehearsed it.

 

TN: Fantastic. George, thanks very much. Thanks for your time. I really appreciate it.

 

If any of the viewers have questions, leave me comments or send us an email at Complete Intelligence. Thanks very much.