Lots More on the Seaborne Chaos Around the Strait of Hormuz

With war breaking out in Iran, the price of oil is surging, in part due to the destruction of oil energy infrastructure, but also the ability of anything to get through the Strait of Hormuz. But it’s not just oil that moves through this key waterway — there are plenty of other goods, including metals and ingredients for fertilizer getting potentially constrained. It’s also not just the risk of violence itself that’s an issue for shipping companies, there’s also the question of how cargoes get insured. On this episode of the podcast, we speak with return guests Anton Posner and Margo Brock, co-founders of the Mercury Group, which helps dry bunk clients solve issues related to logistics, transportation and insurance. They discuss what’s actually happening on the ground, surging insurance rates, and how shippers and carriers are dealing with the chaos. Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

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• 0:55Tracy Alloway?

  There's a little bit of debate over Anton's own naval experience, but we can get into that. But Anton, you have some naval experience, sort of.

• 1:04Speaker 02

  You're teeing it up for Margot to make fun of me now because I was just a reservist. So I fully embrace the fact that I do not have grand military experience. Okay, I served, I was in the reserves. I put on the uniform. I wish it could still fit, but.

• 1:18Tracy Alloway?

  I heard you played a lot of tennis.

• 1:21Speaker 02

  I played tennis in Road to Spain, you know, on a NATO exercise. I'll have you know, Tracy. It was a NATO military exercise, and I don't think I've ever.

• 1:31Tracy Alloway?

  Your exercise was tennis. For your exercise today, you're only tennis.

• 1:36Speaker 02

  Say that Haraz de la Frontera was fantastic for wine and sherry.

• 1:44Tracy Alloway?

  Joe, I want a T-shirt that says ruthless utility maximizer.

• 1:48Joe Weisenthal?

  Black gold.

• 1:49Tracy Alloway?

  Let's talk about losers.

• 1:50Joe Weisenthal?

  Who cares?

• 1:51Tracy Alloway?

  I've decided I'm going to base my entire personality going forward on campaigning for a strategic pork reserve in the US.

• 1:56Joe Weisenthal?

  Skull's unlimited.

• 1:58Tracy Alloway?

  Ooh, what's the ticker for that?

• 1:59Joe Weisenthal?

  No, I think that like in a couple of years, the AI will do a really good job of making the Odd Lots podcast.

• 2:06Tracy Alloway?

  How do I get more popular and successful?

• 2:08Joe Weisenthal?

  One day, that person will have the mandate of heaven. We do have.

• 2:12Speaker 04

  The perfect guest.

• 2:14Tracy Alloway?

  You're listening to Lots More, where we catch up with friends about what's going on right now.

• 2:19Joe Weisenthal?

  Because even when Odd Lots is over, there's always lots more.

• 2:22Tracy Alloway?

  And we really do have the perfect guest.

• 2:30Tracy Alloway?

  I feel a little bit stupid.

• 2:31Joe Weisenthal?

  Go on.

• 2:32Tracy Alloway?

  But on Monday, obviously, the war-

• 2:34Joe Weisenthal?

  Wait, you're just now for the first time? No, just kidding.

• 2:38Tracy Alloway?

  Thanks, Joe. Thank you. Obviously, the war with Iran happened on the weekend and is still happening. And on Monday, I woke up and I was thinking about energy markets and geopolitics in the Middle East. And I was trying to think of someone who would be really good to talk about shipping. And I'm embarrassed to say, it took me a full 24 hours to remember that we actually have marine chaos experts basically on speed dial at the moment.

• 3:05Joe Weisenthal?

  Well, it's perfect because we are experiencing marine chaos, obviously. We're recording this March 4th. Yesterday, Trump posted on Truth Social, talking about the US actually playing a role as sort of an insurer of last resort.

• 3:19Tracy Alloway?

  Yeah.

• 3:19Joe Weisenthal?

  Because one of the things that we've been seeing is like, setting aside the sort of logistical ability to get goods out of the region, get whatever out of the region. There's obviously the question of can you get insurance? And we know that prices are soaring, etc. Insurance costs getting too high could end trade flows regardless of the actual logistics on the ground and so on.

• 3:40Tracy Alloway?

  Well, not just insurance premiums getting too high, but insurance being pulled all together.

• 3:44Joe Weisenthal?

  Just getting pulled all together. That's right. So they are their own entity that's sort of like separate from national. There's nations, and then there's insurers, and they have quite a bit of say over what moves and when and where.

• 3:57Tracy Alloway?

  Well, all of this just confirms my long-running suspicion, as you know, that insurers actually control the world in a very underappreciated way. We should talk to, we need to insert like a sound effect here. Speed dial our marine chaos experts. They are, of course, Margo Brock and Anton Posner. They're the founders of Mercury Group, which specializes in dry cargo and global freight logistics. So really, the perfect people to talk to about this moment. Let's just talk about what you're seeing right now with the Strait of Hormuz. You have a lot of clients who I assume have some presence there. Again, you guys sort of specialize in dry bulk, dry cargo, but you have a good handle on what's going on. What are you seeing and witnessing and living through at the moment?

• 4:41Speaker 02

  Sure. Yeah, it's always great for us to be on during Marine Chaos time, right? As I mentioned to Tracy yesterday, I think that's going to be new business cards for Margo and I, Marine Chaos Expert. So, in addition, certainly to kick things off, right, in addition to everyone knows oil and gas are flowing through Strait of Hormuz and Persian Gulf, which is the always the headline commodity sector that everyone talks about in the region. You also have things like outbound fertilizers coming out of the region. You have outbound aluminum being produced by Emirates Global Aluminum and Quatalum and Alba Aluminum Bahrain. You have inbound raw materials for the aluminum production. Lumina that goes into aluminum production that needs to flow in. You have containerized goods, right?

• 5:26Speaker 02

  You have inbound grains going into the Persian Gulf. So there's a lot more than just oil and gas that's affected when there's a problem in the region. Right now, we're seeing, you know, our world that's heavy on metals, of course, is being affected by the inability for Gulf aluminum producers to be able to ship aluminum out, moving out of the Gulf. So that's already created a spike in global aluminum markets. And there's a shift at the moment going on. I think Emirates Global Aluminum was the one that said they're going to start fulfilling orders with aluminum stockpiles that they have in other parts of the world. So we're starting to see an effect on the markets that we're involved in.

• 6:06Speaker 02

  Of course, overall, diesel in the United States jumped significantly over the past couple of days. So we're going to see that trickle down effect coming into the world of our inland logistics in North America, barge freight on the river system, truck freight, rail freight, where we're going to start seeing, potentially start seeing fuel surcharge clauses kick into effect as diesel starts to move up.

• 6:29Joe Weisenthal?

  And then, so, talk to us about the insurance components, because there's the, yeah, there's the sort of reality of moving goods, and then there's the question of can you get these shipments insured?

• 6:40Tracy Alloway?

  Well, can I just say, I don't understand insurance where like you have a war risk insurance policy, and then something happens and the insurers are like, actually, we're going to cancel all the war risk insurance.

• 6:50Joe Weisenthal?

  Yeah, explain how this market works.

• 6:53Speaker 05

  Well, war risk is an interesting component of your policy because depending upon where the policy is written and what the custom is, if it's a London policy, a US policy, you'll have different terms within your policy, but they all come with a short cancellation notice period on specifically the war risk component. And that cancellation term can be anywhere from, say, two to seven days. I've heard depending upon whether it's written on London or a US policy or so forth. And that's what's happened. Everyone put out the notice immediately upon the war. And now this week is when all those cancellation dates are hitting.

• 7:36Speaker 05

  So after that cancellation date, you can rebuy war risk. But now you're going to buy at a significantly increased premium. So what I'm being told is the current market is that where traditionally your premium, which is assessed on the value, the declared value of your goods, that's what we're insuring against. So your policy in total, inclusive of your war risk, maybe might be something around 0.0055% of value. Now, to carve out just the add-on for war risk, they're seeing offers coming anywhere

• 8:20Speaker 05

  from 0.5 to 1.5%.

• 8:23Joe Weisenthal?

  This is a 10x to 30x increase in that premium.

• 8:27Speaker 05

  Yeah, so that's if you choose to have war risk. And then it, you know, that will push back into the rest of the conversation that says what ships are actually transiting in war risk areas at this point. Because we're seeing the pivot. We're seeing, and we're seeing that, that market dropping off very steeply right now.

• 8:48Joe Weisenthal?

  Well, what types of goods would continue to flow logically or economically at these new levels? What is the pivot?

• 8:57Speaker 02

  Yeah. Joe, I think a good answer to that question right up ahead is let's take the cargoes that have no choice.

• 9:02Joe Weisenthal?

  Okay.

• 9:03Speaker 02

  Our ocean freight team has a client and a ship currently loading in Saudi Arabia in the Gulf, loading dry bulk cargo. The ship's in port, it's loading. The ship's P and I club, the insurance group that ensures the ship has issued the notification of the cancellation. On the ship's, the ship side insurance, right? You've got two sides. You have the cargo insurance, Margo was talking about in some detail, and then there's also the insurance on the ship. Right. So that ship is loading. It's received the notice that their existing war risk coverage under their ship's P and I protection and indemnity policy has been canceled. They're going to need to renew it. The ship has to continue loading, has to eventually sail at some point, right?

• 9:48Speaker 02

  When she will, who knows? But there's no choice but to re-up under the higher insurance premium. That ship is already in the Gulf. It's already loaded cargo. So you have the cargo, the cargo interest, the shipper who owns the dry bulk goods aboard the ship, going to need to have all risk cargo insurance on their cargo. And then the ship owner also needs to renew their P and I policy covering the ship. And there's no choice. Ship's there. So now it's going to be, I think, one of the terms when catching up with our ocean freight team earlier is a slugfest of who's going to pay. Yeah. Margo and I, old professor at New York Maritime College of Maritime Law and Insurance,

• 10:30Speaker 02

  Jeffrey Weiss, would have always said, everything we're going to talk about this semester pulls into the category of who pays, right? Who's responsible to pay? Professor Weiss was famous for that, that who pays phrase, and it comes into play exactly these situations.

• 10:45Tracy Alloway?

  So just on this point, can I ask you to explain very simply, I guess, the ecosystem of insurance and shipping? And this idea that, you know, you hear about things like the club insurers, and then you have the reinsurers, and there seem to be all these different layers. There's the insurer for the cargo, there's the insurer for the ship, as you laid out. And then there's this question of who's actually going to pay it because you have, I guess, a chain that exists between, you know, the charterers, the shipowners, the end buyers of the cargo. Can you just lay that out kind of very simply for us?

• 11:21Speaker 02

  Yeah, and of course, we're freight people, not insurance experts, and all going well, without mentioning names, and I'm working on connecting, Tracy and I discussed yesterday, working on connecting somebody very key at one of the world-leading P and I clubs to potentially.

• 11:38Tracy Alloway?

  Well, now you've said it in public, so the pressure's on.

• 11:42Speaker 02

  Oh, yeah. Notice I'm not mentioning a gender, or a name, or anything that gives away anything other than that, so we'll see. Fingers crossed.

• 11:51Tracy Alloway?

  Pronouns are they them?

• 11:53Speaker 02

  Exactly.

• 11:54Joe Weisenthal?

  You've already gendered the ships. Which is, sorry, it's a tangent. I was just reading something about how, you know, it's very, you know, the English doesn't have gendered nouns, with the exception of ships. Anyway, sorry, keep going.

• 12:07Speaker 02

  Yeah, exactly. So, yeah, to make it, to break it down very simply, right, the ship owner carries protection and indemnity insurance, hull insurance, those policies that cover the ship and its engines and so forth, all of the physical attributes of the vessel and so forth, that's what the ship owner carries on it. Now, in a contract of carriage, whether it's a charter party, or a bill of lading, a liner bill of lading, that has a limitation of liability to the cargo owner in that contract of carriage. The US law is covered by the Carriage of Goods by Seas Act, COGSa, which typically carries a $500 per package or per ton limitation of liability, so the ship owner is only liable

• 12:52Speaker 02

  to a certain extent of value of the goods that the shipper is carrying on the ship. Now, we flip over to the cargo owner's side, and the cargo owner, knowing that the ship owner only has a certain limitation of liability, the cargo owner will go out with the right guidance, will go, will get all risks cargo insurance, and that's to provide them the coverage for the value of the goods that they're carrying on board the ship over and above whatever the ship owner's limitation of liability. It's, when there's a casualty and a loss, as a cargo owner, you want to be able to collect from. Your all risk cargo insurance policy and let them fight it out with the ship owner,

• 13:36Speaker 02

  not be stuck in arbitration in London or in Singapore or New York, fighting it out later on. And then there's another type of insurance too, when you're chartering a ship, as a ship, as a cargo interest, you get charterer's liability insurance is pretty common. And that covers the shipper, the cargo interest from other liability elements. Let's say the ship has a casualty and people are killed or hurt. There's going to be lawsuits filed against everyone involved in the ship and charter's liability insurance covers the charterer, the cargo interest liability as it relates to other damages, or if the ship

• 14:18Speaker 02

  is damaged by their stevedores loading the ship or discharging the ship. So other, other things that can come into play there too. So I don't know, tried to lay it out as kind of clear as possible, but I know it's convoluted.

• 14:29Tracy Alloway?

  Yeah, there's a lot of moving parts.

• 14:44Joe Weisenthal?

  There are some market stories where you want every detail. Tracy and I have made quite a few podcasts on that basis, but sometimes you've only got 10 minutes and need to know what's moving markets and why. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what matters and what to watch next. About the time it takes to grab a coffee. So search Barclays Brief wherever you get your podcasts.

• 15:10Speaker 01

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• 15:39Joe Weisenthal?

  Talk to us about the announcement from Trump that the US could get involved and be some sort of play in insurance role here. What can that do? And is that novel? Is there any precedent for anything like that?

• 15:52Speaker 02

  Yeah, this news just came out. The president will often say things that then need to be implemented by the bureaucrats, right? So the mechanics of it are always complicated. There's precedent where US government agencies providing insurance, the Export-Import Bank, for example, offers trade credit insurance. Let's take that for example, right? As for protection indemnity, PNI insurance on ships, I'm sure, although I don't have any specific instances, but I'm sure there's been precedent for that in history. So I don't think that that's too much of a stretch for the government to necessarily come in and offer some kind of safety net for ships to be able to get

• 16:33Speaker 02

  PNI insurance. What may be more complicated is maybe having US Navy or Coast Guard escorting ships through the Strait of Hormuz. That's not an easy task. That was done, I think, what was it, in the 1980s when we re-flagged tankers, put American flags on them to protect them from the Iran-Iraq war. At the time, we had Navy ships escorting ships through the Strait of Hormuz, but that is an expensive proposition. It's not perfect, right? Missiles can, and attacks can get through. You're putting US Navy ships, you're taking them out of circulation and out of deployment for other purposes, and you're putting them very much in harm's way. That approach to the Strait of Hormuz, navigationally speaking,

• 17:16Speaker 02

  is delicate, to say the least, and it can be very exposing.

• 17:20Tracy Alloway?

  What's it like actually sailing through the Strait?

• 17:25Speaker 02

  I have not sailed through the Strait. Margot hasn't either, right? Both of us were, both of us stayed a lot shoreside after. I sailed through the Panama Canal on a Navy tanker, which was, which really was a fun topic with Tom Keen and Paul Sweeney one morning, when it looked like we were going to take over Panama the day before.

• 17:43Tracy Alloway?

  Oh, of course. Well, okay, actually, this reminds me, just Setting aside the insurance component, do people want to be moving stuff through the Strait of Hormuz at the moment? I imagine if you're captaining or crewing a ship, I would love to captain a ship, by the way, but you wouldn't want to be in the strait at the moment, right? There are human considerations beyond just how am I going to get compensation for the cargo or a lost vessel?

• 18:10Speaker 05

  Obviously, it's a logistical nightmare to get through there. Safety is concerned, personnel. This morning, a small container vessel, I think it was 1,800 TEUs, 20-foot units, was hit with, they're saying, an unknown projectile, hit it above the waterline, put the engine room on fire. They just abandoned ship. They took, they pulled the whole crew off and abandoned ship. I mean, you don't even stay there to fight the fire. You just get out of there. So, yeah, people don't want to be there. And if you are on the liquid side, petroleum, crude, you have a harder time avoiding going through that region because of what it is, right? That's the source of a lot of our global oil.

• 18:55Speaker 05

  But other commodities, dry in large part, we can avoid it. So, to Anton's comments, the aluminum sector has, in large part, shifted, deviated from that area for now. But in addition, ships are navigating away. And it means a longer transit time, which means a more costly voyage. So it's less desirable. It does increase freight rates. But it's safer, your goods are safer. And when you start adding on these new war risk premiums, if you're going to take them, I'd venture to guess it's still cheaper to take the long way around now.

• 19:33Joe Weisenthal?

  So it's the kind of thing, for certain liquids, there's no choice. Like, it has to flow through there. It sounds like for some of these other things, aluminum, otherwise, for now, either there's going to be some long route, or it's just, that is not going to be a source. If we're talking about aluminum, there would just be less, there would just be less aluminum in the world, or some existing source of aluminum will ramp up their production.

• 19:57Speaker 02

  Right, like you take Emirates Global Aluminum, for example, Joe, that United Arab Emirates have the luxury of having ports and the ability to potentially load ships on the Gulf of Oman side outside of the Persian Gulf, right? As Margo said, yeah, longer route, potentially not ideal. This is not where they typically load. One thing I haven't looked at is Emirates Global Aluminum shifting some of that aluminum loading to ports on the Gulf of Oman. So I'm gonna take a look, gotta take a look at that. But I wanted to say, you know, Tracy's question about what a cruise, you know, captains of ships thinking on this too. I'm gonna take you back, Tracy, to a way to answer your question. Imagine two crazy people came up with a scheme to load a teddy

• 20:37Speaker 02

  bear in a container and then into the Persian Gulf. Do you want to risk your life as a ship's crew, like for somebody's teddy bear, you know, stuck in the middle of a 20-foot container? Or you're getting off the ship and saying, "Yeah, I'm not risking my life for that," right?

• 20:53Speaker 05

  I was gonna say, as a side note, though, to that alternate plan on the Gulf of Oman, I was reading that they're reporting missiles and drones in the Gulf of Oman as well. So in addition to the Straits of Hormuz.

• 21:06Joe Weisenthal?

  I find, by the way, listeners, it's helpful to pull up a map during some of these conversations, because, yes, you can see very clearly Oman has the benefit by and large. I don't know exactly where the ports are on its coast, but yes, the Strait of Hormuz is less of an issue for them, whereas for the UAE, they're right in it.

• 21:24Speaker 02

  Yeah, unless the Houthis start up again, right? So the Houthis have been an interesting one, and Margo and I were just talking about this ahead of the, ahead of coming on. The Houthis have put the threat out there that they're gonna restart attacks in the Red Sea and off the coast of Yemen and potentially significantly deter traffic from heading into the Suez Canal, but they haven't started any attacks yet. The threats out there, already you see container ships, container lines diverting ships to the Cape of Good Hope to round southern tip of Africa to avoid heading into the Red Sea in case the Houthis do start, start up with missiles and attacks and boarding ships again. But they've, as of at least 15 minutes ago, before we get

• 22:04Speaker 02

  started this podcast, it's out there as a threat, but the Houthis haven't done anything yet. The threat in and of itself already causes reactions, though, right?

• 22:15Tracy Alloway?

  Yeah, I remember. I think the big port in Oman is Salala, and I only know this because I visited there once, but like it's pretty close to Yemen, right? Like I don't, I don't think there have been any direct attacks, but certainly relatively close. This reminds me, though, have you seen any early signs of people doing maybe insurance arbitrage where, you know, like certain flags or certain jurisdictions or entities are willing to run the Hormuz in a way that I guess Western companies just aren't at the moment? Or is it too soon for that and too uncertain?

• 22:51Speaker 02

  Yeah, I think too, too soon for that, Tracy, not Hormuz, right? We did see on the Hormuz situation of Persian Gulf, haven't seen that happening. There's some ships moving through, so it may be happening, maybe with some of the very few ships that are moving through. But it may be a good anecdote to kind of bring up here was when we were dealing with, you know, a year or plus or so ago, when the Houthis were really, really ramping up their attacks. There was a lot of chatter about the fact that Chinese had essentially the Chinese EZ Pass pole transponder to get past the Houthis. So we're seeing talk at

• 23:32Speaker 02

  that time of working with Chinese ship operators and Chinese ship owners that were more competitive because they could still send their ships through the Red Sea and into the Suez Canal, whereas more Western operated vessels that could be tied to countries that were unfriendly to the Houthis had a really target on them, right? So, so we're seeing some of that arbitrage a bit during the, when the Houthis were at full swing, so.

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• 24:40Joe Weisenthal?

  One of the impressions that I get with when we have incidents such as this is that there's a certain non-linearity or that like things really compound over time that, you know, one day disruption is one thing, a two-day disruption is another thing, but by the time it gets to 10 days or two weeks or a month, then it really is, it gets exponential. Like, talk about, talk to us about the risks and how they compound the longer the war goes on or the longer the disruptions are in this particular part of the world.

• 25:10Speaker 05

  Well, since is that the risk to

• 25:14Joe Weisenthal?

  Yeah, yeah, global supply chains.

• 25:16Speaker 05

  Global supply chain, is that the context?

• 25:17Joe Weisenthal?

  The risk of global supply chains for all of this stuff, the longer this goes on.

• 25:20Speaker 05

  Well, I think we reflect back, we've lived it very recently in a non-war situation in just what we saw during the aftermath of COVID when shipping just, and I think we actually spoke then about this, shipping just grew out of control and we saw all the subsequent delays. And that was really just because of system overuse, congestion, and ultimately, you know, a bit of failure because our system just wasn't big enough for as much as we were trying to ship during that period. That was when we had container ships

• 26:00Speaker 05

  and cargo ships stacked off the port of LA. We had clients with steel coming in where they said, you could be on, you could be on anchor for four to six weeks waiting for your berth. What do you want to do? Then you start to have to look at the bottom line of your dollars and cents. And that's what we're going to see again. Like anything, it just continues to back up, right? So we have cargo on vessels that aren't getting where they need to be. If it does, it's at a significantly increased cost. Going forward, if you want to book your freight, The baseline, the start, the starting cost is going to be that much higher because

• 26:45Speaker 05

  of risk, because of increased sailing distances that you have to go. And once you start using up your assets for longer periods of time, supply and demand, now capacity starts to shrink. So it really becomes quite the domino effect. And the longer it goes, the more out of whack our system gets, the prices go up. And that's where we can talk about the short term is the price of the of commodities. And that's where our jumping, jumping off point is, as we talk about oil, and we're talking about aluminum and fertilizers and cements and all these raw materials or semi finished goods. But down the line, we all

• 27:30Speaker 05

  start to feel it as we did in post COVID, because that effect does start to trickle into our retail as well.

• 27:38Joe Weisenthal?

  You feel like this is the, you know, this has the potential to be a disruption on the scale of COVID? Or like, we talking about that ballpark if this goes on long enough?

• 27:49Speaker 05

  I think that's the wild card. How long does it go on for?

• 27:52Speaker 02

  Yeah, there's going to be winners and losers, right? In addition to the losers, also always winners too, right? Going back to the Houthi mess, no one was more excited than ship fuel suppliers down in Southern Africa, right? With all the ships moving, moving through the area that needed to refuel in South African ports rather than in ports in the Red Sea and so forth. So, so supply chains shift and eventually start to set in. Is this, going to your question, Joe, right? Is this going to be at the scale of what we saw with COVID? Boy, I hope not. I mean, COVID would hit every, every part of the world, every port in the world had problems and so forth. So I think, I think

• 28:34Speaker 02

  it would take quite a bit for it to get to that, that stage. But we're, but already, as I mentioned earlier, right? With the price of diesel fuel in the US jumping, that's already going to start hitting transport of, of local goods going from distribution centers to the pub, you know, local Public supermarket here in Florida. So, so it's going, it's trickling down already.

• 28:54Tracy Alloway?

  Actually.

• 28:55Speaker 02

  Start seeing it. So Mark and I are bracing for the fuel surcharges coming up.

• 28:59Tracy Alloway?

  Yeah. This also reminds me, I think even before recent events, we were starting to see freight rates pick up a little bit in the U.S. And some people were talking about a potential turn in the cycle. I imagine higher oil prices will, you know, eat into some of the industry's profits. But before this week's events, did it feel like we were starting to see a little bit of a turn?

• 29:26Speaker 02

  Yeah, we just previously were working on 2026 barge, barge contracts for particularly northbound goods like steel, metals that are part of our typical business. Mark was on the front lines on that. And we didn't see much in the way of significant increases, right? What do you think for?

• 29:42Tracy Alloway?

  Okay.

• 29:43Speaker 02

  Yeah.

• 29:43Speaker 05

  No, no, routine increases. It was nothing terrible.

• 29:48Joe Weisenthal?

  Yeah, it seems like it's a lot on the, the trucking, the freight.

• 29:52Speaker 02

  Yeah, truck freight has been.

• 29:55Speaker 05

  Yeah, where things are more volatile, trucking is so, so reactive to the market.

• 30:00Speaker 02

  Much more liquid market, right? With thousands of small carriers and owner operators and so forth. And then rail freight, rail freight is the exact opposite of the truck freight market from liquidity to monopolies. But let's not call them monopolies, actually.

• 30:14Joe Weisenthal?

  Right. No, but we know in trucks that you have a down period and then thousands and thousands of owner operators will come out of the market and go out of business and so.

• 30:23Speaker 02

  Right.

• 30:23Joe Weisenthal?

  And so supply swings down and up in trucking in a way that would be unimaginable in something like.

• 30:30Speaker 02

  Right. Exactly.

• 30:32Joe Weisenthal?

  From those reasons. Yeah.

• 30:34Speaker 02

  Yeah.

• 30:34Tracy Alloway?

  So I know we've, we've said multiple times now that the wild card is really the length and how long this goes on for. But are there any, I guess, proactive steps that you're taking in your own business to prepare for further disruption?

• 30:48Speaker 02

  Good question.

• 30:50Speaker 05

  Because where we fit into the, into the supply chain is that our clients are the traders. So we're managing their supply chain.

• 31:01Speaker 05

  What protective actions or course correctors they have in mind really will relate to their trading book, which is going to probably be sourcing in alternate locations as needed if you can't get your commodity out of the Middle East or an affected region. When we dial into domestic logistics here, North American logistics, we will see everything continue to flow. And we don't expect as much a disruption of capacity. The disruption will be prices, but we'll still be moving, moving things. And we will still see truck, rail, barge, and, you know, ocean freight will be more

• 31:46Speaker 05

  of the swing item here on what are the lanes where the freight is moving.

• 31:50Tracy Alloway?

  Joe, did you ever hear about the story of the ships that were stuck in, I think, the Suez Canal for like years and years and years during the Six Day War?

• 31:59Joe Weisenthal?

  No.

• 32:00Tracy Alloway?

  So the crews that were stuck on the ships like started their own postal service and like built their own little society, but it's a very interesting story. I certainly hope nothing like that happens this time around.

• 32:13Joe Weisenthal?

  Lots More is produced by Dashil Bennett, Kermit Rodriguez, and Cal Brooks.

• 32:19Tracy Alloway?

  Please rate, review, and subscribe to Odd Lots and Lots More on your favorite podcast platforms.

• 32:24Joe Weisenthal?

  And for even more beyond Lots More, go to Bloomberg.com/oddlots and chat with fellow listeners in our Discord, discord.gg/oddlots.

• 32:33Tracy Alloway?

  And don't forget that Bloomberg subscribers can listen to all of our podcasts absolutely ad-free. All you have to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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