When there's a lot of ship happening around the world, it's time for What the Ship, the top five maritime stories as of October 13th, 2024. Hi, I'm your host, Sal McCogliano. Welcome to What's Going On With Shipping, our What the Ship episode where we look at the top five maritime stories. There is a lot of shipping going on and it's impossible to put this all into multiple stories, so we're going to jam it into one big story and put it together so that you can understand what is happening in the world of global shipping. If you're new to the channel, hey, take a moment, subscribe to the channel, and hit the bell to be alerted about new videos as they come out.
Our first story takes us to the port of Tampa Bay with the motor tanker Golden State, the first tanker inbound to the port following Hurricane Milton. Now, we had been tracking Hurricane Milton, talked about the fact that Tampa was looking pretty bad to take almost a direct hit from Hurricane Milton. However, at the last minute, Milton moved a little bit south.
The hurricane came ashore between Tampa and Fort Myers, causing massive destruction on the western side of Florida and across. However, the port of Tampa was spared a direct hit, which is really key because that means that supplies can get in, particularly petroleum. This is the tanker Golden State.
Golden State was off, was in the port actually, just prior to the hurricane, did not complete its offload. So it has been sitting off the port waiting to get in. This is why the tanker. is in such a light condition. You can see how far out of the water it is.
This is a Tampa Bay pilot climbing on board. One of the most unheralded jobs out there is that of a ship's pilot. Pilots board vessels to provide expert assistance in the navigating of vessels in and out of ports or through canals. And in this case, a Tampa Bay pilot is climbing up the Jacob's Ladder or pilot's ladder up into the vessel, this wooden rope ladder.
This is a really precarious situation as you can see here. Notice how high he is above the waterline, climbing up to get onto the accommodation ladder, the gangway, onto the ship. You lower that because it's easier for the pilot.
He or she does not need to climb all the way up to the top, but it is very dangerous. So many pilots are injured and some killed in falling off these ladders, and sometimes these ladders are not as well maintained as they should. It is a big issue among pilots. Here's the Golden State inbound into the port of Tampa. That is the Sunshine Skyway Bridge.
This bridge may be familiar to you. It was the precursor of that bridge that was hit in 1980 and taken out and led to a bridge collapse that had been talked about all the time during the motor vessel Dolly incident up in Baltimore a few months ago with the Francis Scott Key Bridge. Here's the vessel making its approach and beautiful day after the hurricane you usually get these days. Flatcom coming into Tampa Bay. Their approach coming in under the bridge is just spectacular.
It's a really beautiful day. You can see those large islands that were created to buttress the pillars of the bridge there so that ships cannot directly hit the bridge. They would hit those islands and those large dolphins that are out there to protect the bridge from such hits.
Here's the vessel coming in. The tanker, the Golden State, is part of the American Petroleum Tankers Company, APT, hence the logo there. on the ship's stack.
Here's the bridge of the Golden State. You see the pilot there navigating the vessel up forward, a able-bodied seaman on the helm there steering the vessel. Not a lot of crew members you'll see on board a commercial ship. That's not unusual at all.
Another view of it, you can see the pilot there who is with, looks like the ship's master, and again you see the able-bodied seaman. You'll see the controls, the bridge console, the radars, the navigation, the electronic charting system that is used. Pilots come on board with their own rigs, their own laptops, with their own navigation equipment, hence the backpack you saw with the pilot coming on board.
And the thing pilots will use more than anything else is their, you know, Mark I eyeballs through the windows there to navigate up the channel as the vessel comes in. This is a photo taken just before the hurricane when the ships were actually evading Hurricane Milton, heading out to sea. You can see the storm coming in there. I'm going to head on over to marine traffic, the global ship tracking system that I like to use for following ships. All ships have to use an automated identification system, AIS, and that is how you track vessels.
You'll see right here, here is the Port of Tampa, and those images I showed you are being repeated right now for this vessel, the Garden State. Garden State is the third of the US flag tankers that are coming back into the port of Tampa at this time making their approach into the bay. If we go up here to the port itself, let's zoom in a little bit here and we'll see the ships here at the berth. There are two tankers that are in there right now. Now, over here, we see the Pelican State.
It is down here at the Kinder Morgan site. It is pumping right now fuel in. There's a Mediterranean shipping company vessel here at the container terminals that are currently offloading. If we go up here, we see the Golden State at Marathon. Petroleum also noticed three cruise liners that are in the grandeur of the sea, the Carnival Paradise.
And down here, Serenity of the Seas. They didn't take long for Tampa to get the cruise ships back in and reopen the port. So good news in that the port of Tampa is wide open again.
However, it is going to take some time to clear the port. As we see off the coast here, a variety of vessels waiting to get in at this time. All these ships are looking to come in and dock and actually load and offload.
So it's going to take a bit of time to clear the port. But again, what we usually use for a kind of a measurement is for every day a port is closed, it's about anywhere from three to seven days to reset it. And remember, Port of Tampa was still recovering from the issues with the port strike.
And so it had not quite gotten itself back up to full running yet. And now all of a sudden you had the hurricane come through. The good news here is that ships were able to top off tanks, ensure that there was fuel cargo in the port, evade. the storm and now come right back in. To be clear, reopening a port is not an easy thing.
You have a whole series of entities that are involved in it. You have the U.S. Coast Guard. You have NOAA. You have the Army Corps of Engineers.
You have the Port of Tampa. You have local agencies. You have the Pilots Association. Everyone has to be in agreement that the channel is clear. There's no obstructions.
The port is operating. The cranes are operating. You can receive fuel passengers. Airports are open. There is a lot that goes into ensuring that a A port is opened back up after a major event.
And I think it's really a testament to the Port of Tampa that they were able to reopen and get product moving again as quickly as they can. Obviously, it's still a lot of issues in and around the Port of Tampa. There's power outages. There's damage from the storm.
But it's good to see that at least fuel, food, everything that Tampa needs, the Floridians will need, is flowing there right now. So, again, a good success story. All right, let's go ahead and jump over to our second story. Story number two. deals with the East Coast, Gulf Coast, U.S. port strike, which was resolved after three days.
A very surprising quick ending. However, there were issues that kind of indicated it would not go for a very long period of time. As you remember, the ILA, the International Longshoremen's Association, went on strike on October 1st at midnight over issues regarding both pay and automation on the East and Gulf Coast ports. That... led to the shutdown of 14 ports up and along the entire coast.
The U.S. Maritime Alliance had initially agreed to a 22% pay raise. The ILA wanted 77%. On the eve of the strike, the U.S.
Maritime Alliance came back and said 50%, but the ILA went on strike. Now, it was pretty clear from the very beginning that the ILA was going on strike. Back in June, we were hearing this from Longshoremen, and based on what the ILA was saying, it was pretty clear it was going to happen. And again, I think the ILA did it for a variety of reasons, not the least of which so that we'd be talking about the ILA and what they do.
However, they were not going to go on a long strike. They did not put together a war chest to fund their workers for a long period of time. That's a good indicator that this was not going to be a long strike. The other issue is the impact this strike has on global shipping. This is a report from Sea Intelligence.
I've shown an earlier version of this during the strike, but this is the after action that came out from... intelligence, that the U.S. East Coast port strike 10 to 17 percent of capacity declined to come.
And that is a big issue. One of the impacts we were talking about is if this strike had gone on for a week, it was going to occupy, tie up 10 percent of the global container fleet. And every week it went, it would eat up another 10 percent.
But as this says, since it ended very quickly, it did not have the impact everybody thought it would. And the chart here shows you the Asia to U.S. East Coast capacity decline.
Shows it for the three-day impact where we see a decline of a little bit over 15%, about 17% is what happened. Whereas if it had gone a week, it would have the impact of impacting about 40% of the Asia to U.S. East Coast capacity.
So the ILA knew they had leverage. They knew they had leverage in this. They were going to force the Maritime Alliance into this situation.
However, the question now is that they're back at work. However, they don't have the new contract in place yet. What they have is an extension of the old one with an agreement to talk. So here's a story from Mike Schiller over at GCAP. Major U.S. container ports are expected to stay elevated this month despite last week's labor strike.
According to the latest Global Port Tracker, this is from the National Retail Federation, the strike is not anticipated to impact the upcoming holiday season. ILA initiated the strike on October 1st. However, the strike lasted only three days with a short-term contract extension until January 15th. Goes on here that Ben Hackett noted that the recent surge in imports have been largely due to contingency planning. Quote, the surge in imports over the past few months had clearly been the result of contingency imports by wholesalers, retailers, and industrial companies in anticipation of the East Gulf Coast port strikes.
This is what we saw. We saw a massive influx coming in prior to October. Everybody was front-loading.
The resolution of the strike and the positive import projections suggest a stable outlook for the retail sector, particularly at the time the holiday season approaches. However, industry leaders stress the importance of reaching a long-term agreement before the current extension expires in mid-January. So I actually had an opportunity to go attend the New York Maritime Security Conference.
I'm going to be doing a separate video on this shortly. And I got a chance to talk to both labor and shipping firms. What was really interesting is the takeaway from both. The shipping firms were still thinking that they're not at a good resolution yet.
This is just a temporary patch because the issue of automation is still at play. If you've seen my previous videos on this, one of the things I've talked about is automation is really a two-edged sword for the big shipping firms. It's really expensive. It's expensive to automate a U.S. port.
And understand, U.S. ports are being automated, being automated on the West Coast, which is the best place to automate because... Cargo tends to focus into the port of LA and Long Beach more so than on East Coast ports. I don't mean the division.
I mean, if you bring a ship into LA and Long Beach, you tend to offload 80% of that ship there. Whereas if you come into East Coast, Gulf Coast ports... You only offload 20% to 30% because you go to multiple ports on the East and Gulf Coast.
So the shipping lines are concentrating their automation on the West Coast. But they still want the ability to automate. Harold Daggett, the president of the ILA, who you've all seen, is a very staunch opponent for automation.
However, automation is taking place on the East and Gulf Coast ports. We saw it down in Mobile where Daggett acts surprised. I'm shocked to find out there's gambling going on here.
That had been there for years down there. So he used it as kind of a... of a cause for the rallying cry against the unions.
However, what I think is going to happen is they're going to come to an agreement. There's going to be an agreement. They do not want a strike.
They don't want this in January for a strike. They are now at the negotiating table. Daggett made his point with the strike.
And so now they're going to have it. This is Daggett's last hurrah. He is going to be the outgoing president of the ILA.
His son, Dennis Daggett, is probably going to take over. And the issue here will be the phased-in automation. The key for the union is protecting their workers, which is what a union is. union does. They want to protect their workers, particularly not just their current workers, but future workers and their retirees. And so this is the issue.
I should also note that the shipping lines just announced record profits again for this upcoming quarter. It looks like third quarter is going to be a massive uptick from where they were. So it's hard for the shipping lines to complain about paying the extra wages to the ILA when they're making these profits. At the same time, shipping lines are paying for a massive fleet rebuilding program. They have to replace their older ships with more fuel-efficient vessels.
So there is both sides to this. It's a very complicated issue. It is not clear-cut, no matter what people are telling you.
There's a lot of work here. However, I tend to think they will broker a deal out here. I could be wrong.
I mean, I've been right a few times here, so I'm due to be wrong here. But I have a feeling that behind the scenes negotiations are pushing ahead. You're going to have a new president-elect.
expected no clear reason not to be worried about what will happen with a new administration that comes in and so I expect to see a change take place here it's going to be one that I think needs to be done because there's too much at risk here coming in it's ironic too at the same time that all this is happening over in Canada we're seeing a port strike taking place also over from GCAM Port of Montreal faces potential disruptions as longshoremen prepare to refuse overtime starting Thursday. This labor action, announced by the Canadian Union of Public Employees, Local 375, is in response to stalled negotiations. We're willing to get down to intensive negotiations, but since the employer is dragging their feet, we're turning up the pressure so they put forth the energy needed to find a solution.
So the Port of Montreal was staging a strike literally at the same time this other one was happening. We've seen Canadian unions do this quite a lot. We saw it up on the Great Lakes earlier this year, saw it on the West Coast, and now we're seeing the Port of Montreal doing this.
Labor is in a very good position to negotiate right now. They're in a really excellent power source. And one of the interesting things about the labor strike on the East and Gulf Coast was U.S. ports are woefully, you know, divided.
They don't operate together. They operate as self-contained independent ports where the executive directors, the port directors, really have very little oversight and play. It is the terminals who lease the land that really control things.
I listened to a talk by the executive director of the Port of New York, New Jersey, Bethann Rooney, who's a classmate of mine from SUNY Maritime. And she was talking about the fact of how little oversight she actually has over a lot that happens in the port. That's just the way we design ports in the United States. There's no oversight controlling central organization, which means that really the true national entity that has an oversight of ports in some strange way is the unions.
They are the ones who can do it. And the fact that the ILA was able to pull 14 ports into a strike, it's pretty incredible, actually. It shows a degree of organization that we did not think the union had to be able to pull it off. If you asked me a year or two ago. If all 14 of the locals would have went, I would have probably said no.
Houston, Charleston, Savannah, I wouldn't think the southern ones would go, but they did. And so that is a big issue. So the future resolving of this issue, I think we're good, but we can't dismiss it yet.
Until they get it in writing, until it's hammered out, we still have that little twinge of doubt. And understand, that twinge of doubt creates problems for the ports on the east and gulf coast. Because as long as there's not a solid contract in place... Shippers, those who ship cargo, are going to favor the West Coast a little bit more, and this is detrimental to the business on the East and Gulf Coast ports. Remember, ILA longshoremen get paid by the hour.
If they're not working, if cargo isn't coming in, they're not working, they're not getting paid. And so it's the betterment of both sides to hammer out a deal here. All right, let's go ahead and jump over to our third story.
Our third story is an update on one that I did earlier in the week, and that was the sinking of the HMNZS. That's the HMNZS. His Majesty's New Zealand ship Manawanui off the coast of Samoa.
This story has garnered a lot of attention for a variety of reasons. And I want to clarify a couple of things from the story I posted and add a few things to it. Now, there is an update here on G-Captain that you can take a look at. There's a lot of updates going on.
This is from Mike Schuller talking about the initiation of a comprehensive court of inquiry. The incident, which resulted in the rescue of all 75 crew members, has prompted a thorough examination. The New Zealand Defense Force said Thursday the recovery of the ship's voyage data recorder will be sent for analysis and is expected to provide crucial information to the ongoing investigation.
So I want to just clarify a couple of things. I did make mistakes. I am not perfect. This is a one-person show here. There's no staff behind me.
There's no control room booth. I kind of do everything myself, and at times I make mistakes, and I did. Uh, Manawanui is not the largest ship in the New Zealand Navy. My apologies. Uh, their, uh, uh, logistics vessel and their amphibious vessel are both larger than Manawanui.
I looked at the wrong tonnage data. I apologize. That's a mistake. It's my fault. Uh, I also want to clarify another thing about the ship's captain.
So the ship's captain has garnered a lot of attention for a variety of reasons. Uh, let me be clear. She is an experienced mariner. She had been in the Royal Navy since 1993. She served on surface warfare vessels. She served on mine clearing vessels.
She served in the Royal Navy until 2012 when she transferred over to the Royal New Zealand Navy. And her transfer over to the Royal New Zealand Navy is not unusual. It happens within navies. I mean, we've seen it happen. She transferred over, served for over a decade in a variety of roles, including leading the mine hunting task force.
for New Zealand, and then she was given command of Manawanui. Now, the Royal New Zealand Navy is a very small navy, and, you know, New Zealand has a vital issue on the oceans. It is a nation of two main islands, the North Island and South Island, has a large economic exclusion zone, EEZ, that it has to patrol. The ship, the Manawanui, is an interesting one.
It was a commercial vessel taken in by the Royal New Zealand Navy to fill the role of two ships. But it was not given a full conversion. One of the interesting things about that ship is it had a dynamic positioning system. Dynamic positioning system is a system that is used to keep ships along track lines and in position. It uses thrusters and the ship's propulsion to maintain a ship's position or a specific track.
And in the survey operation, you'd want to use the dynamic positioning. It does not appear that the Royal New Zealand Navy did the full adopting of that system over to them. Talking with people who have talked to classification societies who are familiar with the vessel, it does not appear the DP system may have been fully in use.
However, these you want to come back to as the master for a second. I am not political. I am as apolitical as you get.
I hope no one ever knows what my political position is. political affiliations are in anything. But I tend to be as neutral as I can be. However, you cannot judge a ship's captain by their race, gender, or sexual orientation.
Let's be clear about that, okay? We don't know yet what happened on board that vessel. that caused the wreck.
What we do know, according to the statement from the defense minister in New Zealand, is the ship lost power. And then the question you have to ask is, okay, why did the ship lose power? The ship has multiple diesel engines. When you say lost power, what do you mean? All the diesel generators cut up?
Was it like the dolly where the diesel generators were running, but then something tripped them and the power was not being articulated to the motors? We don't know. We don't know, and it's going to be a difficult one to know because the ship sank.
So we're going to have to interview crew members. All the crew members will have to be deposed and asked, what was the ship doing at the time? Why could the ship not anchor and not drift ashore? What happened once it drifted ashore? There are too many questions to ask here.
If you think you know the answer to this based on a picture of the ship's captain, you don't know what's happening yet on the vessel. Shipping is very complicated. There are multiple factors that are at play here. When I do an assessment, I talk to people. I talk.
to people who are experts in the different areas. I talk to, when the dolly hit the bridge in Baltimore, I talked to ship's masters. I talked to ship's chief engineers.
I talked to pilots. I talked to everybody. And I give you my opinion based on my research, talking to people. who know this subject in and out.
It is impossible for anyone to know everything. If anybody tells you they know everything, they know nothing. If you think this is the only time civilization has been woke, you are mistaken.
There are issues all the time that are pushing organizations like the Royal New Zealand Navy, among other navies. By the way, ultimately responsible for what happens on the ship. She is going to be culpable for this.
Whatever happened on the ship is going to fall on her shoulders. There's no question about that. Because the shipmaster is ultimately responsible for what happens. responsible. It doesn't matter if she's sleeping in her bunk when it happens, she's responsible.
This is what being a ship's captain is all about. It is a massive amount of responsibility. However, what a ship's captain is supposed to do is put in place the mechanisms before an accident happens to prevent it from happening. Was this a mechanical failure?
Was this a human failure? Was it a systems failure? In other words, was it a mixture of human and mechanical going in that led to the situation happening? She got everybody off the ship. Everybody was saved, which is a really good thing.
Obviously, there's an issue here with the ship sinking off Samoa now. There's going to have to be a salvage operation. There's going to have to be a cleanup operation. Fortunately, the ship was carrying light diesel fuel that tends not to be a very heavy pollutant. It doesn't appear to be a major spill coming from the vessel.
We are getting leakage from it, and there's work being done on this. However, I think you have to be very careful. I will go in after an event and do a quick assessment.
I will, because it takes time. years for an assessment to come out. I will try to give you as many variables as I can without giving you a definitive. I'm never going to tell you 100% this is what caused this unless I have 100% evidence to say that. And I don't have 100% evidence to tell you what caused this accident.
No one does. And was the captain inexperienced? We're about to find out because they're going to look at her career. But I have to think that someone's been in the Navy since 1993, over 30 years of sailing experience. and working with ships, I'm going to say she's got some experience in this.
I'm going to just say it. She's sailed on frigates, sailed on minesweeping vessels. I'm going to say she has some experience about this. They've done operations prior to this.
The question is what led to this event. And I think it's very important that we remember that. that. I don't mean to get on a soapbox.
I never mean to do that. I just want to clarify that because we're going to be looking at this investigation as it transpires, just like we look at Dolly, just like we looked at Ever Given, just like we looked at Ever Forward, just like we'll look at any incident that happens. We will take a look at it, give you the assessment, and as we learn more data, let you know about it. Try to be as trusted as I can. I am trying not to, as I always tell my students, I don't indoctrinate, I educate.
I give you the facts and let you determine for yourself. If your conclusion leads you in a way, that's fine. That's perfectly fine to do it.
However, until you have evidence to back things up, I'm always leery of making any case. All right, let's go ahead and do our next story. Story number four takes us around the world to global choke points, and more importantly, the issue of freedom of the state. the sea, something I've been hopping on quite a bit here recently, talking about these threatening attacks against global shipping and how different players are really threatening it in a way that we haven't seen literally since the world wars.
So first, my buddy, my good buddy, the Yemen spokesman there, this guy always looks mad. I don't know why he's yelling all the time. He's really uptight and everything.
Is he yelling because there's so many microphones? He knows that he doesn't have to yell individually into each microphone, right? Because they're I mean, they listen the same. I don't need to yell all the time, but anyway.
So the Houthi strike another tanker, the Olympic Spirit in the Red Sea. We have seen an escalation and uptick recently in Houthi attacks. This is unfortunately a pretty standard thing.
We're coming up now on almost the one-year anniversary of the attack against the Galaxy Leader in November, November 19th. When that ship was taken, the crew has been held hostage by the Houthi since then. Not exactly sure what they think they're getting out of those crew members besides...
giving them malaria, it appears. But they're holding it, and they are still attacking vessels in this region. We're seeing the amount of shipping going through the region decreasing again. Uptick in attacks, including some of the most recent attacks, the Cordelia Moon, which is a tanker that was empty, heading northbound in the Red Sea, was attacked by an unmanned surface vessel. It was sailing from India to Russia.
Obviously, that has a great deal to do with Israel and Gaza. So hence the Houthi attack it. Houthi can make all the excuses they want. They're hitting ships that have nothing to do with what is going on in the region. And the best numbers we have show that of the 100 plus ships they have attacked, about 29% have a link to Israel.
The rest don't. If you are scoring 29% out of 100, you're failing. You're failing as a group.
And that's what the Houthis are doing. However, where the Houthis are successful in that they are able to divert vessels. In this, they're scoring an A+.
They have successfully forced the U.S., the U.K., and almost every other nation to divert their vessels around the region. And we're seeing this kind of very mixed results coming out of the Houthis. Then we see this over from Bridget Diken over at Lloyd's.
Bab el-Mendab, Suez transits hit fresh lows in September. We knew this was happening because of the uptick in attacks, and it has been materializing. Meanwhile, over in the Black Sea, we're seeing a renewed offensive by the Russians against shipping.
Now, it's not clear if the Russians are specifically targeting ships, or if their aim is so bad they're just hitting ships, because I think it's the latter more than the former. But a third ship was struck in Ukraine within a space of one week. We know the Russians are targeting the port infrastructure.
of the Ukrainians. I would argue that the Russians realize it's a bad move to start targeting ships because what they're worried about is the Ukrainian targeting their ships. And before somebody says, well, the Ukrainians can't target Russian ships, they can. They've proved that by targeting the Black Sea fleet.
If they can hit the Black Sea fleet, they can hit commercial vessels coming out of the Kerch Strait. Interesting story also here by G-Captain about how Russia is losing the Ukraine but winning with China because the Chinese are growing cooperation with the Russians. And what we're seeing here is really the Russians being pushed further and further into that Chinese camp.
I don't buy the argument that this is the creation of a new kind of access of evil in any ways. I think it is a marriage at a convenience more than anything else. Remember all the analogies to Cold War 2.0 that people make.
The biggest difference here is the Soviet Union was never integrated into the global economic scheme the way the Chinese are and even the Russians. That is what's different here. The biggest problem that governments and militaries fail to understand is how integrated all these countries are economically, particularly via shipping. I think it's a big flaw in a lot of nations and their ability to understand what is happening.
This story also from Lloyd's list, Black Sea war risk rates heading north after Russian attacks. We've seen a spike in Red Sea rates. Now we're seeing the spike again in Black Sea rates. If you want to ask who is winning the wars in the Black Sea and the Red Sea, I'll give you the answer to that real quick.
Insurance companies raking in the money right now from war risk. They are just pocketing money left and right. Because if you think about it, over 100 ships have sailed through the Red Sea that have been attacked.
Of those, two have been sunk, a handful damaged, four mariners killed. Yet every ship going through the region is paying war risk insurance. Same thing in the Black Sea.
Just a handful of vessels have been hit without any really being sunk during this period of time. So again, the winner here is definitely the insurance companies. Then you see stories like this, where the U.S. tightens its noose on Iran's ghost fleet after Israel's attack. So the U.S., along with the European Union, the G7, and a whole batch of nations, are using sanctions as a weapon. The U.S. has been using it against Iran for a long time, and they keep targeting Iranian vessels carrying oil.
And they're adding them to the fleet of vessels that are under U.S. sanctions. However, the Iranians are still trading oil. They're just avoiding U.S. and the U.S. reach of sanctions.
And so what we're creating here is the emergence of this parallel fleet operating with the Iranians, the Venezuelans, the Russians that are going to get registries in countries. that don't really have registries. They're being insured by companies that aren't really good insurance companies.
And they're being basically inspected by states that have very little inspections. And we're creating this parallel fleet, which is extremely dangerous because you are bifurcating the world's oceans. And if that happens, you are talking about creating rival fleets out there.
It is a bad move. And then we also have the South China Sea, where the Philippines and China are blaming each other in the most recent South China sea spat. I like the word that Reuters used there, sea spat. The Chinese and the Filipinos are basically banging vessels against each other, shooting water at each other. And it's only a matter of time until we see the death of someone involved in this.
This is going to lead to death on the seas. And the danger between the Philippines and China is great. The U.S. has a defense agreement with the Philippines. The Chinese are pushing the Filipinos around. Understand the Chinese are very concerned that a small nation like the Philippines could pinch off its trade by blocking access to the South China Sea or other areas.
This is why China is so adamant about having these islands in the South China Sea to protect their trade. I don't think they're trying to create a military hegemony in the region and take over, but I do think they want to kowtow these smaller nations. to allow them a free hand. And the Philippines isn't appearing to do that. It's creating problems.
Finally, we get this story from a maritime executive. Maritime crime and piracy at the lowest level in 30 years. That is great that crime and piracy is at a low level in 30 years. The problem is attacks on vessels by state actors and non-state actors is at the highest it's been in 80 years. With the Black Sea, with the Red Sea, with the South China Sea, with everything going on.
We are seeing just the evolution here of a loss of freedom of the seas. And when Hugo Grotus wrote this in 1609, in Mer Librum, he was talking about the idea that, you know, nations end at the waterline and that the oceans are open to everyone. Well, that does not seem to be the case. The best example of that is the Houthi, who think they can prohibit the passage of vessels through the Red Sea, the Gulf of Aden, and the Bab el-Mandab.
All of that because they argue it's their waters. They have a right to do it. When in truth, under the UN Convention on the Law of the Sea, Article 19, the right of innocent passage, nations cannot do that.
The problem is we make exceptions to this. The Danes are talking about closing the Baltic to Russian ships. The Canadians are talking about closing the Northwest Passage.
The Turks can close the Dardanelles and the Bosphorus. under the Montreux Convention. So some states do have control over certain seas.
And while the U.S. can sail up and down the Taiwan Straits all they want, it's not a closed sea. Ships are sailing through the Taiwan Strait every day. You're not really proving freedom of navigation when you do it. Areas where we need to prove freedom of navigation, we're not doing it. And I think I'd much rather see us exercising control in the Red Sea.
We saw three American warships go through the Red Sea, get attacked, and subsequently... Weeks later, the U.S. initiated a retaliatory strike against the Houthi because they were giving way to the Israelis to strike the Houthi. The problem is shipping is under attack and the mariners on board don't have a say in this.
They are basically the subject of attacks. And my side will always be on the mariner who's out there getting shot at for just doing their job. All right, let's go ahead to our last story.
Our last story deals with the impact of all this and what does this mean for global shipping? And it means a lot. When you start taking a look at all these impacts, what does it shake out to be? Well, story over in G-Captain, this is Lorianne Larocco, who is now with G-Captain, writing over there, shipping's new normal, how Red Sea diversions are reshaping the global trade.
We're seeing that. We're seeing what the geopolitical impact is having. We're moving ships a lot longer. We're having more pollution.
Where are the people who protest about, you know, global emissions? Because the Houthi are requiring ships to sail three to five thousand miles more than before. It is sucking up ships, sucking up containers, causing escalation in freight rates, surcharges, you name it. There is less stability for the world's fleet to answer the dynamic.
And that results in many things. We see Maersk and Hapag in their new Gemini cooperation. They're going to initiate their. cape route.
They had actually come up with two plans. One was a cape route. One was going through the Red Sea. However, they realized they're not going through the Red Sea. So now they've developed their plan to be initiated on February 1st on how they're going to handle shipments when you use Maersk and HopHog in this new cooperation.
Remember, Maersk and MSC used to be together in what was the 2M alliance. That split because they were getting too big. Now MSC is with Zim.
Maersk is with HopHog. And then you still have the other two alliances that exist. So now we are in a four alliance system. The big fear here is that one of these alliances or one of the shipping lines will collapse or merge with other ones and we'll have less competition out there from before.
Remember back to Hanjin collapse in 2017. Then we get this story from Sam Chambers. Can I say Sam Chambers never looked better than in this picture? This should be the photo that Sam uses. All the time. The roaring 20s and volatility.
Sam goes in-depth here discussing about the situation that shipping lines face. This chart was included in Sam's work, a shipping driven by events leading to volatility. He's using the Baltic Dry Index to mark the volatility of shipping since the early 2000s. And what you see right here is shortly after the entrance of China into the WTO and trade increased, you saw the impact of congestion hit. Then, of course, you have this massive drop due to the credit crisis.
the mortgage and all of a sudden everything just falls off the bottom. You see issues with Indian iron ore exports ban. We talk about Indonesia ban, talk about Chinese steel industry being down. All of that impacts the shipping market.
Then all of a sudden you start seeing in the early 2020s, the uptick begin to happen as Chinese power requirements begin to stall. We see a series of issues between the U.S. and China. Then you have the COVID-19 hit.
And what you basically see here is this volatility that exists across the board. I used this chart a few weeks ago. Sam included it again in this article.
You can see maritime leaders'perception of risk against shipping's ability to address the risk. The one that has the highest risk and the lowest confidence is political instability. The one with the lowest risk and most confidence is industry reputation and the impacts of epidemics and pandemics. They believe they have that.
under control. But the other issues that they have no confidence in, high risk, malicious physical attacks. These are attacks like we're seeing in the Black Sea, the Red Sea, the South China Sea, and then cyber attacks. Those are really the insurmountable ones that are a big challenge for ocean shipping because of the need for open networks.
And then finally, geopolitical volatility fuels surge in tanker rates. We're seeing an uptick in tanker rates. So for example, very large crude carriers, these are the massive super tankers can't go through the Suez Canal that carry crude oil. They're up from 30,000 per day up to 40,000 per day. We saw them as high as 90,000 per day earlier this year.
And there's a perception that the rates may continue to grow. And so volatility exists across the shipping industry. And let's not forget, we have a presidential election coming up here.
That's a big variable. Nobody's sure what's going to happen with tariffs in the United States. We don't know what the next geopolitical black swan to drop is going to be.
We just never know what's going to be the next one. So the prospect that, OK, we're going to see things stabilize, slow down again, not exactly sure about that. We're waiting to see the latest freight rates come out.
We're going to expect to see an uptick in the freight rates because of what happened with the port strike. And then that's going to come back down with the end of the port strike again. everything lags in shipping. It's not an instantaneous. You don't see the instantaneous.
The big thing for you, the consumer, to look for is ever-increasing costs associated with shipping. If you are a shipper, you're hauling cargo, you know the issue you're dealing with is uncertainty and variables. You are more willing to pay more money usually for better reliability, but if you don't have the money to pay, then you get unreliable service.
And if you're the ocean carriers, you're doing very well. You are making profits right now. However, you are dealing with massive overhead because you have to invest in new ships, new terminals, automation, all those issues.
And if you're a laborer and a longshoreman, you're trying to get as much as you can because you see the writing on the wall that your job is going to be ticking away. So therefore, get the profits that you can, the salary you can. Not a bad thing.
That's a lot to look at. I hope you enjoyed this week's episode. If you did, hey, take a moment, subscribe to the channel and hit the bell.
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Until our next episode or until the next ship hits the fan, this is Sal signing off.