News Roundup: Navigating the Waters of International Commerce and Conflict

Prepare to be enlightened as we honor National Supply Chain Day, revealing the unseen choreography of logistics that keep our daily lives running smoothly. Discover how efficiency in this sector turbocharges economic growth and take a moment to appreciate the unsung heroes who ensure this global network never skips a beat. We'll also dive into Elon Musk's latest foray into China's market with Tesla's self-driving innovations, scrutinize the stock market's reaction, and what this means for the future of autonomous vehicles. Moreover, I'll scrutinize the shipping industry's unprecedented expansion, the FLIRT variant's influence on public health, and the surging cocoa bean prices that might just make your chocolate indulgence a luxury.

Shift gears as we assess the economic and geopolitical shockwaves disrupting our planet. Unpack Germany's stubborn inflation and Tesla's internal tumult, feeling the pulse of market dynamics and workforce morale impacted by Musk's strategic maneuvers. Navigate through the treacherous waters of the Indian Ocean as Houthi attacks threaten commercial shipping, underscoring a larger web of international conflict. Plus, we'll weigh in on BMW's investment decisions in China, the OECD's perspective on the UK's financial tactics, and unravel Shell's financial revelations amidst global economic complexities. All this, set against a backdrop of ever-present tensions between Israel and Palestine, with Turkey's decisive trade measures further stirring the geopolitical pot.

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Transcript

Speaker 1: 0:05

Hello, tony Hines. Here You're listening to the Chain Reaction podcast, all about supply chain advantage. Thanks for dropping by today. We've got some good things coming along in the episode, so stick around, stay tuned, get informed.

Speaker 1: 0:17

Well, national Supply Chain Day that's what they have in America, and I think we should celebrate too, because supply chains are the backbone of industry. They keep everything moving along and we should celebrate that. We should celebrate the people that work in supply chains and we should celebrate the fact that they're able to drive the economy. Despite all the regulations and despite all the friction that's introduced by governments, supply chains are able to deliver More than we can say for lots of organisations. So, to everybody that works in the supply chains, give yourself a pat on the back, because you're driving the economy upwards and that's how we get growth, and we need frictionless supply chains. Wouldn't that be great? So, if you think about some of the things that have been happening in the past few days, elon Musk jumped on a plane, went to China, so he went to see the Premier, li Chong, and talk about his electric vehicles. Of course, he's been suffering with a downturn in the marketplace and, of course, with competition from Chinese car maker BYD. But he has a big plant, the biggest Tesla plant in the world in Shanghai, and he's gone to China to announce that he wants to introduce them to the self-driving technology and they're keen on that, of course. So he's going to push through the self-drive technology with the Chinese. Of course he's having a bit of trouble at home in the United States with that, with the National Highways Transport Authority questioning the capability of the technology, and he has promised by the mid-year point to have his self-driving taxis, but it remains to be seen if that's going to become a reality this year with the difficulties at hand. But anyway, the stock market liked it and on the fact that Mr Musk jumped on that plane to China, tesla stock's going to buy about 15% since he made the trip. So it's interesting how markets work on sentiment, isn't it? And that's definitely sentiment, because the results we still haven't had them yet, but we're waiting with bated breath to see what Tesla is going to do in the financial markets in the next week or two.

Speaker 1: 2:44

Well, lots of new ships are coming out of Asian shipyards at the moment. In March, 41 new vessels, 260,000 TEU were delivered, but April's gone way above this. It's now 50 new ships in April At 333,000 TEU's capacity. Teu is 20 equivalent units, by the way, and that's the size of a normal container box. So how much more capacity can there be online? And, more importantly, are these ships all going to be profitable or are prices for container shipping going to go down?

Speaker 1: 3:20

Many predicted this capacity problem would come about from 2024 onwards because many new ships were already in the making, but so far the market has absorbed all the capacity that's been thrown at it, which is quite interesting. The vessel diversions that went round the Cape of Good Hope because of the Hootie Rebels have certainly demanded that extra capacity is at hand, have certainly demanded that extra capacity is at hand. Container fleet capacity currently stands at 29.37 million TEUs and it will reach 30 million by the end of June. This is a record year for new build delivery and that's according to data coming from Lina Litica. Cargo volumes at the moment are quite healthy and will absorb this. So there aren't many idle ships around at present. Only about 0.6% of the global fleet is idle, which means underemployed. Well, we don't speak about COVID much at the moment, but it's still there, isn't it in the background? Covid-19. And just before Christmas in the UK I think there were about 4.6% of the population suffering from the JM1 variant which was around at the time. Well, there's a new variant around presently. It's called the FLIRT variant that's its nickname and that's likely to build up. And it comes just at a time when the immunity in the population is falling after vaccinations have slowed down and, of course, infections have slowed down. So the virus has been suppressed for quite a while. So we'll have to see how that impacts productivity and work and, of course, will there be any more vaccinations of the general public?

Speaker 1: 5:10

Three cities in the United Kingdom Nottingham, brighton and Cardiff are among the worst cities with the highest concentration of toxic particles, and these, of course, are conducive to a number of health problems, which include asthma and cancer. Particulate pollution is slowly going away across the United Kingdom, according to government statistics, but there are spikes and there are places where it's still prevalent. Particulate matter is the problem and it describes everything in the air that isn't gas. These are tiny particles and they have toxic chemicals entering the bloodstream from them and they lodge in the heart, the brain and the lungs. It's the deadliest form of pollution. It causes respiratory problems and cardiovascular disease. Wood-burning stoves are one of the major problems and some industrial processes too, where they push out chemicals into the atmosphere, including ammonia, which is emitted from agriculture. It's used as fertilizer and other chemicals too. If you want a good place to live where these particulates are lowest, then consider Glasgow, edinburgh and Aberdeen and Aberdeen. So I think clean air is going to become a serious problem and of course, that's going to impact industries as they try to change their processes to ensure that they're compliant with any legislation that might come their way with regard to clean air. So it is a big problem.

Speaker 1: 6:38

I reported on the Chain Reaction podcast a few weeks back the problems with rising cocoa prices and, of course, what that means for chocolate prices for consumers. Well, this puts it in to stark reality. Just a year ago, cocoa beans cost 2 100 pounds that's about two and a half thousand dollars and today that same amount of cocoa beans is priced at 5 800,800 a tonne. So if you wonder why your chocolate prices are going up, there's the reason. Green and Black's Organic Dark Chocolate cost £2.03 in 2023, and it's £2.68 in 2024. That's a 90g bar, and Lindt Excellent Dark Supreme 90% Cocoa Chocolate Bars £2.16 to £2.85. Toblerone's gone up from £2.76 to £3.26 for the 200g bar and Cadbury's own bar of dairy milk chocolate from about £1.39 to £1.56. Trouble is, that's not the end of it, because most of the price rises in the price of the raw material haven't fed through the supply chain yet to the consumer price points. So we still have more shocks in store when it comes to chocolate.

Speaker 1: 8:02

It was reported this week that the inflation in Germany remains at 2.2%. The Federal Statistical Office in Weisbaden announced this week and that's unchanged from March, but down from 2.5% in February. Rising oil prices are the problem. Food prices are actually falling in Germany. The Bundesbank has warned that it could be 3% in May.

Speaker 1: 8:32

Well, there's a few strange things going on at Tesla at the moment. Elon Musk has fired the entire marketing team. Now he's added to that he's actually fired the entire supercharger team. So what is going on with Tesla? Does he think all these people are not doing their job? Does he think they're ineffective? Does he think he can do better? Or is he just cutting costs relentlessly because he's under pressure to deliver profits to the market? Well, he shut down the whole division at the Tesla supercharger business, got rid of two senior executives and fired hundreds more staff as he restructures During this downturn in the electric vehicle market, elon Musk announced on Monday that Rebecca Tinucci and Daniel Ho, head of new products, would be leaving, along with their entire teams.

Speaker 1: 9:23

About 500 people were in that group. It's the largest charging network in the world, the supercharger system that Tesla has, and it was one of the reasons that the company enjoyed such success over rival car makers. The entire public policy unit is also disbanded following the departure of its leader, rohan Patel, in the middle of April. So this is about headcount and cost reduction. Tesla shares fell by 5.5% on Tuesday and were down another 2.6% on Wednesday. This is after they'd bounced back from Elon Musk's visit to China over the weekend, when they rose 15%. It's still declared it will reduce the workforce by 10%, and that's about 14,000 jobs still to go.

Speaker 1: 10:14

Well, if you listen to public news services, you don't hear much right now about the Yemen Iranian-backed Houthis still attacking merchant ships, but they are attacking those ships hundreds of miles out in the Indian Ocean. After they struck a container vessel well beyond the Red Sea last week, drone attacks on the MSC Orion on the night of April 26th followed a threat by the Houthis in March to extend attacks into the Indian Ocean and they have done on commercial vessels sailing between Asia and Europe around the Cape of Good Hope. So they're trying to strike now beyond their own territory. So this is a bad turn. Many shipping companies have gone for the longer route to avoid the trouble around the Red Sea, gulf of Aden and Suez Canal areas, but it seems that that may not be quite enough. They say, of course they're acting because of the Gaza-Palestinian trouble, and that seems to be creating trouble elsewhere, in US universities right now and on the streets of major cities in other countries too. It's likely that any ships with links to Israel, the United States or the UK will be routed further away from those threats, from those threats.

Speaker 1: 11:37

German automaker BMW Group announced its plans this week to invest an additional 20 billion yuan, which is 3.12 billion US dollars, into a production unit at Shenyang, northeast China. This new investment underlines not only confidence in China's long-term economic prospects, but also in the innovation capabilities of our Chinese partners, said Oliver Zips, the chairman of the board at BMW. This new investment will continue to see upgrades and expansions which make BMW's Shenyang manufacturing hub ready for the production of New Class, a completely new generation of vehicles. It combines innovations in the areas of electrification, digitalization and, of course, the circular economy. In 2026, new Class, which is spelled in the German version N-E-U-E-K-L-A-S-S-E, will roll off the production lines in Shenyang In 2022, the German company BMW had already invested 10 billion yuan on a battery project in Shenyang. It demonstrates BMW's commitment to China in the long run.

Speaker 1: 13:00

The Organisation for Economic Co-operation and Development, the OECD, said this week that interest rates are at a post-2008 era high of 5.25% in the United Kingdom, but that they should stay high until inflation comes down. So effectively they're endorsing the Bank of England strategy. Gdp is expected to grow at 0.4% in 2024 and 1% in 2025. So remarkably flat US central bank, the Fed, has again kept interest rates at 5.25% to 5.5%, so very similar to the UK in that sense. It's unlikely to raise rates until they get better inflation data in the coming months. Inflation hit 3.5% in March, up from 3.2% in February and 3.1% in January, and that's above the Fed's inflation target and higher than expected.

Speaker 1: 14:04

Shell reported better-than-expected profits for the first quarter. Its Europe's largest oil and gas firm Profits came in at US$7.7 billion. That's £6.14 billion over the first three months of this year and it's more than a billion dollars higher than the analysts had forecast, but down US$9.7 billion on the year previous. Shell said its strong oil trading and higher refining margins had contributed significantly to the profit, and it said it would reward investors with a further 3.5 billion share buyback.

Speaker 1: 14:44

Now there's plenty of geopolitical unrest at the moment, with the trouble in Palestine on the Gaza Strip, and the Israel-Palestine conflict is causing confrontation on campus around the globe with authorities as student protesters try to apply pressure on authorities to take action. Now another interesting turn At the end of this week, it was announced that Turkey has stopped all exports and imports to and from Israel as of Thursday. The Turkish trade ministry has said that the worsening humanitarian tragedy in the Palestine territories has forced them to take this action, and it affects all products. All trade force them to take this action and it affects all products all trade. Israel and Turkey had about 6.8 billion US dollars in trade in 2023. Trade restrictions were imposed on Israel by Turkey last month over the refusal to allow Ankara to take part in aid airdrop operations for Gaza. President Erdogan was breaking agreements by blocking ports for Israel imports and exports. Israel's foreign minister, israel Katz, posted on social media Platform X this is how a dictator behaves, disregarding the interests of the Turkish people and businessmen and ignoring international trade agreements, but many think that that's somewhat missing the point. International trade agreements but many think that that's somewhat missing the point.

Speaker 1: 16:20

The Baltimore Bridge is likely to cost 1.7 billion to 1.9 billion US dollars to rebuild. The time estimate is that it will be completed by the fall of 2028, so it's going to put the bridge out of action for nearly four years. They've taken this estimate because it's in line with similar projects of this scale and complexity. According to the Maryland Department of Transportation, the Dally cargo ship, you remember, crashed into the Francis Scott Key Bridge on March the 26th. It killed six people and lawmakers in Congress are currently working on legislation that would waive the current requirements that the state pay 10% of rebuilding cost and ensure there's enough money in a federal rebuilding fund. The US Department of Transportation provided an initial $60 million in emergency funds to clear the debris and to start the process of rebuilding the bridge. Senator Brian Schatz, who chairs the subcommittee overseeing transportation funding, said we're going to build the Baltimore Bridge whatever it needs and there'll be lawsuits, of course, following against the ship owners, which may bring in some funds to go towards that building cost.

Speaker 1: 17:35

New Zealand's foreign minister described the relationship of his country with China as complex. He said the hardening rhetoric across the Taiwan Strait, human rights violations in Hong Kong and increased engagement in Pacific security sectors are some of the issues that are uncomfortable. It was acknowledged that China is a vital economic partner to New Zealand and they have many things in common as well as many differences in opinion. Human rights is an issue and they expect China to adhere to the principles and commitments of the human rights framework that's been internationally agreed. The Taiwan Straits is another issue of concern and the treatment of Muslim minorities in Xinjiang. New Zealand has become increasingly concerned over China's behaviour in the past couple of years. Earlier in the week, peters said that New Zealand was still a long way from joining the security pact AUKUS, that's, australia, the UK and the US.

Speaker 1: 18:40

A BBC news story this week reported that it was just 10 years ago that a Chinese company bought into the lithium triangle of Argentina, bolivia and Chile, which holds most of the world's lithium reserves, and they bought into the project to extract the lithium from those areas. The BBC estimated that it now controls 33% of the lithium projects currently producing the mineral or those under construction, as the Chinese companies have expanded in those regions, they've faced allegations of abuse, similar to those often levelled at other international mining giants. China has significant business interests in mining around the globe, not just for lithium, but for cobalt, nickel and manganese. They operate in Canada, mexico, guyana, in the Lithium Triangle, in Argentina, bolivia and Chile, in Africa, in Mali, ghana, gabon, democratic Republic of Congo, zambia, zimbabwe, namibia and, of course, in Asia, myanmar, indonesia, papua New Guinea and in Australia. So they've got significant investments, which you may well expect because they are dominant in those particular minerals needed to support the development of EVs and new battery technologies.

Speaker 1: 20:07

Honda has invested 15 billion Canadian dollars, that's about $11 billion US dollars, in Ontario at a production hub that includes two factories and material processing units with joint venture partners. The investment includes a new EV factory and a separate battery plant in Alliston Ontario EV factory and a separate battery plant in Alliston, ontario. The EV factory is expected to start production in 2028 with a capacity of 240,000 EVs per year, and the battery plant will have a capacity of 36 gigawatt hours per year. Honda's investment in Canada follows a $700 million commitment to establish EV production hubs in Ohio that will share knowledge and expertise with other plants in North America, including the two new plants in Ontario. Amazon has opened its newest facility in Smithfield, north Carolina, a 620,000 square foot warehouse. It's about the size of 11 football pitches. It'll have about 1,000 jobs with positions beginning at $17 an hour. The facility is a cross-docking facility and it'll be able to integrate inventory from small and medium-sized sellers into the worldwide online marketplace.

Speaker 1: 21:31

The Russian energy giant, gazprom, has had its biggest loss in a quarter of a century, and this is because gas sales have more than halved since the war in Ukraine. The loss is 629 billion rubles, that's 6.9 billion US dollars in 2023. It underlines how the impact of war in Ukraine has damaged the state-owned natural gas monopoly. Gazprom. Revenues have fallen by 30% year on year and its shares listed on the Moscow exchange have fallen by 4.4%. European countries have been able to find alternative sources of gas as Russia could supply.

Speaker 1: 22:25

Well, that's it for this week. I hope you've enjoyed the episode. I hope you found out something you didn't know before you started listening, and I hope it's informative. Don't forget to subscribe to the Change Reaction Podcast and be the first to know about new episodes. Follow us on LinkedIn, x and Facebook. I look forward to seeing you in the next edition of the Change Reaction Podcast. Until then, there are many episodes for you to catch up on and I suggest you stop by the website and have a listen to those you've missed or want to listen to again. I'm Tony Hines, I'm signing off and I'll see you next time in the Chain Reaction Podcast. Bye for now, thank you.