C.O.B. Tuesday

We are excited to share this Special Edition COBT focused on the impact of the recent dockworkers’ strike and its implications for the energy sector. As we send this out, you may have heard the strike has been suspended. It was and is a fascinating situation… and wait until you meet who we found to discuss the issues.

We were lucky enough to connect with Dr. Salvatore Mercogliano, Associate Professor of History at Campbell University. In addition to his role at Campbell, Dr. Mercogliano also serves as an Adjunct Professor with the U.S. Merchant Marine Academy. Dr. Mercogliano has an extensive background in shipping and maritime history, having previously served as a merchant mariner with the U.S. Navy’s Military Sealift Command. He holds a Ph.D. in Military and Naval History from the University of Alabama and is also the host of “What is Going on With Shipping?” We were thrilled to hear Sal’s unique insights on the dockworkers’ strike and on the shipping world overall. One strong takeaway we had from the conversation with Sal is that shipping will be getting more expensive over the next decade for a number of reasons.

Sal first provides key background for understanding why the strike happened, differences between the International Longshore and Warehouse Union (ILWU) on the West Coast and the International Longshoremen’s Association (ILA) on the East and Gulf Coast, and recent contract history for the ILWU and ILA. We discuss the post-COVID surge in profits for container liners and how it has been a key driver for the ILA’s push for wage increases, the ILA’s concerns with automation, fearing job losses similar to what the ILWU experienced on the West Coast after automation was introduced, and the broader resurgence of unions’ power post-COVID across different industries. Sal shares his perspectives on the ILA’s leadership and influence, the potential economic impact of prolonged strikes (had the strike continued or if it resumes January 15), the effects on energy and refined product transportation, and rising shipping costs due to new fuel regulations, aging fleets, limited shipyard capacity, and longer lead times for shipbuilding. We also explore the evolving global shipping market, government involvement in strikes, global shipping’s critical role in the world economy, the cyclical nature of trade trends, the importance of maintaining open maritime routes for continued global trade, and much more. It was an absolutely fascinating discussion. After we hung up with Sal, we stumbled on many other issues to explore with Sal in the future (like the dark fleet that transports Russian oil for example).

As you’ll hear in the discussion, we reference our COBT episode with Captain John Konrad, CEO of gCaptain. The episode is linked here.

Mike Bradley kicked us off with a quick update on two current events: the East & Gulf Coast longshoremen’s strike and the escalating Middle East conflict. On the longshoremen strike front, he noted that equity markets haven’t been overly concerned that this strike would extend beyond the weekend, but if it does, then equity markets will begin to dial in some equity risk premium early next week. Regarding crude oil, he highlighted that WTI price spiked ~$4/bbl (to ~$74/bbl) on Thursday after President Biden was asked by a reporter whether he would support Israel striking Iran’s oil facilities and Biden responded that they’re discussing it. Oil markets are beginning to dial in some modest risk premium due to uncertainty of whether Israel will attack Iranian nuclear sites and/or key Iranian crude oil export terminals & refineries. He also noted that a key reason for the current oil price spike was a hedge fund trading squeeze brought on by an extremely bearish crude oil trading setup. He ended by noting that oil traders are beginning to focus on the December 1st OPEC meeting and whethe