From Strikes to Storms: The Impact on Global Trade

Can artificial intelligence save the world from the existential risks it poses, or is it too late to turn the tide on climate change? Join me, Tony Hines, on the Chain Reaction Podcast News Edition as we tackle these pressing questions. This week, you'll uncover alarming statistics that reveal the Earth's critical health state and understand how these environmental challenges are disrupting global supply chains. From extreme weather events to the challenges of a growing human population, we explore the intricate web of issues affecting industries worldwide. Additionally, learn the implications of the recent Boeing workers' strike on production and finances as negotiations over pay raises hit a stalemate.

Stay informed about the latest in global supply chain developments, including Taiwan Semiconductor Manufacturing Company's soaring revenues fueled by AI demand and Honda's massive recall over steering issues. Discover China's discontent with U.S. tariffs, BYD's ambitious sales goals in Mexico, and the financial havoc wrought by Hurricane Milton. As we anticipate potential interest rate cuts from the European Central Bank, we delve into Rio Tinto's strategic acquisition of Arcadium Lithium, Unilever's exit from the Russian market, and Amazon's leap into AI-enhanced delivery systems. Don't miss out on these essential updates, and remember to subscribe for more insightful content on the ever-evolving landscape of global supply chains.

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Chapters

• 0:07 Climate Change and AI in Supply Chains
• 13:34 Global Supply Chain Highlights
• 23:19 Podcast Sign-Off and Subscription Reminder

Transcript

Tony Hines: 0:07

Hello, tony Hines here and you're listening to the Chain Reaction Podcast News Edition. All things impacting global supply chains this week, chain Reaction. Well, if you're health conscious, perhaps you go for an annual check-up to see how you're doing. Well, it struck me this week that the Earth is showing signs on its annual health check, which looks something like this Global average temperatures. The record's been broken three times in July, with 17.16 degrees Celsius on the 22nd of July.

Tony Hines: 0:51

Fossil fuel emissions have hit an all-time high. Coal use increased by 16% over the past year. Oil consumption has risen by 2.5% over the past year. Ocean acidity and heat content have reached new peaks. Atmospheric concentrations of carbon dioxide and methane were at record highs, ice sheets in Greenland and Antarctica and average glacier thickness were at all-time lows, and the human population is growing by 200,000 a day. The climate-dam damaging ruminant livestock population has risen by 170 000 every day on average, and tree cover loss has risen by 51 million hectares in the past two years. And renewable energy consumption is 1 14th of fossil fuel consumption.

Tony Hines: 1:42

Now, all those figures were in the report in the I newspaper in the UK and those are the findings of scientists looking at the numbers with regard to the state of the Earth's health. So implications for supply chains right there. Now put that information together with what we know from our own experience over the past year with the increasing level of floods, fires in some areas of the world. So we've had extremes of heat and flooding, and we've also had major hurricanes Helene and Milton, category 4 and Category 5 hurricanes doing lots of damage, taking lives, and that's also a symptom of major climate change when these things are happening in places that wouldn't normally experience those sorts of incidents. So if ever there was a message that action needs to be taken to reduce the impacts of climate change, this scorecard probably shows the evidence.

Tony Hines: 2:52

One of the impacts of climate change and life chances and deprivation and poverty is that people tend to migrate, and in the UK in the past year the migration numbers are up to 677,300. And the population of the UK has increased to 68,265,200. And that's significant. If we think back, say, 30 years ago, the population in the UK was about 55 million, 56 million, that sort of number. So we've added about 12 million people in that time and, of course, the picture is the same worldwide Numbers of population. Population growth overall has risen and we're now well over the 8 billion people in the world, heading towards 9. That means more pollution from human output and it also means more consumption and it means there's a bigger drain on the Earth's resources. So how sustainable is the planet if the population keeps growing at that kind of rate?

Tony Hines: 4:08

Now, what happens when your best friend is AI? It's quite a serious question really, because, with isolation, ageing population and all that kind of change, ai might be the only link that a human person has with the outside world at some stage in their life. And AI has advanced so much that it's doing intelligent things. It's gone beyond being responsive. It can actually do all kinds of things that we would have never imagined.

Tony Hines: 4:41

I doubt that Alan Turing when he was developing his ideas about machines and asked the Turing question can machines think? Well, it's proving to be the case that they probably can, as they learn and hoover up vast amounts of data from humans, of course, but can process it much faster and give answers much quicker. And I was reminded of that this week because Professor Geoffrey Hinton, who's one of the leading people in artificial intelligence, got the Nobel Prize in Physics. He's a British-Canadian who worked for Google and he resigned from Google last year, saying that he was very concerned about existential risks posed by machines that could outsmart humans. Machine learning, of course, is the central component of artificial intelligence. It allows machines to perform tasks that mimic human intelligence, such as learning, reasoning and problem solving. And the impact of AI on human lives from uncovering illnesses, editing visual material, sound and mobile phones and powering things like large language models such as chat, gpt all come under the umbrella of artificial intelligence, and it's going to be a huge influence. Professor Hinton said we're in a period of scientific and technological development not seen since the 18th century industrial revolution. It could be wonderful, but we have no idea how it's going to play out. It promises massive improvements in productivity, but it could also lead to things getting out of control. And when we think of AI and supply chains, I have a couple of episodes coming up where I discuss artificial intelligence in supply chains, and you'll probably want to have a listen to those, and you can see how it's changing our world in one aspect, that's, in supply chains. John Hopfield is a US academic and he also won the Nobel Prize this week in physics for artificial intelligence.

Tony Hines: 6:55

More than 30,000 Boeing workers in the northwest of the United States went on strike last month and they've overwhelmingly rejected a 25% pay rise. As a result of the walkout, production has shut down and some planes will not be produced. The company has suspended the jobs of thousands of staff. They've been asked to take one week off in every four, as long as the strikes last, and the company said the impact of the strike will depend on its length of time, but many commentators say an extended stoppage would cost the company and its suppliers billions of dollars. The last strike that Boeing had back in 2008 lasted about eight weeks. It's a challenge to the new chief executive.

Tony Hines: 7:43

Boeing said this week it's withdrawn its pay rise offer to the striking workers. After the negotiations with representatives of the union reached stalemate. Companies accused the union of not giving the proposals serious consideration. The International Association of Machinists and Aerospace Workers Union said Boeing was hell-bent on standing on the non-negotiated offer, which was already rejected by its members. Boeing said this is its best and final offer to workers and proposed a 30% pay rise over four years, lower than the 40% being demanded by the union.

Tony Hines: 8:18

So on it goes and the woes of Boeing continue. Boeing is looking at options to raise billions of dollars through the sale of stock and equity, like securities that's according to a number of sources. The planemaker doesn't want to slip into what they call junk territory on credit ratings. I'm guessing the cash might be running through the company at the moment as well, although it's probably stemmed with the strike just a little bit, because when you're not paying wages well, you're not going through cash as fast, but of course you can't get planes out the door.

Tony Hines: 8:55

Boeing has burned about 8.3 billion US dollars in cash in the first half of 2024, and it expects free cash flow to be negative in the year. Boeing's cash outflow comes to about 10 billion US dollars. It's been estimated in 2024, assuming that the strike ends, of course in the fourth quarter. It's had three consecutive years of negative cash flow from 2019 to 2021. That was following two crashes during the coronavirus pandemic.

Tony Hines: 9:27

The price earnings ratio for Boeing and Airbus are very different. Boeing's PE ratio on the 3rd of October 2024 came in at minus 32.9, based on financial reports and stock prices on that day, whereas Airbus came in at 32.69 positive, also based on financial reports and stock prices on the 2nd of October. Airbus has a much healthier financial outlook compared to Boeing. The negative PE ratio for Boeing shows that it's been losing money recently, and this can happen when a company is going through financial difficulties or some restructuring. It means that the stock is probably overvalued. The debt at Boeing is currently about $60 billion and about $4 billion of that's due in 2025. The strike, if it goes on for 50 days, could cost Boeing about $3 billion or maybe $3.5 billion in cash flow. That's according to TD Cowan. Shares in the company are down by about 40% in 2024 because of the regulatory requirements set down by the FAA and production issues. It's all been very bad for the company's reputation.

Tony Hines: 10:47

Lloyds of London has said that the global economy is likely to lose about 14.5 trillion US dollars over a five-year period from geopolitical conflicts which have hit supply chains. Insurers are good at this type of calculation. They have actuaries on the job who can work out the risks and they can assess the damage that those risks cause. And of course, you'd expect no less, would you, with an insurance business With more than 80% of the world's imports and exports around 11 billion tonnes of goods at sea at any given time. The closure of major trade routes due to geopolitical conflict is one of the greatest threats to the resources needed for a resilient economy, according to a Lloyd's statement.

Tony Hines: 11:34

According to a Lloyd's statement, the United States government said on Tuesday it may ask a judge to force Alphabet Google to divest part of its business, such as the Chrome browser and the Android operating system. And this all goes back to a landmark case, when a judge found in August that Google processes 90% of US internet searches and, as a result, had built up an illegal monopoly. The Justice Department proposed remedies have the potential to reshape how Americans and probably a large part of the rest of the world find information on the internet, while shrinking Google's revenues and giving it less control over the whole sector. It's likely that competitors, some of them at least, could benefit from this action. It basically requires control over Google's control of the distribution networks, and they also aim to hold Google back from its burgeoning business of artificial intelligence. Google made annual payments of 26.3 billion US dollars in 2021 to companies, including Apple and other device manufacturers, to ensure its search engines remained the default on smartphones and browsers, and that secured its market share in the global economy. Google, of course, will plan to appeal this decision, and they've said as much in a corporate blog post. They think the actions are too radical and go far beyond the specific issues of the legal case, google maintains its search engines are winners because of the quality in the face of robust competition. Well, it's a difficult one. Obviously, there's a threat of a corporation holding a monopoly, but at the same time, much of what Google has done and driven ahead has, according to many, been beneficial for society. So there's no simple solution to this, and the legislators need to be careful they don't destroy what many still see as a good force in the digital world.

Tony Hines: 13:34

Taiwan Semiconductor Manufacturing, tsmc, is the world's largest contractor chipmaker, and it reported its third quarter revenue figures this week, which beat both the market and the company's own forecasts, as it reaped benefits from artificial intelligence demand. Tsmc's customers include Apple and NVIDIA, and they've been at the forefront of the march towards AI, and that helped TSMC recover from the lost business during the pandemic era. The revenue between July and September this year was 759.69 billion Taiwanese dollars, which is about 23.62 US dollars, and that's higher than the estimates that were given earlier. It represents about a 36.5% growth year on year. It was about 17.3 billion US dollars a year ago.

Tony Hines: 14:28

In the United States this week, honda said it's recalling about 1.7 million vehicles and it's over difficulties in steering on certain models which can increase the risk of a crash. That's according to the National Highway Traffic Safety Administration. The recall includes some of the Japanese automakers' famous vehicles, such as the Civic Type R, the Acura Integra and the CR-V from model years 22 to 25. The steering gearbox assembly is the possible cause because it's been manufactured incorrectly, according to the NHTSA, and it causes excessive internal friction. That can lead to difficulties when steering. Dealers will replace the worn gear spring and redistribute or add grease as necessary for free. So if you've got one of those models, get it in, get it repaired, it's free.

Tony Hines: 15:34

China has expressed concern over the United States policy towards chips and EVs. They're very unhappy with the level of tariffs being applied to those categories of goods. On a related note this week, chinese electric automaker BYD expects to sell 50,000 EVs in Mexico this year and then 100,000 in 2025, the company's Mexican head, jorge Vallejo, said on Tuesday. Byd will be announcing shortly where it builds its first factory in Mexico and that's likely to come before the end of this year. The announcement that is not the factory, and that factory will probably have capacity, in the first phase for 150,000 and in the second phase for a further 150,000 vehicles to be made at the plant. Byd is asking for an extension of tariff relief for EV imports into Mexico, and you do wonder, don't you, where those vehicles will end up. Will they stay in Mexico or will they cross the border?

Tony Hines: 16:36

Hurricane Milton could cost 60 billion US dollars, similar to Hurricane Ian, which was the big hurricane back in 2022. That's according to RBC Capital. It's a Category 5 hurricane and it hit landfall this week on the Gulf Coast of Florida on Wednesday and Thursday. About 11 people have lost their lives that we know of so far, and it's caused lots of damage. It's potentially one of the most destructive ever to hit the region, which is already impacted by Hurricane Helene and the devastation that that caused just two weeks ago. We're seeing these events happen more frequently, more often, and you just wonder how anything can be done to prevent such hurricanes causing such enormous damage. A previous hurricane was the second largest insurance loss from a hurricane, and that was Hurricane Ian. That was on top of Hurricane Katrina remember that one back in 2005? So these imposed great hardship and cost people's lives and livelihoods. And, of course, it's raising the rates on insurance to obviously try and cover such risks for business and for people. Earlier in the week, the estimate by Barclays Bank for this particular hurricane, milton, came in at 50 billion US dollars, but RBC Capital have just revised that. Came in at 50 billion US dollars, but RBC Capital have just revised that figure upwards by 10 billion US dollars. A number of European central bank policy makers have said that it's likely that they'll make a cut in interest rates next week. Rio Tinto is about to make a bid to buy US-based Arcadium Lithium for about 6.7 billion US dollars, and that would make Rio Tinto one of the world's largest miners of metal used in electric vehicles and mobile devices.

Tony Hines: 18:30

Now, in the past week or so, unilever has completed the sale of its Russian and Belarusian businesses to Arnus Group, a Russian manufacturer of perfume, cosmetics and household products. The deal includes all of Unilever's operations and four factories in Russia, as well as its business in Belarus. The terms of the transactions were not disclosed, but it's estimated to be worth about 600 million euros. It's part of Unilever's strategy to exit Russia following the invasion of Ukraine, which had drawn criticism for not leaving earlier. It's part of the sanctions against Russia that, of course, european businesses are not trading with Russia. So interesting move.

Tony Hines: 19:11

Over a thousand companies have publicly announced that they're curtailing operations in Russia beyond the bare minimum legally required by international sanctions. This number is continuously updated as more companies decide to withdraw or scale back their operations. It's a significant move by many businesses to align with international sanctions and respond to this geopolitical situation. Companies that have divested are Amazon, apple, volkswagen, toyota, samsung Electronics, mcdonald's, ford, renault, ikea and Shell, to name a few. Companies, though, that haven't fully divested and chosen to remain are Coca-Cola, pepsi, heineken. Coca-cola, though they've suspended operations, they haven't fully exited and Pepsi, similarly, hasn't fully exited. Heineken also suspended operations, but that hasn't fully exited either. It's interesting to see how different companies have responded to the geopolitical situation and how many are sticking around.

Tony Hines: 20:16

Amazon in the United States is to use vision-assisted packages retrieval, and it's to be installed in 1,000 trucks next year. Ai software to help customers make faster buying choices New tech aims to increase delivery efficiency and customer satisfaction. Greater efficiency is the target here, and they're developing new systems to shave seconds off each package delivery, which will help customers make faster buying choices even for products they don't know much about. It's created something called spotlights within the trucks to guide delivery people to packages for each stop along a route. The technology which Amazon is calling Vision Assisted Package Retrieval works by shining a green light on packages, so that the deliverer doesn't have to waste precious seconds reading labels. So the AI has highlighted it for them already.

Tony Hines: 21:08

Doug Harrington, ceo of Amazon Worldwide, said when we speed up deliveries, customers shop more, and when they experience fast delivery, they come back for good sooner than they might otherwise. Delivery van ceilings are equipped with cameras and LED projectors and they instantly read package labels so the person knows which are bound for which customer. It's all about speed, it's all about efficiency and it's all about getting the customer coming back. So the focus is on the customer here. A few precious seconds can make all the difference, and the more cycles you can cycle through, so to speak, means that you make more money, more turnover, more profit and the customer comes back faster, and the customer's always satisfied.

Tony Hines: 21:52

Elon Musk rolled out his Tesla robo-taxi this week, but the market's not too impressed. The shares in Tesla have fallen by about 9% after that particular unveiling. The closing price for Brent crude oil this week is $79.13 per barrel for Brent crude oil this week is $79.13 per barrel, which is up about 6.36% from last week's $74.69 per barrel. West Texan crude oil closing price $74.31 per barrel, so slightly up on the week. Well, that's it for this week.

Tony Hines: 22:29

Hope you've enjoyed the episode and you've learned something from the news on what's happening in global supply chains around the world, and I'll see you in next week's episode in the midweek edition. Now we've got some great additions coming forward. We've got Madhu Hosadurga, who's the VP for AI at Schneider Electric, and he'll be talking about AI and sustainability in the forthcoming episode. We've got mastering promotions, building resilience in the supply chain, and that's the impact of what's happening when a promotion takes place how it impacts the supply chain. We've got an episode on future-proofing supply chains, talking about resilience, agility and sustainability, and we've got an episode coming up explaining Industry 4, and sustainability, and we've got an episode coming up explaining industry 4 and how that's changed supply chains so that we've got our own version in supply chains called supply chain 4 zero. So that's it.

Tony Hines: 23:19

I'm tony hines, I'm signing off and I'll see you next time, but just before I go, don't forget to subscribe to the podcast and you'll be first to know when new episodes break. Thanks for listening. Take care, see you next time. Bye for now, and you'll be first to know when new episodes break. Thanks for listening. Take care, see you next time. Bye for now, thank you.