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US com­pan­ies are start­ing to cut their reli­ance on Chinese sup­ply chains.

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US com­pan­ies are start­ing to cut their reli­ance on Chinese sup­ply chains and seek altern­at­ive ship­ping routes in Asia as rela­tions between the two super­powers deteri­or­ate, accord­ing to the head of one of the world’s biggest con­tainer com­pan­ies.

Rodol­phe Saadé, chief exec­ut­ive of France’s CMA CGM, sug­ges­ted the over­haul would take sev­eral years because poten­tial bene­fi­ciar­ies, such as India or south-east Asian coun­tries Viet­nam and Thai­l­and, lacked the infra­struc­ture to accom­mod­ate the very largest con­tainer ships.

«We have cli­ents telling us they do not want to put all their eggs in one bas­ket in China, so they are look­ing for other solu­tions,» he said in an inter­view.

«The move­ment has begun but not yet at large volumes. It will take time. Maybe in five or ten years, if India and south-east Asia build port ter­min­als that can accom­mod­ate large ships, then they will play a dif­fer­ent, big­ger role,» he added.

Saadé did not name any of the US com­pan­ies.

The Covid-19 pan­demic and the Rus­sian inva­sion of Ukraine have high­lighted the risks of global sup­ply chains under­pin­ning everything from energy to med­ical sup­plies.

Profits also declined to $3bn, with mar­gins slid­ing to 33.7 per cent from 46 per cent in the third quarter.

AP Møller-Maersk and MSC Medi­ter­ranean Ship­ping Com­pany have also been hit by the steep drop in freight rates over the past six months. On routes from China to the US west coast, these are 85 per cent below their peak.

The ship­ping industry has long been prone to boom-and-bust cycles.

«After what we’ve exper­i­enced in the past two and a half years, any­thing that hap­pens after that is a hard land­ing,» Saadé said.

The boom helped to drive CMA CGM to a record net profit of $24.9bn last year, while rev­enue rose 33 per cent to $74.5bn. Although the ship­ping group does not give spe­cific guid­ance, Saadé pro­jec­ted CMA CGM would turn a profit again this year, adding that he was optim­istic that the US would avoid a reces­sion.

But next year could be more challenging as ship­ping com­pan­ies took deliv­ery of new ves­sels equipped to meet stricter envir­on­mental stand­ards, caus­ing a poten­tial over­ca­pa­city prob­lem, he added.

Like other ship­ping exec­ut­ives, Saadé argued that a shift from China, par­tic­u­larly by US com­pan­ies, did not sig­nal an end to glob­al­isa­tion but an evol­u­tion towards more regional sup­ply chains.

Rolf Habben Jansen, the chief exec­ut­ive of Ger­man ship­ping group Hapag-Lloyd, said this week that India could be one of the big bene­fi­ciar­ies.

«Cer­tainly a lot of people are look­ing at India as an altern­at­ive or an addi­tion to China,» Habben Jansen said.

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Comments

  1. Eric7 March 2023 at 15:57

    It's about time if you ask me. We should have done this years ago, if not decades ago. This pandemic probably opened the eyes of many who didn't see the threat this posed.

    ReplyDelete
    Replies
    1. Jermaine7 March 2023 at 16:10

      Without the pandemic we wouldn't even think of doing this move. It will take time, maybe even more than 10 years but it's well worth the wait and investments.

      Delete

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