Globalisation to go into reverse
Prospect of higher oil prices bringing manufacturing nearer home
Intercontinental volume growth rates may never return to the levels of the last 10 years, according to a senior express industry executive.
Scott Price, CEO of DHL Express’s Emea region, said the prospect of higher oil prices long-term meant shippers were seriously looking at bringing at least part of their manufacturing closer to consumer markets.
"When the world’s economy starts to grow again, transport growth will begin again, but I think it will not be the same as we have seen in the last 10 years, " he said.
"I think that growth spurt is gone.
"I think that China as the world’s manufacturer has hit its peak and we will see a bit of stability moving forward." Although some in the forwarding industry questioned his views, Price told IFW there was already evidence from discussions with customers.
"What we are already seeing is the consumer electronics companies coming to us and saying: ’If we were to shift our supply chain and manufacture 20% or 40% or 60% of our volumes in eastern or central Europe, what would be the impact with oil at $50 a barrel, $100 a barrel or at $150 a barrel?’"
Although oil currently trades at around $50 a barrel, shippers were concerned that when the global economy began to grow again, the price of oil would rise.
"With oil at $120-140 a barrel, you can no longer justify moving the vast majority of value-density products from Asia for consumption in western Europe, " said Price.
"It is not going to be the death of the global economy, but we will see intercontinental transport growing less, or even flat compared with intra-regional transport."
But Price said it was difficult to separate decisions that were being made at the moment related to supply chain issues from those caused by the economic slowdown.
"When [manufacturing] capacity investment begins again, we are going to see a very keen focus on what projections are for oil prices, but it is not an issue for 12-18 months, because noone is investing in capacity, " he said.
"Everyone’s volumes are down, starting with the ultimate consumer."
A report commissioned by DHL into trade between Asia, Europe and North America has concluded that Asian trade with the West is more vulnerable to high oil prices than transatlantic trade, which contains a higher proportion of high-value goods traded.
South-east Asian countries were more vulnerable than Japan, South Korea and China to a rise in oil prices - a doubling of oil prices was forecast to lead to a 30% drop in trade between Asean countries and the West, compared with a 24% average drop for all the trade relationships studied.
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