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Lloyd’s List Outlook Forum told of tectonic shifts in supply chain and trading flows

Global supply webs and shipping routes are expected to undergo accelerating changes in the next five years

The unfolding events in the Middle East are capturing everyone’s attention, but bigger changes may still lie ahead

THE reshaping of global supply chains and resulting seismic shifts in shipping routes will gain greater momentum over the next five years, speakers and attendees at the Lloyd’s List Outlook Singapore Forum agreed.

While geopolitics are already disrupting trade flows now, structural transformations from decarbonisation and technology will prove the more powerful long-term drivers of change, the conference was told.

“The things that are immediately shaping boardrooms, around decisions on resiliency are geopolitics,” said Alan Beacham, managing director at Toll Group, one of Asia’s largest forwarding and logistics firms.

But the green transition, digitalisation and automation, which would alter the role labour arbitrage plays in manufacturing location decisions, are the fundamental drivers, Beacham said.

“I think we’ll see more changes in the next five years in supply chain reconfiguration than we’ve seen perhaps in the last 20, as companies really start to grapple with all of those drivers,” he said.

The latest turbulence stems from the escalating tensions in the Middle East, with Iran and Israel locked in tit-for-tat strikes.

Drewry principal consultant Han Ning said if marine traffic in the Strait of Hormuz is blocked, tanker shipping would be most directly affected, given the massive amount of oil and gas the Gulf nations produce.

In terms of cargo volume, container shipping has relatively modest exposure in the region, but a blockade would force liners and logistics firms to seek new corridors, such as overland routes into the market.

“I see some logistics companies have started to look at these alternatives, including [scouting] inland container depots there,” she said.

The forum was told the volume via the Gulf far exceeds the Red Sea, so smaller regional carriers could not fill the gap if Iran acted in the strait. This might benefit certain major carriers from countries friendly to Tehran that operate independent services on the route.

Looking further ahead, Han said November’s US election is shipping’s next big uncertainty. If Trump is re-elected, his tariff plans — 60% on Chinese imports and 10% on others — would be “the biggest threat to Asia Pacific trade,” she said.

And the experience from the last tariff war between Washington and Beijing suggests trade routes could once again undergo significant changes.

“Loading ports used to export will change to avoid tariffs. So all logistics providers need to serve more diversified trading routes for each of their clients,” Han said.

A common tactic by exporters was repackaging Chinese-made goods in Southeast Asia before US shipment, Beacham noted. “People are finding different points of entry, because of the mess.”

How ASEAN and other Asian economies stay neutral amid turbulent geopolitics to maintain their positions in East-West trade is increasingly important, Ship Shape Strategies founder Su Yin Anand said.

Anand, ex-head of shipping at miner South32 and a member of Lloyd’s List’s editorial board, noted the role geology plays in the dry bulk trade as some minerals can only be mined in certain locations.

But societal decarbonisation and green transitions are altering individual mineral ebbs and flows, reshaping trading and shipping lanes in the sector, she said.

For example, electric vehicles are boosting demand for battery minerals like manganese and nickel, Anand explained. “And you’ll see that expressly called out in the annual reports of many public listed mining companies out there.”

In an online poll of over 270 guests during the forum, 98% of respondents felt supply chain shifts will further accelerate over the coming half-decade. Also, 42% saw the re-orchestration as positive for shipping, 20% negative and 28% neutral.

So far, changes in trade flows caused by geopolitical conflicts have generally benefitted shipping, with increased tonnage-mile demand bolstering freight rates. However, it remains to be seen whether these shocks will hurt the global economy or demand.

In addition, Beacham mentioned the harm to emission reduction efforts caused by ships shunning the Red Sea, as the longer voyages around Africa clearly increase emissions.

Carbon and climate costs would cause the industry “to rethink about where we locate supply chains”. 

Beacham also expressed scepticism about whether the logistics integration approach can ultimately succeed.

Large carriers and even port firms have followed this strategy, pushing well beyond their core businesses to expand revenue sources amid stretched supply chains. 

Beacham said the rapid rise of integrated logistics during the pandemic was natural when cargo demand exceeded vessel capacity, better ensuring stability. But if the market shifts to oversupply, shippers will want cheaper logistics services.

The Red Sea crisis has absorbed a large amount of capacity from containerships that might otherwise have been surplus, and escalating tensions in the Middle East suggest that the situation will continue.

But once conflicts calm and trade diversions end, released vessel supply will mean “we will see an integrated strategy truly tested,” Beacham said.


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