Logistics groups seek Asian bases to help clients offshore from China

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Major shipping and logistics corporations around the globe are engaged in a fiercely competitive race to acquire establishments in Asia. This pursuit is driven by their objective to assist clients in diversifying their supply chains and exploring alternative options outside of China.

The race to acquire assets has been intensified by the cash reserves that transportation companies worldwide accumulated when the Covid-19 pandemic caused disruptions and escalated the need for logistics services due to the surge in online shopping.

Companies like Hapag-Lloyd, a German container carrier, and AP Møller-Maersk, based in Denmark, have put their money into ports, warehouses, and other logistical infrastructure. These establishments are there to assist the growing supply chains that are becoming more intricate between countries like Vietnam, India, and Malaysia.

Dheeraj Bhatia, the person in charge of Hapag-Lloyd's operations in India, stated that the competition to invest in these markets is intensifying due to the growing interest in offshore manufacturing, which was traditionally centered in China.

Bhatia expressed that India and south-east Asia are unanimously recognized as the upcoming ideal choice for offshoring by the global community. Organizations hailing from the Middle East, China, Europe, and various other regions will undoubtedly seek opportunities to invest in these markets.

Executives stated that they were addressing the wishes of multinational companies from the Western world to decrease their dependence on China and create alternative manufacturing lines. This inclination was influenced by political conflicts and disruptions amid the global health crisis.

However, the top managers cautioned that significant funding was required for alternative production centers in the southern and southeastern regions of Asia.

Hapag-Lloyd, a company that experienced a significant 40 times growth in profits from 2019 to 2022, revealed in April that it had purchased a 40 percent portion of JM Baxi, an Indian port operator. Bhatia mentioned that the team is contemplating additional investments in Indian ports and railway infrastructure.

Bhatia expressed that the port facilities on the western coast, in particular, are approaching their maximum capacity.

In the meantime, Maersk successfully finalized the purchase of LF Logistics, a company based in Hong Kong, for a whopping $3.6 billion. LF Logistics possesses a vast network of 198 warehouses throughout Asia. Furthermore, the Danish conglomerate recently announced its intentions to construct two additional shipping berths at Vietnam's Lach Huyen port in collaboration with the local Hateco group.

Anne-Sophie Zerlang Karlsen, the individual in charge of customer delivery in the Asia Pacific region at Maersk, emphasized the significance of enlarging and devoting resources to south-east Asia due to the increasing volume of trade within the region. She expressed her belief that the region is likely to witness a substantial and swift expansion for several years to come.

China maintains a significant advantage in the size of its freight infrastructure. According to a recent study by Drewry, China possesses 76 container terminals that can accommodate enormous vessels carrying over 14,000 20-foot containers, which are commonly utilized on trading paths connecting Asia with Europe and North America. In contrast, the combined total for South and Southeast Asian nations amounts to merely 31 container terminals.

Despite this, Drewry analysts anticipate that the container volume of ports in south Asia will witness a significant growth of 31 percent by 2027, in comparison to the 14 percent increase expected globally.

This growth is supported by significant rises in the transportation of goods from Asian nations besides China. Eric Reuter, the Vice President of Asia Pacific at Forto, a freight forwarding company based in Berlin, stated that they had experienced a twofold increase in the amount of exports they managed from Vietnam between the years 2021 and 2022.

Additionally, there are forecasts of a significant increase in trade among Asian nations. UPS, a logistics company headquartered in the United States, anticipates that trade within the region will more than twofold by 2030, reaching a value of $13.5tn. Michelle Ho, the Asia Pacific president of this American logistics corporation, expressed her belief in the immense potential of intra-Asia trade.

Singapore has been one of the countries that has profited from the thriving trade. Onno Boots, who is in charge of the Asia-Pacific and Middle East region at logistics company Geodis, a subsidiary of France's government-owned SNCF, mentioned that several producers are relocating their distribution centers for the Asia-Pacific region to Singapore.

However, he mentioned that numerous warehouses in Singapore had reached their maximum storage limit.

According to Joerg Wolle, the chairman of Kuehne+Nagel, a logistics company based in Switzerland, the company decided to relocate its regional headquarters from China to Singapore before finalizing its $1.3 billion purchase of Apex Logistics, a company based in Hong Kong, in 2021. This strategic move was made in anticipation of the increasing trade in southeast Asia.

"Asia presents us with the most significant potential for growth," Wolle mentioned. "The inclination towards safeguarding supply chains is highly favorable."

Chinese businesses are also looking to participate in the evolving landscape. Reuter highlighted that numerous recently established factories in Vietnam were under the control of Chinese investors.

In the meantime, Michael Fitzgerald, the vice CFO of Orient Overseas Container Line, a division of the state-owned Cosco shipping group in China, expressed that the attempts made by businesses to minimize their reliance on China provided a favorable situation for his company.

"In this section of China, if I can assist a company that produces certain items, in that other area of China, as well as some products in Thailand, it would present a greater opportunity for me in terms of logistics management," he expressed, referencing an earlier conversation this year.