Video: Supply chain woes to last until mid-2022, Maersk chairman saysJim Hagemann Snabe speaks on the deglobalisation trend and congestion of shipping containers at ports due to COVID-19.
The following is a transcript of the accompanying video. ©2022 Thomson Reuters.
Annette Weisbach: Let's talk about another big trend which seems to have arisen from the COVID crisis as well, which is a certain level of deglobalisation. Are you witnessing that as well in your business areas?
Jim Hagemann Snabe: Well, it is certainly a big concern I have. We haven't seen much of it yet, but there's no doubt that when you have supply chain issues, most companies begin to wonder, "Have I put my production too far away? Should I nearshore it or onshore it?"
It's a bit concerning to me for a very simple reason. I think globalisation and global trade happens because two countries benefit from trading with each other.
I come from Denmark. We're not very good in producing bananas in Denmark. If we can buy them in a country that's better at producing them, it's good for both countries, and it's good for the world economy. That has lifted hundreds of millions of people out of poverty because they can connect to global markets.
If you make your supply chain shorter, suddenly the developing countries are without market access. I think that would be a mistake because then you can't create livelihood in those countries, and in particular in Africa, we need to create opportunities.
I'm arguing that instead of making shorter supply chains, we should make them more resilient. That means instead of sourcing everything from one big factory in China, you should source from ten countries. We have the technology today to manage such a complex supply chain, and with that, nine new countries get a chance to participate in global trade and create livelihood where they are.
That's why I'm concerned if we shorten it too much, and I think we should use the intelligent technology that I spoke about earlier to make those supply chains actually more complex and more resilient instead. So you have choices and thereby offer more opportunities.
Weisbach: I think the world is still puzzled why we have these enormous supply chain issues and why everything is so imbalanced. You are an expert in shipping, being the chairman of Maersk, how could that happen and how is the situation?
Snabe: Yeah, I think it's fair to say that I think it surprised everyone that in a COVID situation where we locked down countries, the trade of goods has actually gone up, not down. Of course, there was a short period when the factories closed, that the volumes went down.
But since then, since middle of 2020, the demand for physical products has gone dramatically up. I think it has to do with the fact that we don't spend money on services anymore, and people are home in their homes and they want to improve their homes.
That's the first observation, is that the physical goods are actually being moved more and while we thought the country is closed, the supply chains, the transportation routes were still open. The second thing that's happening right now is that we have congestions.
We had the Suez situation where suddenly lots of vessels are stuck. But that has opened again, and I think we can deal with that. But right now, we have congestions primarily in the West Coast of the US where the ports are full of containers.
We don't have enough truck drivers to pick up the containers. That takes capacity out of the shipping industry because they are lying there idle. So you have higher demand and lower capacity, not because we don't have enough vessels, but because they are not sailing because of congestions, and we have to balance that out.
We think this will happen somewhere mid-next year, but maybe not before.