Logistics executives wary of recession, over-reliance on China

DUBAI, UAE — Global logistics executives, still worried about recession, say they are battling higher costs, reducing dependence on sourcing from China, and planning to boost investment in Africa despite seeing emerging markets investment overall as somewhat riskier.

Half of the 830 industry professionals surveyed for the 2024 Agility Emerging Markets Logistics Index expect a global recession in the coming year – down from nearly 70 per cent a year ago.

More than 63 per cent of respondents say their companies continue overhauling supply chains by spreading production to multiple locations or relocating it to home markets and nearby countries. China, the world’s leading producer, stands to be most affected: 37.4 per cent of industry professionals say they plan move production or sourcing out of China or reduce investment there.

“Shippers and carriers are struggling to minimize supply chain risk and find new growth opportunities,” said Agility vice-chairman Tarek Sultan. “Inflation and recession risks have eased, but the industry is still living with the aftershocks of the COVID pandemic. At the same time, businesses are worried about geopolitics — troubled trade relations between China and the U.S. and Europe, and the thicket of sanctions against a growing number of countries.”

The survey and Index are Agility’s 15th-annual snapshot of industry sentiment and ranking of the world’s 50 leading emerging markets. The index ranks countries for overall competitiveness based on their logistics strengths, business climates and digital readiness — factors that make them attractive to logistics providers, freight forwarders, air and ocean carriers, distributors and investors.

Shipping and logistics costs that soared during the COVID-19 pandemic and its aftermath are still climbing but at a slower rate, the survey found. One way shippers expect to cope is by increasing use of digital freight forwarding from 37.8 per cent today to 52 per cent in five years.

Meantime, the industry is gearing up for a surge in Africa investment. Nearly 62 per cent of professionals say their companies are planning additional or first-time investments in Africa versus only about 7 per cent exiting or scaling back there.

China and India, the world’s two largest countries, held their spots at numbers one and two in the overall rankings. UAE, Malaysia, Indonesia, Saudi Arabia, Qatar, Vietnam, Mexico, and Thailand rounded out the top 10. Number 24 South Africa and 25 Kenya were highest among countries in Sub-Saharan Africa.

Three of the four countries offering the best emerging markets business conditions are situated in the Arabian Gulf: UAE (1), Saudi Arabia (3) and Qatar (4). Malaysia (2) and Jordan (5) both moved up in the business fundamentals rankings.

China and India were tops for domestic and international logistics. In digital readiness, China jumped three spots to number one, followed by UAE, Malaysia and Qatar. India fell from the top spot a year ago to number five this year.

Outside of the top 10, many of the biggest swings in year-to-year rankings involved countries experiencing conflict, facing international economic sanctions, or suffering from chronic economic instability. Among them: Ukraine, Russia, Iran, Ethiopia, Argentina, Lebanon, Tunisia.

The 2024 Index Highlights include:

Supply chain restructuring – India, Europe and North America rank ahead of China as destinations executives expect to move production to in 2024 and onwards.
China – 40 per cent expect their businesses to be less reliant on China in five years. Leading factors in decisions to de-risk in China: difficulty of doing business; US-China trade friction; a slowing economy; the harshness of China’s COVID-19 restrictions.
Climate change – 66 per cent say climate change is something they’re planning for, or already affecting their businesses.
Emerging markets – the largest percentage sees increased risk/decreased rewards in emerging markets.
India – many see India growing in importance as a producer and market, but cite inadequate infrastructure and corruption as the biggest obstacles there.

“Supply chain managers are still coming to terms with the political and economic instability characterizing the post-COVID global economy,” said John Manners-Bell, chief executive of Ti. “Geopolitical relationships are changing rapidly, and this is having a major impact on international trade and risk profiles. Businesses need to be alive to the opportunities and threats that exist in emerging markets and use data, such as that the Agility Emerging Market Logistics Index, to inform agile decision-making.”