Ocean carriers are expected to feel the squeeze as foreign companies begin to re-shore manufacturing operations in the U.S. / E.U. mainly due to the rise of costs in China, and yearly rising oceanic transportation costs.

 

MNCs (Multi National Companies) that have manufacturing operations based in china are seeing profit margins squeezed from all directions, which is increasingly making manufacturing back home and paying folks a fair wage seems like a non-brainer.

The rising yuan & cost of doing business in china is forcing many MNCs to near-shore manufacturing operations that they had once off-shored for good in order to keep profits high and expenses low – China has grown up, and manufactures don’t like it – we are seeing an exodus of manufacturing from china, it’s going back to the West, and to Southeast Asia.

Increasingly the cost and time of getting goods from Asia, to Europe or America is being discussed in board rooms worldwide partially due to the west coast slow down that is spreading like wild fire throughout ports worldwide.

The Western business model that has dominated Western business schools, and is what eventually led to the economic crisis in the EU and U.S. has been cut costs, off-shore everything, rely on cheap labor and low shipping costs to maximize profits.

A recent survey of European & American companies engaged in over sea’s manufacturing found that over 50 percent had near-shored some manufacturing operations, while the other 50 percent was still considering further off shoring of the manufacturing operations, but diversifying out of China into south-east Asia.

Spainand Italy both of whom are experiencing massive unemployment and severely depressed wage levels are seeing in-country manufacturing renaissances as businesses have grown weary

Of the increasing cost of manufacturing in China, the increasing risk of Maritime Piracy, and long waits for new products manufactured in China to hit the shelves in the West.

Chinese manufactures’ are designed for continued production of massive volumes for a few different products, they cannot change gears fast enough for us to meet market demand and get the new product to the shelves while the trend is still hot.

Many companies have decided to re-base their manufacturing in Europe in order to cut down on transportation & import duty costs & be more nimble in response to new trends and ever changing consumer habits, said a fashion company executive.

Companies across Europe are returning to their roots as trade unions, once a dominant factor in the decision of companies to off-shore manufacturing are becoming ever more flexible with wage & benefits expectations.

While union concessions are a novel thing, most firms cited rising salaries in China, coupled with a lack of rise in the manufacturing quality to match the added expenses as the reason why they were pulling out of china.

Official data from the EU & US show China's average wages in manufacturing rose more than 300% percent between 2000 and 2014. To illustrate just how fast Chinese wages are rising - the salary of Italian factory workers right now is around 5-6 times higher than Chinese factory workers, but in 2008 Italian factory workers earned 16 times more than Chinese factory workers.

Manufacturing in Italian factories is about a third more costly than it is in Chinese factories, but despite the manufacturing cost-gap foreign manufacturers in China are seeing profits go in smoke due to uncertainty in ever-rising transportation costs, and a new nationalist trend amongst countries enacting protectionist agenda’s via higher customs duties for goods manufactured on the cheap in China or southeast Asia.

Questions / Comments? Contact: Mark@cmaritime.com.cn