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OOCL CFO Says It’s Impossible To Decouple From China

OOCL Germany calls at Eurogate Container Terminal in Wilhelmshaven, Germany. Photo: EUROGATE

OOCL CFO Says It’s Impossible To Decouple From China

John Konrad
Total Views: 3603
April 24, 2023

As geopolitical tensions rise, businesses are exploring alternatives to China for production and diversification, yet China’s vast influence in global trade makes it virtually impossible to remove the country from the world’s supply chains, according to one of China’s leading shipping organizations.

Michael Fitzgerald, deputy CFO of Hong Kong-based Orient Overseas Container Line (OOCL), which is owned by Chinese state-owned Cosco shipping, cautions against overstating the “China plus one” strategy. While there has been a real shift of production outside of China, Fitzgerald claims the country’s sheer scale makes it irreplaceable in the supply chain. For example, even if Vietnam’s growth rate is higher, China’s smaller growth rate still represents a significant portion of the supply chain.

Also Read: ONE CEO Says US-China Tensions Add to Global Trade Shifts

Major corporations like Apple, Samsung, Sony, and Adidas have relocated manufacturing from China to Southeast Asia in recent years, and Siemens is also exploring investment opportunities in the region to mitigate supply chain risks. Although Fitzgerald acknowledges that companies have made adjustments and moved some production away from China due to factors such as lower labor costs and risk management, he stresses that this will be a gradual, incremental shift. A sudden exodus of manufacturing is simply not feasible.

OOCL and its parent company control about 11% of the global container shipping market, as per Alphaliner data. This perspective comes after the share of US container import volumes from China fell by 10 percentage points compared to the previous year to around 32%, as reported by logistics technology group Descartes. Meanwhile, import shares from India and Thailand slightly increased to 5% and 4%, respectively.

OOCL has been diversifying its freight routes and expanding in Southeast Asian countries such as Vietnam, with its newest vessel—one of the world’s largest container ships—docking in Vietnam during its maiden Asia-Europe voyage. Fitzgerald told the Finacial Times the company’s diversification approach, which includes growth in emerging markets like Africa and Latin America, but also emphasized the continued importance of the US-China market for a wide variety of products.

In 2018, COSCO SHIPPING Holdings, a Chinese state-owned multinational conglomerate headquartered in Shanghai, successfully acquired OOIL, the Hong Kong-based parent company of OOCL, for US$6.3 billion.

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