Fabio: Consumer prices are going to start hitting people’s pockets. Consumers will vote with their feet and buy less oil, which will impact the price.
And if people stop shipping from China and start sourcing domestically, China will have to do something about the price of the freight. Everyone is on a profit drug at the moment – and they’re using the war and Covid-19 as excuses.
We’re only just starting to see the impact that the pandemic will have on the economy, there’s still a way to go. We’re going to see further hikes in interest rates. When it starts hitting people’s pockets, we’ll see a host of changes in demand, and that’s when we have to re-evaluate and see where we really are.
Ian: But if we stop sourcing from China, and setting up manufacturing, it’s a similar situation to what’s been said about sourcing gas and oil. Someone has to build the facilities and train the workforce to do what the Chinese do really well. It can be done but it will take a long time to switch on.
Fabio: People talk about moving from offshoring to nearshoring, but at the moment any country on the border with Ukraine is at risk – and that’s where that nearshoring opportunity was. People are looking at more traditional countries like Germany, Italy and France, but that comes at a premium. There’s a balancing point between sourcing closer to home against sourcing from Asia.
Nigel: I saw President Biden say the USA would supply Europe with LNG. So instead of exporting a cargo to Asia, he would export one to Europe. But that means the Asian demand will have to be met from elsewhere, and where will they go? Russia, because that’s where they’ll get it cheapest at the moment. There’s no new commodity coming on to the market, it’s just going round by different trade routes.