No longer heading to China!
The strategy it’s called Betting the Shop when you put all of your resources into one area. So many companies did this when China’s economy was growing at double digits. Businesses ranging from coal-mines to shipbuilding decided it was the only game in town.
And this despite warnings from China about its economy transitioning and rebalancing, moving away from fixed asset investment to an economy that depends on services and consumption.
Why did the brains of the shipping industry think that China’s economic boom was going to last forever?
China is buying less from the world, and that’s having a knock on effect on everyone – from Australia to Indonesia.
- The items that China needed as its economy grew at 9% to 10% – coal, iron ore, grain, steel were being transported as ‘dry bulk’ in massive container ships. But not so much nowadays.
- In 2015 China bought a third less coal, and Indonesia – one of its key suppliers – saw the amount of coal it sold drop by 40%.
Shipments are measured by the Dry Bulk Index. Back in 2008 this reached a peak of 11,000 points. This year figures have been around just 300.
Politicians and Commentators can talk of ‘green shoots’ in the economy but the facts do not support these claims. Much of the growth since 2008 is driven by government subsidy and stimulus.
People were so greedy that they had forward-booked ships for 2016 back in 2012 assuming that demand would stay high.
Before you ‘bet the shop’, why not talk with us about strategy development?