Understanding chokepoints and disruptive hazards are becoming key to business viability - Russell Group

International trading hubs have become centres of high value concentration, with the larger ports handling goods worth several billion dollars every day, according to research by Russell Group.

It outlines how supply chain chokepoints are a threat to consumers, corporates, nation states and the (re)insurers that need to understand their potential risk accumulations. 

The report contains a special focus on international chokepoints, China and other South China Seas nation state perils and the impact of the COVID-19 Pandemic to ports and shipping in that region.

China bucks the trend

One major deviation from this chokepoint illustration is China, which is hugely aware of its exposures. Through its investment in infrastructure to relieve pressure on today’s chokepoints, China is a major investor in Brazilian infrastructure.

In Brazil, for example, it is diversifying supply routes (eg lessening reliance on the Panama Canal by constructing a railway across South America); and expanding the operational base across its supply chains.

This country with the world’s largest population to feed is a highly invested owner and operator of ports and trans-shipment hubs. 
  
Russell’s proprietary data analysis reveals that 55% of world trade by TEU in 2021 passed through the South China Seas, which seems to chime with other third-party maritime trade estimates of around 60%. 

Connected risk insights

Russell Group MD Suki Basi comments: “The report concludes that understanding chokepoints and enhancing knowledge of disruptive hazards are becoming key to business viability.

“We must connect existing models of transport network dynamics with real-time trade data to enable the modelling of geopolitical chokepoints.

”Expanded data functionality underpinned by an understanding of connected risk insights could provide the basis for the development of risk management strategies.” 

Other key stats from the analysis include:

  • In 2021, Indonesia annually imported $1.9 billion and exported $7 billion of coal
  • Manila port is a vital for Philippines trade, with an annual flow of trade of $42 billion as of 2021

The annual values of the following exports from Vietnam to US are: 

  • Clothing - $17 billion 
  • Furniture - $9 billion 
  • Electronic and Industrial Machinery - $848 million 
  • Integrated Circuit Boards - $527 million 
  • Rubber - $315 million

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