Nearshoring prominence stands out due to international conflicts
By Frontier Industrial
October 27, 2023
As the Palestinian-Israeli confrontation gains prominence in the international media, the business world should acknowledge the critical need to reevaluate the current production and distribution economic model. In this context, nearshoring can be a good answer.
This is not the first instance in recent years where political instability in a region has impacted global logistics. Much like the COVID-19 pandemic and the Russian-Ukrainian conflict, the current hostilities between Palestine and Israel underscore the need to bring production closer to consumer markets.
Regarding international commerce and logistics, this is a recurring theme. Russia's actions towards Ukraine exposed the fragility of gas and oil supplies to Europe, while the global pandemic highlighted the world's dependence on Asian manufacturing supply chains.
The maritime trade routes are limited and highly susceptible to geopolitical disruptions. We can mention the five main naval ways for international commerce to analyze why nearshoring remains a model with vital advantages.
Ormuz and Bab-el-Mandeb straits
Both are located near the center of the conflict. The Hormuz Strait is crucial for transporting 21% of the liquid oil used in the world, and 33% of the natural gas is also carried in shipments through its structure.
The Suez Canal
Currently, 12% of global international commerce traverses through the canal, with more than 19,000 ships using it yearly.
As the Hormuz Strait, it is at a conflict point due to the presence of Israel in a mainly Arab region.
The Panama Canal
As the Suez Canal is used as a connection through Asia and Europe, the Panama Canal is vital for maritime transport and logistics through America and Asia.
With an 80-kilometer route, nearly 6% of the global shipments traverse it each year, with around 13,000 ships: 144 maritime routes use it, and 160 countries benefit from its operations.
The Malacca Strait
It’s a 930-kilometer way that goes through the Indic and the Pacific oceans. The straitened point is in Singapore and is 2.7 kilometers in width.
According to The Atlantic, a United States news magazine published in Boston, 84,000 ships traverse the Malacca Strait each year, with 25% of the global commerce transported in this maritime way.
The Bosphorus Strait
It’s the only way to connect the Mediterranean Sea and the Black Sea. The Bosphorus Strait has been watched carefully since the Russian actions for occupying Ukraine started.
The Turkish strait is the primary transportation way of food to Ethiopia, Yemen, Djibouti, Somalia, and Afghanistan, and it’s vital for grain transportation.
As it’s noticeable, the world’s logistics and commerce are highly vulnerable due to the location of some of the main transportation routes, making it essential to develop new systems to keep global economic dynamics active.
Nearshoring to Mexico has shown to be an effective way for diversifying the production points regarding manufacture and technology products, and Mexico’s location near the Caribbean, Latin America, and the United States market brings the country an advantage for developing a logistics hub that allows the region to watch the international commerce disruptions from a different perspective.