Could fuel costs scuttle China’s dominance?

With the cost of fuel on an upward spiral, and with China’s labour costs on the rise, questions are being raised about the long-term viability of outsourcing manufacturing to China. Eyefortransport.com points out in a recent analysis: “When a shortfall of 4% in supply can raise the oil price by 177%, the supply-demand gap is of increasing concern to companies stretching their supply chains and outsourcing manufacturing to China. “About ten barrels of fuel are needed to ship a 40 ft container from China to Hamburg, and about six barrels to ship the same container from Romania to Hamburg. At $100 per barrel, the difference in transport cost is $400 per 40 ft container. This difference becomes prominent ($1 000) when the oil price rises to $250 per barrel.” According to the report, companies aiming at the Western European market are looking closer to home. For instance, Samsung and Sony are expanding their manufacturing operations in Slovakia as the country prepares to adopt the euro currency in 2009.