War rooms and Safe havens

The effects remain uneven across sectors and geographies, but early stress points are forcing uncomfortable decisions.

• Leaders are moving from strategic planning to triage, from price risk to availability risk.

There’s a war room every day with my leadership team to make decisions on everything from rerouting supplies to raising prices with customers. Never a dull moment.’ (science-based service provider)

Supply chain resiliency is the key question in this very uncertain world. This is my biggest concern right now, which is keeping me up at night. (global manufacturer with assembly in the US)

Here’s what Asia CEOs and managers are saying.

Feedstock gaps are emerging, sometimes in unexpected places.

Customers are cutting operations because they are running out of feedstock. Packaging suppliers sent us force majeure letters because the petroleum-derived raw materials, or resin feedstocks, are not reaching the region.

We have a vast supply chain network with redundancy capability, but packaging is not viable if it must be air freighted. Air cargo prices are through the roof. In a few weeks, we could run out of some plastic jug SKUs. We are having to increase prices. Inflation hit us hard on transportation costs, and now it’s impacting raw materials. We are in crisis mode.

Scarcity is forcing tough trade-offs on the factory floor and with customers.

In chemicals and plastics, the past month has been chaotic. Energy prices matter, but the bigger issue is feedstocks. Crude and gas are refined into inputs for chemicals and plastics. Across the region, supply is disrupted. Key inputs like naphtha and LPG are in short supply. Producers in Korea, Japan, and Taiwan are scrambling — deciding how hard to run plants, how long inventory will last, and prioritising customers who can pay higher prices.

Planning has become extremely difficult. Running plants too low is inefficient and costly; running them too high, burns through feedstock too fast. Both carry risks, including equipment damage. So, it’s constant trade-offs, every day.

Energy exposure varies significantly by country and needs to be assessed…

We are going country by country to understand how much energy is coming from the Middle East or elsewhere. Our team has been doing a deep dive to educate ourselves. Our Vietnam country head said energy costs rose by 50% in February due to energy shortages. Hydro and coal are the main energy sources; gas accounts for only 10%. While Malaysia is more stable.

High fuel costs limit the mobility of employees and goods.

So many Asian countries are energy dependent and people can’t afford the high prices. This makes it hard for employees in outsourced business functions, such as HR or finance, to get to work when fuel costs are so high. In Sri Lanka, companies are letting employees work from home or arranging busing to get them to the office.

We are absorbing material costs for now, but logistics costs have gone through the roof. At the end of the day, we must deliver the P&L. We are discussing price increases with customers.

Air freight has become an expensive stopgap for some.

I advise a British company with a large factory in Dubai that supplies India and parts of the Middle East. We are using air freight from the UK to keep supplying our Indian customers while Middle East sales are down by 50%. But thankfully, customers in the Gulf are still discussing future orders, so there is still a pipeline.

China’s energy mix offers a temporary buffer.

We have huge supply chain issues in India. Our powder-coat facilities require large amounts of gas to bake the paint. We are considering temporarily switching production back to China to avoid disrupting the customer experience, but this will have significant import tax implications. We are eating all the costs for now, but I don’t know how long we can do that for.

Coal-based chemical production has kept running in China…despite the push towards renewables.

Energy is where China stands out. There was a lot of talk about China moving away from coal toward solar, wind, and hydrogen. But in the chemical industry, China maintained coal-based production. Coal prices have barely moved, and coal-to-chemicals is running very well. China’s oil demand was expected to decline as EVs and renewables grew, yet it continued to stockpile oil. Looking back, their strategy is vindicated.

What’s next: keeping an eye on other vital maritime chokepoints.

• Members raised concerns about the Taiwan Strait, the Panama Canal, and the Suez Canal.
• Panama has taken steps affecting CK Hutchison’s port concessions, further straining relations with China. While in Egypt, China has invested substantially in the Suez Canal.

Ships are avoiding the Suez Canal because of higher insurance premiums and other risks. They are going around the southern tip of Africa, causing delays of 10 to 18 days for shipments to Southeast Asia coming from Europe and the US East Coast. We are also aware of the strategic presence of Chinese investment in that part of the world and in the Panama Canal, which creates some uncertainty.

Bottom line: The Strait of Hormuz disruption is still working its way through the system, and the impact is uneven.

• But as buffers erode, more sectors are likely to face the same trade-offs caused by price volatility and availability risk.

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Silver Linings and Safe Havens

 

What’s new: Cancelled flights to the Middle East (and more recently China), along with rising fuel costs, are disrupting long-haul travel and compressing airline margins.

 

• On the ground, however, more than one Asia CEO shared their experiences of packed regional hubs.

There are media reports that taxis stopped running to the Bangkok airport because of fuel prices but that seems overstated. I was just in Bangkok, the airport was jam-packed, same as when I returned to Terminal 2 in Singapore. Both were busier than I have seen them in a long time.’

Why it matters: Asian tourists and students may be staying and spending closer to home. A silver lining, perhaps.

• Demand appears to be shifting toward intra-Asia routes — benefiting regional tourism players and education hubs positioned as ‘safer’ alternatives to long-haul destinations.

Southeast Asia will likely benefit from a hospitality point of view because of the geopolitical situation around the world. Some are calling this region a safe haven. People are thinking twice about flying to Europe.

For example, one hotel pivoted to capitalise on the mood for regional excursions.

Soon after the Iran war started, a hotel client GM pivoted to an inter-Asian tourism strategy. He realised that travelling to and from Europe would not work as before. His team acted rapidly and will stick with this plan until the (Iran) situation is resolved.

In fact, the growth of the region’s aircraft market is so strong that it is even outpacing China’s.

Southeast Asia is the fastest growing commercial aviation market in the world and is the fourth largest in terms of absolute size. This market is growing even faster than China’s, which surprises people.

At the same time, students seeking a Western-style education are looking to study on campuses located in Asia.

Geopolitical concerns are making it harder for students to travel or feel welcome abroad in some cases. We see a significant growth opportunity in the education buildings market, driven by large investments in universities and international schools, particularly across Southeast and North Asia. Private equity is even getting involved – they recently made an investment in Dulwich school.

The big shift: international education is becoming regional, with Western institutions exporting campuses, not just importing students.

• Australia is leading the way with investments in Malaysia, Indonesia and Vietnam.

Monash University recently announced a major expansion in Kuala Lumpur, including plans linked to the Tun Razak Exchange — a flagship commercial and financial hub. Embedding a university presence within a dense, mixed-use urban development is becoming more common.

In Indonesia, both Monash and RMIT University are developing campuses. Vietnam is also seeing increased activity from Australian and US institutions. We’re adapting our portfolio to support these education-led developments.

From safe havens to quiet havens. Meanwhile, in other news about what’s driving property demand, a different kind of ‘safe haven’ is emerging inside the office.

Open-plan offices were designed for collaboration, but noise and distraction are now a top complaint. Demand is rising for acoustic retrofits — from phone booths to quiet zones — to restore focus.

This trend sits alongside a growing acceptance of neurodiverse individuals in the workplace and the benefits of designing more inclusive environments.

The neurodiversity movement is reinforcing this shift in Asia, as companies design spaces that better support different cognitive and sensory needs. Government grants are supporting many investments.

(Note: neurodiversity refers to natural variations in how people think and respond to stimuli, such as those on the autism spectrum or with Attention Deficit Hyperactivity Disorder, ADHD.)

The through line? Across travel, education, and workplaces, a pattern is emerging:

• Volatility is pushing activity closer to home towards environments that feel predictable, controlled, and safe.

Interested in joining the discussions? Join IMA Asia to access our forums.

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Thank you for your time.

The IMA Asia Bulletin is a curated mix of brief, timely insights from our forums or monthly catch-ups with IMA members. Our sessions are convened under the Chatham House Rule, and quotes are edited for brevity and clarity.

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