Global trade hit an all-time high of $35 trillion, but volume-wise it’s a very different story. In the past, world wars changed the trajectory of routes. Will fractured trade routes or world order fundamentally alter the course of the logistics business?
We’re just coming off an era of globalisation where trade barriers fell and there was free flow of money. That was what it was fundamentally based upon. And, hence, you had concepts such as just-in-time, and you could do a zero-cost finance world. Since Covid, things have started to change.
Everything has got weaponised. The financial system got weaponised. The key ingredients, products, and inputs got weaponised. If I had chips, I wouldn’t give them to anybody. If I had some other raw material, I would not provide it to somebody.
All this, unfortunately, reflects a thought process of not strong leadership, but weak leadership. What you’re seeing today is a result of all these things. So, now suddenly everybody’s weaponising everything they’ve got. So, Hormuz is also gone, Bab al-Mandab is also gone. God knows what’s next.
Prime Minister Narendra Modi said something so apt recently when spoke of “power to empower.” He has repeatedly kept saying: “If India does well, the world will do well.” He’s proven it through Covid by the vaccine support India gave to the world. Every time there’s a disaster, India will do whatever it can, and they’re not asking for anything. So, in critical areas, India has gone ahead and supported and shared. No leverage, but shared. This is what the powers failed to do.
The old-world order has gone. It is disorder and chaos. Those who had the trust have lost it. But no one else has won it yet.
So, what is going to happen?
Globalisation, per se, was fantastic. The amount of wealth that got generated was massive. It was good, but was not inclusive, as it turns out. Wealth accretion has been massive, but it created distortion in terms of who owns the wealth. And the impact of that is, as you go around the world, it does not matter whether you are developed, developing or undeveloped, you are seeing a political move to the extreme right. That’s a reflection of the truth.
So, I think forces will work towards a more inclusive new global order. The question is: will it happen tomorrow? One can only hope that better sense prevails and the world is endowed with leadership to accept reality on the ground and come to a resolution which is ultimately more inclusive, for it to be sustainable.
Before a new world order emerges, how does DP World position yourself? Logistics is the most crucial, integrated part of a business. In an era of globalisation, you thought of having a complete, unified platform approach, a hub-and-spoke model. But given the present circumstances are you happy with DP World’s current construct?
Thank God for our construct. We are hugely diversified. Shifts, no matter where they happen, will go from one place to another. Who is that “another”? I’m there. I operate in 80 countries. My model is to connect every country from within and then connect the businesses in that country to the rest of the world.
In this era where everyone will want to build resilient supply chains, there are two or three things that are evident. One, is there a cost to redundancy, or resilience. If you go back over the past two years and look at what every shipping company CEO said at the end of each quarter was, “the next quarter will be the best. There is too much capacity coming on the water,” and so forth. What is the reality? Freight rates are 5x, 10x. That means all that extra capacity of 30-40% has been used. So, in a new emerging supply chain, one will need 40% more capacity to deal with the same curve.
And this is going to happen at a time when costs are going to go sharply northwards. You're no longer in a zero-interest-rate game. So, what took me to create something for a billion will need half a billion more. If in the past I was paying 2%, I’m now paying 8%. So, who do you think pays for this? This will be paid for by the end users. You and me, out of our home budgets.
Before end users get squeezed, how do the firms running the show find a middle ground when you’re in an expansionary mode with leverage? You have to ensure a certain level of ROCE, and you have a stated target of where you want that number to be. But the glide path to it becomes much more challenging. In a zero-interest-rate game, investors had a certain idea of what the return on equity should be. What do you think it’s going to be now?
I think everybody will have to rethink. Money was also weaponised. Zero interest rate, but equity returns should be 15%. Why? Who’s determining this? This is where power was irresponsible.
Because investors understood that it [interest rate] is not 0%. The ask was 15%, because they expected rates to go up at some point in time.
No, it was zero because they were just printing money and wasting it or not doing productive things with it. So, it’s irresponsible. What can I say? The world was in an okay place.
So, how do you recalibrate today?
This is recalibration. The question in front of everybody is: how do I survive, given chaos is likely to last, if we are lucky, five years.
What would you need to do to survive in an era of chaos?
Just-in-time as a concept is history. Now one has to assume that things will not work, and that there will be some form of disruption. If I was keeping seven days of inventory, I need to keep 70 days. That costs money, that costs working capital, and working capital is 3-4x more expensive. So, every solution has a cost to it. When we were in a world order that was functioning, everyone kept looking for efficiency, efficiency, efficiency. Now there is no order, efficiency goes out. Now it is just survival, or doing your business under very different circumstances where you’re factoring in disruption.
When the cost of capital changes, as a CEO running a huge business with operations in 80 countries, you have to pick and choose which part you want to focus on to ensure sustained, steady margins. Like the shift from ports to terminals…
See, that is a question asked by investors. The first thing is: you have to have a business. Margins come later. Every business is customer-facing. See what your customers will be doing, because at the end you are servicing their needs. It depends on what the customer can recover. My customers are all owners of cargo. What is it that they can recover? Price accordingly, and accordingly they will price. Their operating model will undergo that change. I no longer need only one supply source, I need four supply sources. That is going to drive how I think about my business. So, I am very diversified as a company, which puts me in an amazing situation. It doesn’t matter where it changes. I will play.
But in a decentralised and chaotic world, will the capital allocation decision lie with you, or would you leave it to the regional heads? Because what you see as a leader will be fundamentally different from the noise that comes from an India portfolio or a Middle East portfolio?
Our leadership is trained to think: what is your customer going to do? We do not work in silos, we are not 80 companies, we’re one company. So, what is DP World’s operating model? We have data. That is common. 11% of world trade goes through my facilities. You can imagine the kind of data I have. So, this is a common data platform. On top of the data platform, I have operating units. Ports are different from shipping, which is different from dry docks, which is different from logistics. And logistics, in itself, has freight forwarding, contract logistics, freight management, and so forth. These are different operating models. And at the top, I am one DP World. From a customer perspective, they face one DP World. It doesn’t matter which region. So, there are local businesses, global businesses and regional businesses. Global businesses are dealt with at a global level, regional businesses at a regional level, and local businesses at a local level.
For us, I don’t have any issues around access to capital. In fact, just three months ago I raised about $1.5 billion. And I borrowed at a time when, between then and now, rates are already almost 75 bps higher. So, what is going to be important is access, whether that remains. Access will remain because of the strength of our business.
And who’s to say that 11% is a good number, or 12% is a good number, or 8%? Is 9% over ten years better than 12% over three years and 3% after that?
But with fractured trade routes, the Middle East remains core to what DP World is, and that itself is in the eye of the storm.
See, “core” means it is a large facility. It is a large facility not just for DP World, but for the world, in some sense. Let me give you an example of the impact. For ten months of 2026, we have done various things. We’ve done alternatives, worked through Jeddah, through Khor Fakkan, through Fujairah. We’re down to 10%. So, if I was making $1.2 billion in EBITDA out of that facility, I will make $120 [million], $100 [million]. So, I should have lost $1.1 billion. In 2025, I ended with an EBITDA of $6.4 billion. You know what I’m going to earn in 2026? $6 billion. Yes, I hate the fact that I’m down by $400 million, but I will make it up this year again. That is a sign of a resilient business, and it emerges out of diversification.
So, the impact of Jebel Ali on DP World is a billion. But let me tell you, the impact of Jebel Ali on the supply chain is a trillion. It’s not a global surprise, because all the connectivity came from Jebel Ali. So, you’ve taken this massive piece of logistical support, right in the middle of the world, in the middle of the East-West trade route, out of the equation. I’m not even talking about oil. So, I believe everybody who is in power today better find a quick solution.
When the inherent model itself is broken and, as you say, trust is in deficit, solutions will not come easily. In that uncertain world, as a CEO, how do you insulate yourself?
This is what we are prepared for. We become even more important than we used to be in a world that was functioning. In a perfectly functioning world, marginal players survive. All the marginal players are now gone. So, whenever there is disruption and chaos, those who are sitting on infrastructure assets will make money. Very good money. But we must be careful that there is no abuse.
In a perfect world, everyone thrived because everyone had that opportunity. Are you seeing pain points emerging? Will it be a pan-global story where marginal logistics players get further marginalised or finished?
Those providing services, nothing will happen and those paying for the service must have businesses where they can pass on these costs. The final product must be able to pass costs on to consumers. Otherwise, they will have issues.
I think wasteful expenditure will get wiped out. It will become too expensive. Essential expenditure will increase, but the cost will go up. Essential expenditure just to keep the business running.
And that will not come cheap for customers.
How price-inelastic is your product? That’s not going to be an easy answer for everyone. And it will depend on size. If you are a small marginal player, you cannot… As I said, the test is going to be product price elasticity. If someone wants steel and there’s no way to get it, they’ll pay whatever it takes. But if that steel is going into a car that nobody’s prepared to buy, then what?
What, according to you, would be the new normal?
The new normal will be people will deal with chaos. The world will deal with a broken order. These are the kinds of things we will be thinking about until the new order emerges.
Now, whenever there is a vacuum, by definition, there is space. Today you already have a situation where the world is dealing with each other on a bilateral basis. There is no mighty economy. Everyone has got their own game plan. Everyone is dealing in their own settlement currencies. So, power has been lost already. What are you going to weaponise now? So that ability to weaponise will keep declining. And these are the things to watch. Look at global sovereign reserves in US dollars three years ago and today. It can tell you a story. The strongest currency in the world: ever since I was born, they have run a deficit year on year on year.
If everything is bilateral right now. Where do you see an emerging market like India positioned, and how bullish are you on this economy?
India today has a market. India is the fastest-growing big economy in the world. India has favourable demographics. The Indian education system must be good, given that you have so many Indian-educated people in responsible positions globally. We have an abundance of talent. Our issue is around pace. Today, India is sitting at a cusp. The world wants to be here. Do you have a large enough gate to let all that come in? Big heart. That’s a fundamentally bigger challenge for India: how big is your gate to let everyone come in? I don’t think you can talk to anybody here who doesn’t want to be in India. They want to expand in India. They want to grow in India. Then what’s the problem?
Does that mean the China story is over?
Not at all. That’s a big mistake. I’ve just visited China. I didn’t go to China for 20 years because they just did not treat investors well. The world cannot afford not to build the future. That’s very clear.
US power and influence will decline from what it was. It was the only power. It was absolute, but that doesn’t mean it’s going to get wiped away. They will remain a very powerful country, and a very large economy. But so will China.
For me, when I look at it, China has lost a huge opportunity because they did not invest enough to win the trust. Otherwise, it would have been automatic. Because they also weaponised, when it came to key ingredients for pharma and other stuff. So, weapons were used against them, but they also used them. Someone had the trust and lost it to weaponisation.
Therein lies the space. Who’s going to grab it? I don’t think there is a single country that will grab it.