The disruption of shipping routes through the Red Sea and the subsequent rerouting of vessels around Africa led to a temporary inflation of demand on the Asia-Europe trade lane. This analysis indicates a potential substantial demand correction upon the resumption of Suez Canal transits, according to Sea Intelligence.
The rerouting of vessels added 7-14 days to Asia-Europe supply chain transit times. This extension effectively increased shipper inventories, as cargo in transit became part of their inventory holdings.
In 2024, Asia-Europe trade demand grew by 8.5%. Adjusting for the 7-14 day inventory increase, the actual demand growth is estimated between 4.5% and 6.5%. This implies a demand growth boost of 2-4 percentage points (PP) due to the extended transit times. Assuming an average supply chain lengthening of 10 days, the demand growth boost equates to 2.9 PP.
Upon the return to Suez Canal routing, the supply chain will contract, releasing the excess inventory. This is expected to lead to a temporary reduction in importer orders. The symmetrical effect suggests a potential -2.9 PP impact on Asia-Europe demand growth in the year following the Suez Canal reopening. However, the contraction is likely to occur over a shorter timeframe, potentially intensifying the impact.
Modeling scenarios from a 2-week to a 12-week transition period demonstrates significant volatility. A 2-week contraction could result in a 70 PP year-over-year volume drop, while a 12-week transition would still lead to a reduction of over 10 PP in Asia-Europe year-over-year growth.
Sea Intelligence is a maritime data and analysis firm that provides insights into the container shipping industry, specializing in market analysis, forecasting, and operational performance.
The Suez Canal is a critical shipping route connecting the Mediterranean Sea to the Red Sea, facilitating trade between Europe and Asia.