In 2024, demand in Asia-Europe grew by 8.5%. However, when transit times and, hence, inventory increases of 7-14 days are taken into account, Asia-Europe growth drops to 4.5%- 6.5% (depending on the lengthening of the supply chain between 7-14 days).
Murphy said this means that the Asia-Europe trade saw a demand growth boost of 2-4 percentage points (PP) purely due to the increased transit times.
"If we reasonably average the supply chain lengthening to 10 days, then the demand growth boost on Asia-Europe equates to 2.9 PP."
"When vessels revert to the Suez routing, the supply chain will contract by the same amount as it expanded in 2024," he added, noting that the excess inventory held in the longer supply chain will be released and, for a temporary period, importers will curb ordering to mitigate this sudden excess inventory.
"Of course, the effect on an annual basis is symmetrical; hence, in the year following an opening of the Suez Canal, we should expect a negative -2.9 PP impact on the Asia-Europe demand growth."
"However, the contraction of the supply chain is likely to play out over a much shorter timeframe than a full year, potentially increasing its severity," the Sea-Intelligence chief further said.
The new analysis noted that the timeline remains unclear.
"We do not know how quick this process will be and have therefore modeled a range of scenarios ranging from 2 weeks (unrealistically fast) to 12 weeks," Murphy said.
[This is shown in Figure 1.]
"In the case of the unrealistic 2-week contraction, we see how the volume drops by 70 percentage points Y/Y – an event even more extreme than the usual lull after Chinese New Year," Murphy said.
"Even at a 12-week transition period, this still leads to a reduction in Asia-Europe Y/Y growth by more than 10 percentage points over the full 12 weeks," he added.
