Asia’s economies are intimately linked to global maritime trade. Cargo vessels sailing from the ports of Northeast Asia’s export giants supply the consumers of North America and Europe, while much of Asia’s energy and natural resources arrive by sea. According to the UNCTAD, over 40% of global seaborne exports are loaded in Asia, while the region accounts for around 60% of all imports. Yet despite the huge value of maritime trade, the smooth and timely flow of goods remains dependent on a small number of narrow, highly congested and strategically vulnerable pinch points, most notably the Suez and Panama canals and straits such as Hormuz and Malacca.
The grounding of the 400-metre, 224,000-tonne Ever Given cargo vessel in the Suez Canal last Tuesday inevitably sparked concern across the global economy and, while the vessel is now afloat and traffic has resumed, will have once again reminded Asian countries of the risks such trade arteries continue to present. With the canal’s west-bound daily traffic valued at over US$5 billion, and east-bound at around US$4.5 billion, the numbers speak for themselves. But how has the blockage impacted energy supplies into Asia? Will there be wider economic fallout? And what might this mean for alternative transport routes in the future? To understand more I spoke with WoodMac analysts across our economics and commodities teams in APAC.
The economic impact on Asia and potential upside for rail
The immediate impact of the blockage at Suez will be felt more by China and India than by ASEAN countries and Japan. Trade with Europe accounts for 20% and 17% of the total trade volume of China and India respectively. At the same time trade with Europe accounts for only around 10% of the total trade of ASEAN counties and Japan.
Even with the Ever Given now afloat, the blockage lasted for almost a week and will take at least another week to clear the backlog, resulting in the loss of around two weeks on delivery schedules. This poses a risk to supply chains given that this time period is close to the inventory days for some manufacturers and will have a ripple effect on many others. I expect to see this reflected in trade data for April and May and it could lead to a lower than expected Q2 GDP for some Asia countries.
The blockage will have the greatest impact on industrial goods and consumer products between Europe and Asia. Exports from Asian countries are mostly upstream of the global supply chain, supporting numerous manufacturing sectors in Europe. This risks disruption and potentially reduced output across these sectors, including automobile manufacturing in Europe…
