The Suez Canal is a fast channel for ocean cargo transportation between Asia and Europe which can save fuel costs and shorten transit time between the two regions. The incident in which the Ever Given, a huge cargo ship, ran aground on the Suez Canal causing a channel blockage will have a serious impact on global trade, even though the giant freighter has successfully been pulled from the mud and muck on the banks of the canal.
Europe is the main market of Thailand that requires transportation through the Suez Canal. Each year, the export of Thai goods to Europe is worth no less than USD 20 billion, accounting for about 9% of Thailand's total export value. The European market is Thailand's fourth largest export market, after the United States, China and Japan. The value of Thailand’s merchandise exports to the European market is approximately USD 1.5-2.0 billion per month. The types of commodities that Thailand exports to Europe through the world’s major trade route are as follows:
- Fresh foods that are sensitive to transit time: only processed chicken products that are transported by freezing and refrigeration. Such commodities rely heavily on the European market, with a monthly export value of approximately USD 50 million, accounting for 30% of Thailand’s total export value of processed chicken products, but only 2.6% of Thailand’s total export value to Europe.
- Durable goods account for no less than 40% of Thailand’s exports to Europe, because Europe is a market with strong purchasing power. Some of Thailand's export luxury goods rely on the European market to a considerable extent. In particular, air conditioners rely on the European market at 20% of all luxury goods exports, automobiles and parts at 5.2%, motorcycles at 31%, jewelry at 7%, clothing at 22%, and pet food at 14%.
- Thailand's intermediate products connected to the European production chain, such as HDDs, rely on the European market at 15%, integrated circuits at 14%, and printed circuit boards at 17%. But if compared with other Asian countries, it can be said that Thailand has a closer relationship with Asian production chains than with European production chains.
At the same time, the Suez Canal is also the only way for Thailand to import goods from Europe. Thailand’s imports from Europe account for 8.4% of Thailand’s total imports. The main imported goods relying heavily on Europe include: machinery and equipment, which rely on Europe at 17%, chemical products at 10%, motors at 7%, auto parts at 10%, passenger cars at 27% and medical products at 44%.
In summary, KResearch believes that although the Suez Canal blockage incident will increase the daily cost by USD 10 billion, preliminary signals indicate that the cargo ship has completely moved and will resume sailing soon; therefore, this will have a limited impact on the trade between Thailand and Europe, but it will also make the government aware that the European market plays an important role in stimulating Thailand’s exports. KResearch maintains its forecasts that Thailand’s total exports to the EU (the United Kingdom is not a member) will grow by 4.3% and its imports from the EU will grow by 4.0%.
Although the blockage of the Suez Canal has been resolved, it is still necessary to track the container shortage caused by the imbalance of regional trade. This problem has not been resolved so far, and will continue to affect transportation costs. In addition, the spread of the COVID-19 epidemic in the EU must be closely followed as it has led to a third lockdown, although the EU’s population vaccination rate has reached 15%. The various above-mentioned factors will affect the direction of Thailand's exports to Europe.
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