26-1-2024 (NEW YORK) Commercial traffic passing through the Suez Canal has witnessed a significant decline of more than 40 per cent in the last two months following attacks by Yemen’s Houthi rebels, as reported by the United Nations, sparking concerns for global trade.
The Houthis, backed by Iran, claim to target what they perceive as Israeli-linked commercial and military shipping in the region in solidarity with Palestinians in Gaza. Consequently, some cargo carriers are opting for longer and costlier routes to evade potential attacks.
Jan Hoffman, head of the UN Conference on Trade and Development (UNCTAD), expressed apprehension regarding the escalating tensions in global trade due to attacks on Red Sea shipping. He highlighted that the attacks exacerbate existing trade disruptions resulting from geopolitics and climate change.
Data from UNCTAD reveals that ships rerouting from the Red Sea, circumventing around South Africa’s Cape of Good Hope, have led to a substantial 42 per cent reduction in transit through the Suez Canal over the past two months. The Suez Canal, situated in Egypt, serves as a crucial link between the Mediterranean Sea and the Red Sea.
Mr Hoffman underscored the pivotal role of maritime transport, emphasizing that over 80 per cent of international goods trade depends on sea routes. Notably, the number of weekly container ship transits through the Suez has plummeted by 67 per cent year-on-year, affecting more than 20 per cent of the world’s container trade.
The decline in container carrying capacity is particularly pronounced as larger container ships predominantly divert from the Suez Canal. Tanker traffic has decreased by 18 per cent, while bulk cargo ships transporting grain and coal experienced a 6 per cent decline. Gas transport has come to a standstill amidst the turmoil.
Approximately 12 to 15 per cent of world trade, equivalent to 20,000 ships annually, passes through the Red Sea, serving as a crucial link between Europe and Asia. This predicament is compounded by disruptions in other global maritime trade routes, notably the Black Sea following Russia’s invasion of Ukraine, and reduced water levels in the Panama Canal due to a drought in Central America.
UNCTAD cautioned that prolonged disruptions in major trade routes could severely impact global supply chains, resulting in delayed deliveries, increased costs, and potential inflation, further highlighting the fragility of the global trade landscape.
