Suez Canal Traffic: Revenue Drops Sharply Amid Red Sea Attacks

18th June 2024

Report : Suez Canal traffic slumps as Red Sea attacks hit revenue.

Egypt’s Suez Canal, a vital artery of global trade, has seen its revenue plummet by nearly half in recent months due to a crisis in the Red Sea. The culprit? A series of attacks on shipping vessels launched by Yemen’s Houthi rebels. The attacks, which began in solidarity with Palestinians in Gaza, have spooked major shipping companies, causing them to divert their vessels away from the Red Sea and opt for the longer, but safer, route around Africa’s Cape of Good Hope.

The impact on the Suez Canal Authority (SCA) has been substantial. According to SCA chief Osama Rabie, January 2024 saw a staggering 64.3% drop in revenue compared to the same period in 2023. This translates to a decline from $804 million to just $337.8 million. The number of ships navigating the canal has also fallen significantly, with May 2024 witnessing a 53% decrease compared to May 2023 (1,111 ships vs. 2,396 ships). This decline in traffic has further crippled the canal’s cargo volume, with a staggering 68.5% drop in cargo passing through the waterway in May 2024 compared to the previous year.

The crisis comes at a particularly inopportune time for Egypt. The record-breaking $9.4 billion earned by the canal in the 2022/2023 fiscal year was a significant source of national income and foreign currency. The current drop in revenue threatens to exacerbate Egypt’s existing economic woes, which include a plummeting currency and a growing economic crisis.

The Houthi attacks are believed to be a response to the Israeli-Palestinian conflict. The rebels have targeted commercial vessels in the Red Sea, raising concerns about the safety of maritime passage in the region. This has forced shipping companies to prioritize crew and cargo safety by rerouting their journeys. While the longer Cape of Good Hope route adds significant time and cost to voyages, it is currently seen as the safer option.

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The international community has responded to the crisis with concern. A 10-nation coalition, spearheaded by the US and including countries like Canada, France, Italy, and the UK, was formed in December 2023 to counter the Houthi threat. However, the attacks have yet to cease, leaving the situation in the Red Sea unresolved.

The SCA is actively seeking solutions. Rabie has emphasized the importance of international cooperation to ensure the security of Red Sea shipping lanes. The Authority is also reportedly considering offering discounts and incentives to shipping companies to entice them back to the canal route. However, the success of these measures hinges on a de-escalation of the conflict in the Red Sea.

Conclusion

The Red Sea crisis has thrown a wrench into the smooth operations of the Suez Canal, a linchpin of global trade. With revenue down by nearly half and shipping traffic dwindling, the economic impact on Egypt is significant. The international community’s role in resolving the underlying conflict in the Red Sea is crucial to restoring stability and ensuring the continued smooth flow of maritime traffic through this vital waterway.

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