"SINCE OPENING in 1869 the Suez Canal has transformed trade between Asia, Europe and the Middle East.
Last year around 24,000 vessels took the passage linking the Mediterranean and Red Seas, carrying 10% of the world's seaborne trade by volume.
But this critical waterway is under threat. The Houthis, a militant group based in Yemen, have fired dozens of drones and missiles at ships in the Red Sea, ostensibly in support of the Palestinians in Gaza. Their attacks have widened the scope of the conflict in the Middle East and threaten global trade.
Using data from MarineTraffic, which tracks and analyses ship movements, The Economist is able to visualise the disruption.
More than 200 container ships travelled through the Red Sea and the Suez Canal between January 4th and 11th last year. During the same week in 2024 only 122 dared to make the journey. Container firms accounting for 95% of the capacity that usually sail the Suez have suspended services in the area. A few energy firms, such as BP and Equinor, have also temporarily stopped using the canal.
This is the biggest disruption to shipping in the Red Sea in recent years. Data from the Kiel Institute, a German think-tank, show that the current volume of cargo is 66% lower than would have otherwise been expected, based on averages between 2017 and 2019. By January only 200,000 standard containers were passing through the waterway per day, compared with around 450,000 in December 2022—the lowest point of the pandemic.
Instead of sailing through the Red Sea, ships travelling between Asia and Europe are now being re-routed around Africa and the Cape of Good Hope. Last year only 51 ships were recorded making this journey in the week to January 11th; that figure more than tripled in the same period this year (see maps 3 and 4).
The longer route will add to shipping times. Sailing from Shanghai to Rotterdam, for example, takes an extra ten days when avoiding the Suez. These delays create a knock-on effect for the rest of the supply chain and lead to bottlenecks at berths and ports. The longer route also requires ships to burn more fuel. That will add to the carbon footprint of the notoriously dirty industry and push up prices.
According to the Freightos Baltic Index (FBX) the cost of shipping a standard container rose by 146% in the 30 days to January 17th. Drewry, a consultancy, notes that costs for the Shanghai to Rotterdam route jumped by 160% over a similar period.
These costs could once again put pressure on consumer prices. During the pandemic, the rise and fall in global inflation tracked the cost of shipping.The current spike, however, pales in comparison with the covid years: the FBX is still only at a quarter of the peak reached in 2022. And annual shipping contracts will typically not be decided until the end of this quarter, which allows time for the latest disruption to subside.
America and Britain have carried out sea and air attacks on Houthi targets in Yemen in an attempt to restore open passage. President Joe Biden has threatened further military action to protect what he called one of the world's most critical commercial routes. But the Houthis, backed by their sponsor Iran, have been hardened by years of war with Saudi Arabia and the United Arab Emirates. They will not quickly be subdued.” [1]
· · · 1. "Tracking ships in the Red Sea." The Economist, 18 Jan. 2024, p. NA.
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