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Houthi Attacks Cause 66% Drop in Suez Canal Traffic
Posted on September 19, 2024 |
The Suez Canal, one of the world's busiest shipping channels, saw an astonishing 66% drop, primarily due to security concerns. Several shipping firms have re-routed ships away from the Red Sea since September 5 in a bid to avoid attacks from Iran-backed Houthi militants, which have been targeting ships in the region and causing disruptions in international trade.
In this blog post, we'll delve a little deeper into the damage inflicted by these attacks on the Suez Canal, the overall economic impacts, and what the future holds for maritime shipping. Keep reading for more.
Ripple Effects of Disruption on Global Trade
The latest disruptions have forced shipping companies to reconfigure their services and reroute volumes to alternative routes, thus placing intense pressure on global infrastructure. This has caused acute port congestion, delays, and the lack of necessary capacity and equipment. Danish shipping giant A.P. Moller-Maersk had already warned in July that rerouting vessels around Africa would severely impact its entire global network.
The diversion of traffic from the Red Sea is now causing bottlenecks at key transhipment hubs, affecting trade with regions like Far East Asia, West Central Asia, and Europe. But because the time it takes to resolve these disruptions and return to "normalcy" is uncertain, that makes things even more complicated in the global shipping landscape.
Houthis' Attacks Disrupt Shipping, Pose Environmental Threats
Since November 2023, the Houthis, aligned with Hamas in Gaza, have launched a series of attacks on commercial vessels in and around the Red Sea, greatly disrupting global trade. An escalation occurred when Iran-backed rebels attacked two oil tankers transiting the region, spiking fears of an environmental disaster. The U.S. Central Command (CENTCOM) confirmed that one of the affected ships is the Saudi-flagged MV Amjad, reportedly carrying around 2 million barrels of crude oil.
It was preceded on August 21 by a second attack, in which the Greek-flagged oil tanker MV Delta Sounion, carrying 1 million barrels of oil, was disabled and left anchored off the coast between Yemen and Eritrea. Fires from the attack were still burning as of early September. Both represent a grave threat of catastrophic oil spills, with the Delta Sounion, according to a State Department warning, could spill a volume four times larger than the Exxon Valdez disaster.
Strategic Importance of the Red Sea Trade Hub
The Red Sea is an important artery of world trade, as some 12% of all commerce — approximately $1 trillion worth of goods annually—passes through the Suez Canal, located at its northwestern edge. In the wake of several weeks of mounting Houthi attacks against commercial ships, on December 18, Defense Secretary Lloyd Austin announced the start of Operation Prosperity Guardian. This operation aims to ensure freedom of navigation in the Red Sea, Gulf of Aden, and Bab el-Mandeb Strait, which are the world's vital sea lanes.
The scale of the disruption is vast. In January, it was reported by the White House that Houthi attacks on shipping had affected more than 50 countries, marking a possible threat to one of the world's busiest trade corridors.
Conclusion: The Wider Impact
The economic cost of the Houthi attacks on the Red Sea and Suez Canal has been heavy, with container shipping through the region having fallen by virtually 90%, according to the April report of the Defense Intelligence Agency. Shipping firms, rerouted to navigate around Africa, are experiencing increased time and prices, a double-edged strain on supply chains already under stress from drought-related issues in the Panama Canal. These cumulative challenges are driving up shipping costs and bringing uncertainty to industries - hence putting the long-term need into strong relief: for international cooperation to reestablish stability and secure these critical waterways.
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