Red Sea Trade Sees Historic Decline Amid Rising Tensions In Middle East

LONDON, Oct 7 (Bernama-Anadolu) -- Trade in the Red Sea, once accounting for 10 per cent of all global maritime trade, has seen a historic decline with the rising tensions in the Middle East caused by Israel’s uninterrupted attacks on Gaza, which has reached its first anniversary.

Israel’s attacks on Gaza, launched on Oct 7, 2023, killed nearly 42,000 and injured nearly 100,000 people. The Iranian-backed political organisation named the Houthis in Yemen launched attacks in retaliation on commercial vessels allegedly linked to Israel in the Red Sea and the Bab-el-Mandeb Strait. These attacks intensified in December last year, Anadolu Agency reported.

The vast majority of commercial vessels that previously used the Red Sea and the Bab-el-Mandeb Strait have rerouted and since been sailing around the Cape of Good Hope, the southernmost point of Africa, for about a year now.

Total vessel transits in the Red Sea fell 56 per cent year-on-year as of September, according to data from the ship tracking and maritime analytics provider MarineTraffic.

Container traffic took the biggest hit with a decline of 73 per cent over the same period, while the vessel traffic for liquefied natural gas (LNG) fell 87 per cent, dry breakbulk 54 per cent, and mixed dry cargo 37 per cent.

Meanwhile, vessel traffic of liquefied petrol gas (LPG) dropped 74 per cent, roll-on/roll-off vessels 78 per cent, and wet bulk cargo 41 per cent, according to the report.

In February and March this year, no LNG ships passed through the Red Sea due to escalated attacks.

Around the Cape of Good Hope, ship traffic rose 76 per cent in a year, and container ship transits surged 420 per cent.

Over the same period, mixed dry cargo vessel traffic gained 157 per cent, while the vessel traffic of dry breakbulk climbed 38 per cent, and the LNG vessel traffic jumped 400 per cent.

LPG vessel traffic increased 138 per cent, while the traffic of roll-on/roll-off vessels surged 350 per cent, and wet bulk cargo vessels 77.5 per cent.

Despite the longer travel times around the Cape of Good Hope, at approximately 10 to 12 days longer, ship traffic rapidly increased around the southernmost point of Africa due to the attacks in the Red Sea.

The increase in delivery durations and travel costs influenced freight rates, which began to rise rapidly in December 2023, according to the maritime research firm Drewry’s World Container Index (WCI).

The index rose 268 per cent in seven months, reaching US$6,000 per 40ft container in July, though this figure eased by the end of July as shippers adjusted delivery schedules around the Cape of Good Hope.

The previous week, the index stood at US$3,489 per 40ft container, up 116 per cent compared to the prices in December last year, and above 146 per cent the average of the pre-pandemic period.

Jan Hoffmann, head of trade logistics at the UN Trade and Development, told Anadolu that the attacks on commercial ships in the Red Sea revealed the critical importance of maritime trade, which accounts for 80 per cent of the global trade volume.

“The Suez Canal, a vital artery for global trade, has seen ships divert around the Cape of Good Hope following attacks in the Red Sea - this significantly increases travel distances,” he said.

“An oil tanker going from the port of Ras Tanura in Saudi Arabia to Rotterdam must travel 74 per cent further than normal, while a container shipped from Singapore to the same Dutch port requires a 42 per cent longer journey,” he added.

Hoffmann stated that maritime trade and foreign trade of some countries highly depend on the Suez Canal.

He noted that one of such countries is Sudan, as 34 per cent of its trade volume passes through the canal.

“That figure (of reliance on the Suez Canal) is 31 per cent for Djibouti, 15 per cent for Kenya and 10 per cent for Tanzania. By comparison, although more important in absolute terms, only 7 per cent of Germany’s foreign trade volume is channeled through the Suez Canal,” said Hoffmann.

Hoffmann added that commodities like oil and grain require longer shipping distances to be covered due to tensions in the Red Sea following the war in Ukraine and the capacity reduction in the Panama Canal, further worsening maritime trade and leading to price hikes in freight rates.

Ioannis Papadimitriou, lead freight analysts at Vortexa, told Anadolu that Israeli attacks on Gaza and the retaliatory attacks by the Houthis have “left their mark” on the tanker market.

He noted that although these developments did not bring about significant changes to the origins or the destinations of trade flow, they resulted in longer voyages for tankers.

“Tanker operators chose to travel longer distances from the Pacific to the Atlantic Basin via the Cape of Good Hope instead of the Suez Canal, in fear of missile strikes which in turn increased shipping requirements; as a result, tanker freight rates rose significantly,” he said.

Papadimitriou mentioned that freight rates for tankers carrying diesel from the Middle East to Europe rose 60 per cent on average between last year and this year.

“What is obvious for now is that, since the start of the attack, tanker operators have consistently preferred these longer distances, with tanker transits via the Suez Canal remaining at historical lows, hence there is not currently any indication for the opposite; however, through time, shipping has shown a flexibility in adapting to changing trading patterns during geopolitical developments,” he said.

“As the stakeholders in the shipping industry are always striving to create the most efficient supply chains, in case of a cease-fire or a de-escalation of the current events, we could gradually see voyage distances receding to pre-Red Sea attack levels,” he added.

-- BERNAMA-ANADOLU AGENCY