The current situation with Houthi attacks on the Suez Canal shipping traffic is the second occasion within a period of only three years that shipping traffic has been interrupted severely. In March 2021, the cargo ship – Ever Given, an Ultra Large Container Vessel operated by Taiwanese container line Evergreen, ran aground and blocked the canal traffic for about a week.
The event caused significant delays and disruptions in the global supply chain and blocked an estimated USD 9.6 billion in global trade each day.
But the current pirate attack situation is causing a massive blockage in the Red Sea is likely to be much more prolonged, with countries such as Egypt seeing massive income deficits monthly and should the conflict continue for months, this is likely to see a direct impact across the global economy, with food security and supply chain disruptions driving up prices and could potentially even result in regional conflict across the Middle East.
The situation is very fluid with no certainty around a resolution being formulated with big political impact and a challenging situation not likely to be resolved easily.
The impact across Africa affects some areas more than others with North Africa essentiall having their shipping routes cutoff, as with Europe, and with shipping companies having to re-route cargo around Southern Africa at enourmous additional costs.
Impact from this is that there are more demands for refueling along the Southern African ports, that will be welcome additional income but can also create fuel shortages.
The other major impact is the additional costs impact product prices and can destroy competitive pricing and drive Europen markets to look elsewhere for product supplies.
Timing is a Critical Factor
The Sea freight industry had been through a year-long period of stagnation in 2024 but saw un upsurge in the last quarter with global freight volumes seeing a 5.3% YoY growth in November 2024, with Asia-Europe routes up 8% and Asia-North America up 15%, setting a high base for Q1 2025.
Based on annual forecasts and historical Q1 trends, global sea freight volume growth in Q1 2025 is estimated to be in the range of 3–4% YoY, with containerized trade (measured in TEUs) likely closer to 3%, as noted by industry experts like Joshua C. Bowen from CEVA Logistics.
More recently the trade war between the US and China in particular had added an additional dimension of concern and challenge for the shipping industry with potential shipping routes having to reroute and falling demand out of China also a potential challenge that may require more freight to be routed to Europe.
Vessels Rerouting Resulting in Delays
A major issue for global freight companies is that the Red Sea links to the Suez Canal – a key shipping route for global trade. While the Houthis initially stated they would target any ship travelling to Israel, the actual destination of the vessels attacked remains unclear.
Shipping freight vessels now need to add an additional 3,500 nautical miles – or 8.5 days – to avoid the conflict zone around the Red Sea and Suez Canal. The forced change in vessel routes has led ocean carriers to apply additional surcharges.
Major shipping companies have not universally suspended operations through the Red Sea and Suez Canal, but many continue to avoid or limit transits due to persistent Houthi attacks and heightened security risks in the Bab el-Mandeb Strait. As such the Suez Canal remains operational, with the Suez Canal Authority reporting normal navigation but acknowledging vastly reduced traffic.
In the first two months of 2024, Suez Canal trade volume dropped by 50% year-over-year, and by May 2024, cargo volume was down 68.5% (44.9 million tonnes vs. 142.9 million tonnes in May 2023).
Recent X posts suggest ongoing disruptions, with one claiming the Suez Canal is “at a standstill” and container traffic down by 75% or more.
Way Forward Uncertain
The U.S. has conducted ongoing military strikes against the Houthi militant groups but have not fully deterred ongoing Houthi attacks, with shipping through the Bab el-Mandeb Strait down 50% and Suez Canal container traffic reduced by 75–80% from pre-crisis levels. By February 2025, only 200 cargo ships transited the strait monthly, compared to 2,068 in November 2023.
The ongoing crisis in the Red Sea and Suez Canal area represents one of the most challenging periods in recent years for the container shipping industry with ocean carriers’ services and networks remaining extremely volatile and prone to rapid changes.
These challenges to Shipping lanes will see ongoing shifts of routes and further price impact on shipped products for the foreseeable future.
