The global maritime industry faces significant disruptions as freight passing through the Suez Canal has plummeted by 45% over the past two months, according to a recent report from the United Nations Conference on Trade and Development (UNCTAD). The decline follows attacks by Yemen’s Houthi rebels, prompting shipping groups to reroute cargo and exacerbating existing strains on maritime trading routes.
UNCTAD, an organization dedicated to supporting developing countries in global trade, highlighted the potential consequences of this downturn. They warned of heightened inflation, increased uncertainty regarding food security, and a rise in greenhouse gas emissions.
The attacks by the Houthi movement, aligned with Iran and controlling most populated parts of Yemen, have led shipping companies to divert vessels from the Red Sea. The Houthis claim their actions support Palestinians in Gaza and in response, the United States and Britain have conducted airstrikes against the group.
Jan Hoffmann, UNCTAD’s head of trade logistics, emphasized the widespread impact of these disruptions on global trade routes. With the Suez Canal now experiencing a significant decrease in traffic, along with disruptions in grain and oil flows due to Russia’s invasion of Ukraine and water shortages affecting the Panama Canal, the situation is undoubtedly dire. Hoffmann expressed grave concern, noting delays, increased costs, and higher greenhouse gas emissions as immediate consequences.
The decrease in traffic through the Suez Canal is stark, with 39% fewer ships transiting the canal compared to early December, resulting in a 45% decline in freight tonnage. Container shipments have been particularly hard hit, with an 82% decrease recorded in the week ending January 19 compared to early December figures. Similarly, LNG shipments have seen a substantial decline.
One of the repercussions of these disruptions is a significant increase in spot container rates, with a weekly rise of $500 observed. This affects not only shipments from Asia to Europe but also alternative routes to the U.S. West Coast, which have seen rates more than double. However, despite this increase, rates remain below peak levels seen during the COVID-19 pandemic.
Hoffmann also highlighted the potential impact on food prices, attributing about half of the recent increases to higher transport costs. However, he noted that consumers in developed countries may not immediately feel the effects, as it could take up to a year for the higher freight rates to trickle down to retail prices.
The global shipping industry now faces a challenging period characterized by uncertainty and disruption. As key trade routes experience significant declines in traffic, stakeholders must navigate higher costs, delays, and environmental concerns. The full extent of the impact on global trade and consumer prices remains to be seen, but urgent action may be needed to address the immediate challenges facing the maritime sector.