Red Sea Trade Declines as Middle East Conflict Disrupts Shipping Routes

Trade in the Red Sea, once accounting for 10 percent 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, reports Bernama.

Red Sea Trade

Israel’s attacks on Gaza, launched on Oct 7, 2023, killed nearly 42,000 and injured almost 100,000 people. The Iranian-backed political organization 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. The Anadolu Agency reported that these attacks intensified in December last year.

The vast majority of commercial vessels that previously used the Red Sea and the Bab-el-Mandeb Strait have rerouted and have 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 percent 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 percent over the same period, while the vessel traffic for liquefied natural gas (LNG) fell 87 percent dry breakbulk 54 percent and mixed dry cargo 37 percent

Meanwhile, vessel traffic of liquefied petrol gas (LPG) dropped 74 percent, roll-on/roll-off vessels 78 percent, and wet bulk cargo 41 percent, 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 ppercentin a year, and container ship transits surged 420 ppercent

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

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

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 ppercentin 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 percent compared to the prices in December last year, and above 146 percent 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 percent of the global trade volume.

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 ppercentof its trade volume passes through the canal.

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 analyst 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 of the destinations of trade flow, they resulted in longer voyages for tankers.

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