Trade in the Red Sea has plummeted dramatically, with a 56% drop in ship traffic as geopolitical tensions escalate in the Middle East. The ongoing conflict, particularly Israel’s military actions in Gaza, has forced vessels to reroute around the Cape of Good Hope, significantly impacting global maritime trade.
Key Takeaways
- Red Sea ship traffic has decreased by 56% year-on-year.
- Container traffic has fallen by 73%, while LNG vessel traffic has dropped by 87%.
- Rerouting around the Cape of Good Hope has increased shipping times by 10 to 12 days.
- Freight rates have surged, with the World Container Index rising 268% in seven months.
Overview of the Decline
The Red Sea, once a vital corridor for 10% of global maritime trade, is now witnessing a historic decline in activity. This downturn is primarily attributed to the ongoing conflict in the region, particularly Israel’s military operations in Gaza, which began on October 7, 2023. The conflict has resulted in significant casualties and has prompted retaliatory attacks by the Iranian-backed Houthis in Yemen on commercial vessels in the Red Sea.
Impact on Shipping Routes
As a result of these tensions, the majority of commercial vessels that previously traversed the Red Sea and the Bab-el-Mandeb Strait have opted for the longer route around the Cape of Good Hope. This shift has led to a staggering 56% decrease in total vessel transits in the Red Sea as of September, according to MarineTraffic data.
- Container Traffic: Down 73%
- LNG Traffic: Down 87%
- Dry Breakbulk: Down 54%
- Mixed Dry Cargo: Down 37%
- LPG Traffic: Down 74%
- Roll-On/Roll-Off Vessels: Down 78%
- Wet Bulk Cargo: Down 41%
Increased Traffic Around the Cape of Good Hope
In stark contrast, ship traffic around the Cape of Good Hope has surged by 76% over the past year, with container ship transits skyrocketing by 420%. This increase is attributed to the heightened risks in the Red Sea, prompting shipping companies to seek safer routes despite the longer travel times.
- Mixed Dry Cargo: Up 157%
- Dry Breakbulk: Up 38%
- LNG Traffic: Up 400%
- LPG Traffic: Up 138%
- Roll-On/Roll-Off Vessels: Up 350%
- Wet Bulk Cargo: Up 77.5%
Rising Freight Rates
The rerouting of vessels has not only extended travel times but has also led to a significant increase in freight rates. The World Container Index (WCI) rose by 268% in just seven months, reaching $6,000 per 40ft container in July. Although this figure has eased slightly, it remains 116% higher than prices recorded in December last year.
The Importance of Maritime Trade
Jan Hoffmann, head of trade logistics at the UN Trade and Development, emphasized the critical role of maritime trade, which accounts for 80% of global trade volume. The Suez Canal, a crucial artery for international shipping, has seen a marked decline in traffic as vessels divert around the Cape of Good Hope, increasing travel distances significantly.
- Saudi Arabia to Rotterdam: 74% longer
- Singapore to Rotterdam: 42% longer
Conclusion
The ongoing conflict in the Middle East has left an indelible mark on global maritime trade, with the Red Sea’s historic decline serving as a stark reminder of the fragility of international shipping routes. As tensions persist, the shipping industry may need to adapt to these new realities, potentially leading to longer-term changes in trade patterns.
