Red Sea trade plummets to historic low amid Middle East tensions

Trade in the Red Sea, which once represented 10% of global maritime trade, has experienced a historic decline due to escalating tensions in the Middle East.

On October 7, 2023, Israel-Hamas conflict erupted. The Iranian-backed 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.

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, News.Az reports, citing foreign media.

Total vessel transits in the Red Sea fell 56% 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% over the same period, while the vessel traffic for liquefied natural gas (LNG) fell 87%, dry breakbulk 54%, and mixed dry cargo 37%.

Meanwhile, vessel traffic of liquefied petrol gas (LPG) dropped 74%, roll-on/roll-off vessels 78%, and wet bulk cargo 41%.

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% in a year, and container ship transits surged 420%.

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

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

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% in seven months, reaching $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 $3,489 per 40ft container, up 116% compared to the prices in December last year, and above 146% the average of the pre-pandemic period.

News.Az