The Suez Canal, one of the most important waterways in the world, is facing serious trouble. Recently, its revenues have dropped by a massive 60%, and nearly half of the ships that usually pass through this crucial route are now avoiding it. But why is this happening, and what does it mean for global trade?
The Houthi Attacks and the Conflict in Gaza
The major reason behind this decline is the escalating conflict in the Middle East. Yemeni fighters, known as the “Ansar Allah” movement, or the Houthis, have been targeting ships they believe are linked to Israel or are traveling to or from the country. This is their way of retaliating against what they see as Israeli military actions in Gaza, which has been a hotspot of violence since October 2023.
These attacks have made shipping companies extremely nervous. Many of them are now steering clear of the Red Sea, which is a key area for reaching the Suez Canal. The uncertainty and danger in the region have caused a big drop in the number of ships using the canal, which is the fastest route between Europe and Asia.
Suez Canal Revenues Take a Nosedive
Osama Rabie, the chairman of the Suez Canal Authority (SCA), recently shared some alarming statistics. The canal’s revenues fell from $9.4 billion in the 2022/2023 fiscal year to $7.2 billion in 2023/2024. That’s a 60% decrease in just a year! Rabie pointed to the “unprecedented challenges in the Red Sea region” as the main cause, referring to the constant threat of Houthi attacks and the broader instability in the Middle East.
In fact, since January 2024, the number of ships passing through the canal has dropped by nearly half, down 49%. This is a massive problem for Egypt, as the Suez Canal is a major source of revenue for the country.
No Better Alternative
Despite the current chaos, Rabie emphasized that there’s no better alternative to the Suez Canal for international shipping. During meetings with major shipping companies, they all agreed that while they are avoiding the canal now due to safety concerns, they plan to return once the region is more stable.
This is because the Suez Canal cuts down travel time significantly, saving ships thousands of miles that they would have to sail if they went around the southern tip of Africa instead.
New Services to Lure Back Ships
The Suez Canal Authority isn’t just sitting idly by. They are introducing new services to attract ships and diversify their revenue streams. These include fuel services at the canal’s entrances, pollution control, waste removal from ships, marine rescue, and even ship maintenance and repair. These efforts are aimed at providing added value to shipping companies and making the canal more attractive once the political situation improves.
