Cargo Throughput Plummets in the Red Sea Amidst Vessel Assaults

During the initial seven weeks of 2024, cargo volumes to and from ports in the Gulf of Aden and the Red Sea witnessed a significant decline of 21% year-over-year. This downturn is attributed to a notable decrease in the number of ships arriving at these ports, as merchant shipping increasingly opts to bypass the region. This shift in maritime routes is largely due to heightened concerns over attacks on vessels by Houthi forces, as explained by Niels Rasmussen, the chief shipping analyst at BIMCO.

Since November 2023, there have been reported attacks by Houthi forces on ships navigating through the Red Sea and Gulf of Aden. By December, the majority of container and gas carriers began to steer clear of the region, leading to a marked reduction in transits across most sectors by January.

As of February, the frequency of ships passing through the Gulf of Aden and the Suez Canal has plummeted to 50% and 37% lower, respectively, compared to the previous year. Specifically, container ship transits through these areas have decreased by 70%. Before these incidents, the Suez Canal was responsible for facilitating approximately 10% of global trade.

Rasmussen highlighted the direct impact of these attacks on the shipping capabilities of regional countries, affecting both imports and exports. Although alternative export routes exist, they often entail higher costs, longer transit times, and limited capacity.

Countries like Saudi Arabia, Jordan, and Egypt have the option to circumvent the Red Sea by utilizing ports such as Dammam in the Persian Gulf for Saudi Arabia and Jordan, and Mediterranean ports like Alexandria and Damietta for Egypt. However, rerouting poses challenges, particularly for container cargoes.

For other nations without feasible alternatives to Red Sea shipping, overland cargo transport remains a daunting task. As a result, shipments in countries like Sudan, Somalia, Eritrea, and Yemen have dropped by 25% year-over-year in 2024. Djibouti stands out as an exception, maintaining stable shipment levels.

The ongoing situation threatens to exacerbate economic instability in the region, particularly in countries already grappling with armed conflicts such as Yemen, Sudan, and Somalia. The difficulty in receiving international aid and the potential rise in the cost of basic goods are among the pressing concerns.

Efforts by a US-led coalition and a recent maritime operation initiated by the EU aim to protect ships in the Red Sea. Despite these measures, attacks continue, casting uncertainty on the region’s outlook. Until a viable solution is found, Rasmussen warns that regional economies will continue to endure the repercussions.