Suez Canal: 50% drop in traffic

22. February 2024
-IAM, News

Hugues Chevalier, Economist

According to the United Nations Conference on Trade and Development (UNCTAD), maritime traffic through the Suez Canal has fallen by almost 50% since November following attacks on commercial vessels off the coast of Yemen (Red Sea or Gulf of Aden) by the “Houthists”, opponents of the current government and supported by Iran. The decline for container ships was almost 70%. Only bulk traffic (grain, coal, etc.) seems to have been spared, with a fall of less than 10%. The diversions via the Cape of Good Hope adds around 2 weeks to the journey time and doubles the cost of container transport between Asia and Europe. If this situation were to persist, inflation, which has been falling for several months in line with monetary tightening, could start to rise again, affecting industrial activity, particularly in Europe. Already, a number of European carmaker sites are operating at a slower pace or are closed due to a shortage of parts. Italy, along with Egypt, is the country hardest hit, since 54% of its exports go by sea, and almost 45% through the Suez Canal. The Confartigianato research centre (confederation of SMEs and craftsmen) points out that the volume of Italian foreign trade has already lost 8.8 billion euros since last November: 3.3 billion because of export delays and 5.5 billion because of a shortage of supplies of manufactured goods. All the Mediterranean ports are affected by a sharp drop in maritime traffic. Without the freedom to sail between the Bab Al-Mandab strait and the Suez Canal, the risks of a resurgence of inflation and new bottlenecks in industry are, and will be, detrimental to the European economy.