The tanker Island Challenger is moored off the coast of the Mediterranean port of Limassol. Cyprus, Friday, December 15, 2023. The Cyprus Chamber of Shipping has expressed deep concern about recent attacks by paramilitary forces in Yemen on commercial ships passing through the Red Sea and Gulf of Aden. The Cyprus Chamber of Shipping has expressed deep concern about recent attacks by paramilitary forces in Yemen on commercial ships passing through the Red Sea and Gulf of Aden. / © AFP archive
Crucial to the global shipping industry and in face of the Panama Canal crisis, Drs Valantasis Kanellos and Schiffling argue that a solution to the Suez Canal situation must be found swiftly.
In recent weeks, Houthi rebels have launched nine deliberate attacks on vessels at the Bab al Mandab Strait in the Southern Red Sea. This has led major shipping companies like Maersk, MSC, Hapag Lloyd and CMA-CMH to temporarily halt or reroute their container ships passing through the Red Sea.
The Gate of Grief, which received its name from the dangers it posed for ships in the past, is situated at the southern approach to the Red Sea. It is a crucial passage connecting the Red Sea to the Mediterranean through the Suez Canal, with no alternative route to the canal from the South.
Importance of Suez
Given that about 90% of global trade relies on sea routes, the Suez Canal is very important. It facilitates approximately 12% of global trade, including 22% of container trade. This vital waterway is the most direct route between Asia and Europe and is increasingly used for Asia to America traffic because of current troubles with the Panama Canal. Recent improvements have seen substantial increases in traffic, with 2264 vessels carrying 135.5 million tons in November 2023.
Rerouting via the Cape of Good Hope adds approximately 3,500 nautical miles to trips between East Asia and Northwest Europe, which means 1-2 weeks of additional shipping time. The Southern tip of Africa is notorious for severe waves, and any rerouting will lead to higher costs driven by greater fuel consumption and increased carbon emissions, impacting cost, time and sustainability.
Comparison with 2021 Evergiven Blockage
Comparing the current situation with the 2021 Ever Given blockage reveals significant differences in causes, geography and root causes. While the 2021 incident was due to an accident caused by bad weather and human error, and occurred at the Suez Canal, the 2023 attacks are deliberate, and target ships 2,300km further south at the Bab al Mandab Strait. The root causes also differ, with the 2021 incident exposing challenges posed by ever-growing vessel sizes to cater for ever-growing consumer demand using outdated transport infrastructure. The 2023 attacks are linked to geopolitical conflicts in the Middle East. In particular, Houthi rebels, who support Hamas against the backdrop of the war in Gaza and the 9 year civil war in Yemen.
Yemeni coastguard members loyal to the internationally-recognised government ride in a patrol boat cruising in the Red Sea off of the government-held town of Mokha in the western Taiz province, close to the strategic Bab al-Mandab Strait, on December 12, 2023. / © AF
The effect of the incidents is different also, with the current situation limiting, and not completely halting, traffic through the Suez Canal. Vessels continue to navigate the canal, but the complexity of the situation suggests that a comprehensive solution to the attacks may take months. The incidents have led to reactions in energy markets, doubled insurance costs for vessels passing through the Red Sea, and sparked speculations about involvement from China and India, further complicating the situation. The need for an immediate solution is obvious.
Combination with Panama Canal crisis
Adding to the complexity is the crisis at the Panama Canal, a canal in Central America, which forms an even more severe bottleneck to global trade. At the Panama Canal, drought has led to low water levels and severe traffic limitations. For instance, only 167 vessels crossed the Panama Canal in the first week of December 2023, in comparison to 238 in the same week in December 2022. Although a small increase in available slots is planned for January 2024, the constraints faced in Panama, have led to shipping lines redirecting vessels to the Suez, taking the longer route from Asia to the US East Coast. Recent delays in the Suez Canal, may exacerbate the impact on global trade.
The latest announcements of vessels being stopped will not affect Christmas supplies, which are mostly in shops and distribution centres in their destination countries already. But long-standing issues with both canals are prompting companies to reconsider how goods are transported worldwide. With the previous blocking of the Suez Canal appearing to have been forgiven and forgotten, the need to re-evaluate demand and supply patterns and use incidents like this as opportunities for reflection on how to make global supply chains and infrastructure supporting global trade more resilient and sustainable is more significant than ever.
Dr Nikolaos Valantasis Kanellos is a Lecturer in Logistics at the School of Business Technology, Retail, and Supply chain at TU Dublin in Ireland. Dr Sarah Schiffling is an Assistant Professor Supply Chain Management & Social Responsibility at Hanken School of Economics and the Deputy Director of the HUMLOG Institute in Helsinki, Finland.