– Pratik Bijlani
The maritime industry is seeing a huge shift in trade routes as Yemen-based Houthi terrorists launch attacks on commercial vessels in the Red Sea. These attacks have significantly curtailed travel through the Suez Canal, Asia’s shortest route to Europe, forcing many vessel operators to seek alternative routes. As a result, the volume of crude oil and oil products transported around Africa’s southernmost point, the Cape of Good Hope, has increased significantly.
In the first five months of 2024, the volume of oil moving around the Cape increased by about 50% compared to the 2023 average. This transition, fueled by the Houthis’ continued drone and missile attacks, saw the volume of crude oil and oil products climb from 5.9 million barrels per day (b/d) in 2023 to an astonishing 8.7 million b/d in early 2024—a staggering 47% increase. This rerouting indicates a strategic decision by commercial ship operators to avoid the dangerous Bab el-Mandeb Strait and the Red Sea.
On the other side of the world, extreme dry conditions at the Panama Canal have resulted in limitations that have drastically decreased daily ship crossings since October 2023. The Panama Canal, a critical chokepoint that handles around 5% of global maritime traffic, has seen its transit trade volume plummet by roughly 32% from the previous year.
According to the IMF’s PortWatch data; the volume of trade through the Suez Canal decreased by 50% year on year in the first two months of 2024. Conversely, trade passing the Cape of Good Hope has increased by an estimated 74%. These changes have also resulted in a 6.7% year-over-year decrease in port calls to 70 sub-Saharan African ports. Similar 5.3% losses were seen in the European Union, the Middle East, and Central Asia.
These developments underscore the broader ramifications for global supply networks, which may cause temporary delays and put upward pressure on inflation due to higher shipping costs. As the marine industry adapts to these new difficulties, robust strategic planning and alternate routes become increasingly important for ensuring global trade flow.
Marex Media