Hard blow for Egypt: the Suez Canal deserted after attacks by Yemeni rebels
logistics | SupplyChain | Shipping
Par Ibrahima DIALLO
11 January 2024 / 09:14

More and more ships from all over the world are avoiding the Suez Canal due to the increasing number of attacks by Yemeni Houthi rebels, a blow for Egypt which is going through its worst economic crisis, but one that experts say will have a limited impact.

Data from the International Monetary Fund (IMF) speak for themselves: volumes transported via the canal fell by 35% last week compared to the same period in 2023. At the same time, volumes transiting the Cape of Good Hope off the coast of South Africa jumped by 67%.

"All Maersk ships transiting the Red Sea and Gulf of Aden will be diverted southwards around the Cape of Good Hope," said Danish shipping giant Maersk on Friday, the same day that US Vice Admiral Brad Cooper counted "25 attacks on merchant ships" in just under two months.

Since the start of the October 7 war between Israel and the Palestinian Islamist movement Hamas in Gaza, the Israeli army has been pounding the small Palestinian territory. To show their support for Gaza, the Houthis, who are part of the pro-Iranian, anti-Israel "axis of resistance", are stepping up attacks in the Red Sea against commercial vessels they consider to be linked to Israel.

According to the International Chamber of Shipping (ICS), around 12% of world trade passes through the narrow strip of sea running from Yemen to Egypt.

On December 17, the Suez Canal Authority acknowledged that 55 boats had been prevented from transiting. Since then, radio silence.

Insofar as the patrols in the Red Sea by the international maritime coalition led by the USA have failed to reassure, "the players are ready to raise prices", says Paul Tourret, Director of the Observatoire des industries maritimes ISEMAR.

Expense increases

"Shipowners had very low prices because of the slowdown in European consumption. They explain that bypassing Africa is very expensive, but it turns out that it's more or less the same price", because what they spend on oil, they save on transit fees paid to the Egyptians, the expert assures AFP.

The Soufan Center, an American think-tank, lists "at least 18 major shipping companies that have chosen to avoid the Red Sea", thus adding "around ten days to their journey", and as many fuel tank refills. A cost increase that is nevertheless absorbed, experts agree.

"Transportation costs have almost tripled since the start of the Houthi attacks", notes the Soufan Center, but "remain lower than during the Covid-19 pandemic".

And for Egypt, revenues from the Suez Canal reached $749 million in December 2023, compared with $737 million in December 2022, boasts the Canal Authority - an immense structure inaugurated in 1869 that brought in around $8.6 billion over the 2022-2023 fiscal year.

While these foreign exchange earnings are under close scrutiny in a country where importers and money changers are now struggling to find dollars, one port official is reassuring: "The crisis is temporary" and still "at an acceptable level", he tells AFP on condition of anonymity. "But its impact will grow if it lasts", he agrees.

In 2015, President Abdel Fattah al-Sissi inaugurated his first megaproject: a new section of the canal designed to make it easier for ships to cross. It has absorbed almost eight billion euros, but has not led to a massive increase in revenues, achieved each year solely through higher transit fees.

"Social pressure cooker

But canal revenues are only part of Egypt's foreign exchange earnings. Combined with tourism revenues, they account for only half of the country's real windfall: remittances from Egyptian workers abroad. On the other hand, debt servicing is skyrocketing: more than 60% of state revenues in 2023 and 70% in 2024, according to the European Bank for Reconstruction and Development (EBRD).

For Mr. Tourret, "canal revenues also serve to keep the lid on the social pressure cooker" in Egypt, where two-thirds of the population is poor or on the verge of poverty. "They feed directly into the state, which reinvests them in the army and social bread. One month is acceptable, but two months will be worrying," he says.

Le360 Afrique (avec AFP)

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