Record drop in Suez Canal transits due to Houthis’ attacks

Record drop in Suez Canal transits due to Houthis’ attacks

Subject: IR

Section: Places in news

Who are Houthis?

• The Houthis are an Iranian-backed, Shiite Muslim armed religious and political movement in Yemen.

Recent activities of Houthis

Houthis attacked ships traversing the Red Sea in solidarity with the Palestinians caught in the Hamas-Israel war.

Impact of Houthis’ attack:

• It disrupted trade through the critical waterway that connects Asia and Europe. (Suez Canal)
• Companies are re-routing ships to avoid the Suez Canal and opting for the longer route (8900 km more) around the Cape of Good Hope, the southern tip of Africa.

Recent route shift: 

• As per UNCTAD report ,Suez Canal handled 12%-15% of global trade in 2023.
• But since attack,container tonnage crossing the canal fell by 82% this year.
• While container tonnage passing around the Cape of Good Hope increased by 60% and sbout 621 container ships were rerouted around the Cape of Good Hope.

Disruption in Panama Canal: 

• The Panama Canal is under stress due to low water levels due to drought.
• Disruption in Red Sea also come at this time.

What is Suez Canal: 

• The Suez Canal was established in 1896 is 120 miles long from the city of Port Said (Mediterranean Sea) in the north to the city of Suez ( Egypt, Red sea , Indian Ocean )  in the south.
• It separates the African continent from the Sinai Peninsula.
• Importance:
• It is a crucial international shipping route, allowing vessels to navigate between Europe and Asia without having to circumnavigate the African continent.

What is Cape of Good Hope: 

• The Cape of Good Hope is a rocky headland on the Atlantic coast of the Cape Peninsula in South Africa
• It joins Eastern Asia and Europe to southern parts of Africa.

What is Panama canal?

The Panama Canal is an artificial 82-kilometre waterway in Panama that connects the Atlantic Ocean with the Pacific Ocean, cutting across the Isthmus of Panama, and is a conduit for maritime trade.

Analysis of recent happenings: 

• Monthly transits went down by more than 40% in the Suez Canal only recently due to attack and by 50% in the Panama Canal due to drought in last two years compared to their peak.
• Attack led to re-routing from Suez Canal to Cape of Good Hope that increased the distance travelled. An oil tanker starting from the port of Ras Tanura in Saudi Arabia to Rotterdam in the Netherlands will have to travel 10,358 km through the Suez Canal route. The alternative journey around the Cape of Good Hope is 17,975 km.
• This means that the Suez Canal cut the distance by 42%.
• Also, according to UNCTAD report, today there is no ideal alternative to the Suez Canal, especially for Asia–Europe and Asia–North Africa trade.
• The extra distance travelled led to higher shipping costs. Container freight rates for Asia-Pacific to Europe routes have increased.

Impact on India:

India is also impacted by such attacks in following manner: 

• Russia — the source of most of India’s oil — sends its oil containers through the Suez Canal. As of now, domestic fuel prices have not impacted.
• India’s petroleum products export to European countries, especially the Netherlands is also through the Suez Canal route.
• Other routes increase export cost making it unviable.