Increasing attacks by Houthi rebels prompt ships to avoid Suez Canal

In light of the escalating attacks by Houthi rebels in Yemen, an increasing number of ships worldwide are steering clear of the Suez Canal. While this poses a significant challenge for Egypt, which is grappling with its worst economic crisis, experts suggest that the impact may be limited.

According to data from the International Monetary Fund (IMF), cargo volumes passing through the Suez Canal dropped by 35% last week compared to the same period in 2023. Concurrently, volumes transiting through the Cape of Good Hope off the coast of South Africa surged by 67%.

Approximately 12% of global trade passes through the narrow stretch of water from Yemen to Egypt, as per the International Chamber of Shipping (ICS).

On December 17, the Suez Canal Authority acknowledged that 55 ships had been prevented from transiting. Since then, there has been little communication on the matter. Given that the maritime patrols in the Red Sea by the U.S.-led international coalition have failed to provide reassurance, experts believe that "stakeholders are prepared to raise prices," says Paul Tourret, Director of the ISEMAR Maritime Industries Observatory.

For Egypt, the revenues from the Suez Canal reached $749 million in December 2023, compared to $737 million in December 2022, a point of pride for the Suez Canal Authority. This massive waterway, inaugurated in 1869, brought in approximately $8.6 billion in the fiscal year 2022-2023.

While these foreign currency earnings are closely monitored in a country where importers and currency traders struggle to find dollars, a port official seeks to reassure that "the crisis is temporary" and currently "at an acceptable level." However, he acknowledges that "its impact will grow if it persists."

In 2015, President Abdel Fattah al-Sissi inaugurated his first mega-project: a new section of the canal aimed at facilitating ship crossings. It consumed nearly €8 billion ($9 billion) but failed to lead to a substantial increase in revenues, which are primarily bolstered each year through higher transit fees.

Yet, the earnings from the canal represent only a fraction of Egypt's foreign currency inflows. When combined with tourism revenues, they account for only half of the country's main source of income: remittances from Egyptian workers abroad.

In contrast, the cost of servicing the national debt has skyrocketed, comprising over 60% of the state's income in 2023 and rising to 70% in 2024, according to the European Bank for Reconstruction and Development (EBRD).