Suez Canal disruption threatens global trade

The cargo ship Galaxy Leader (right), which was captured by Houthi forces two days ago, arrives at the port of Hodeida province, off the Red Sea. (Photo: AFP/VNA)

Disruption to shipping through the Suez Canal due to instability in the Bab al-Mandab Strait could slash the canal's revenue and threaten global trade, experts have warned.

On December 21, the Egyptian news site Ahram Online quoted the Chairman of the Egyptian International Freight Forwarders Association (EIFFA), Mr. Medhat El-Kady, as saying that the impact of instability in the Red Sea is huge, which could affect the revenue of the Suez Canal, while the Houthi forces in Yemen continue to attack commercial ships moving in the Red Sea and more and more international shipping companies are using the Cape of Good Hope instead of the Suez Canal.

Earlier on December 17, Chairman of Egypt's Suez Canal Authority (SCA), Osama Rabie, said that 55 ships had switched to the Cape of Good Hope route since November 19.

According to Mr. Rabie, this figure is only a small proportion compared to the total 2,128 ships that passed through the Suez Canal during this period.

Meanwhile, Egyptian economist Dr. Ihab El-Gamal asserted that the actual number of ships avoiding the Suez Canal is much higher than the reported number. This could be a bad omen for Egypt, which relies heavily on revenue from the Suez Canal, as Cairo tries to close a $17 billion annual fiscal gap by 2026. In the fiscal year ending in late June 2023, the Suez Canal is expected to generate $8.8 billion in revenue.

EIFFA President El-Kady said that the Egyptian economy is losing millions of dollars every day from Suez Canal revenues due to the unresolved Red Sea crisis.

The expert noted that the unrest surrounding the Bab al-Mandab Strait has also had global implications, referring to the incident in March 2021 when the Evergreen container ship ran aground in the Suez Canal, costing global trade $10 billion.

As a vital waterway connecting the Mediterranean and the Red Sea, the Suez Canal carries about 12% of the world 's maritime cargo volume and is one of Egypt's key sources of foreign exchange.

Economist El-Gamal commented that the Suez Canal serves as a vital sea route for global trade, so the decision by some shipping companies to avoid the shortest shipping route between Asia and Europe has disrupted established routes, causing delays in deliveries and increasing costs.

According to Mr. El-Gamal, the disruption caused by instability in the Bab al-Mandab Strait could have a negative impact on global supply chains, affecting the timely movement of goods and creating challenges for businesses.

He also said that as a vital route for the world's oil and liquefied natural gas (LNG) transportation, disruptions to traffic through the Suez Canal could impact global energy markets.

El-Gamal said that rerouting away from the Suez Canal would result in longer journeys, increased fuel consumption and costs, and could result in higher shipping costs for consumers as the global economy continues to recover from the COVID-19 pandemic and the impact of the conflict in Ukraine.

According to the World Economic Outlook report released by the International Monetary Fund (IMF) in October this year, global economic growth in 2023 and 2024 will be 3% and 2.9%, respectively, lower than the 3.5% recorded in 2022./.

According to vietnamplus.vn

Source: https://www.vietnamplus.vn/su-gian-doan-hoat-dong-hang-hai-qua-kenh-dao-suez-de-doa-thuong-mai-toan-cau-post917077.vnp

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