Home News Red Sea attacks cut Suez Canal trade in half

Red Sea attacks cut Suez Canal trade in half

Red Sea attacks cut Suez Canal trade in half

Trade has been diverted from Suez to a route around South Africa’s Cape of Good Hope, the International Monetary Fund reports

The International Monetary Fund (IMF) reports that the Suez and Panama Canals saw a 50% and 32% decline in trade during January and February, respectively, compared to the same months in 2023.

According to the fund, transit trade fell in the first two months of 2024 due to Houthi attacks in the Red Sea and drought affecting the Panama Canal.

Meanwhile, the volume of trade through the Cape of Good Hope, the most south-western point of the African continent, increased by 74% in the same period.

Attacks on vessels in the Red Sea region have reduced traffic through the Suez Canal, a vital route between Asia and Europe that normally carries about 15% of global maritime trade. As a result, numerous shipping companies diverted ships around the Cape of Good Hope, increasing average delivery times by more than ten days.

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A severe drought affecting the Panama Canal has forced authorities to impose substantial restrictions on daily shipping transits since last October, hampering maritime trade at a crucial time when about 5% of global maritime trade normally moves between the Atlantic and Pacific oceans.

Such measures have negatively affected companies with limited supplies, the IMF said.

The organization warns of the potential impact of these disruptions on inflation rates due to rising transport costs as well as complications in global trade and economic activity statistics.

“If the ripple effect of these disruptions continues, they could temporarily constrain some supply chains in affected countries and put upward pressure on inflation. [due to higher shipping costs]” it worked.

January goods trade reports from Africa, the Middle East and Europe indicated a slowdown in import growth as a result of these trade challenges.

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