A few months after Israel began its war on Gaza, Yemen’s Houthi group started targeting Israel-bound vessels crossing the Bab Al-Mandab Strait through the Red Sea.
With the signing of the ceasefire agreement on Gaza last week, questions have begun to emerge on whether the truce will impact navigation in the Red Sea and restore maritime traffic in the Suez Canal and help end hostilities between Israel and the Houthis.
Since the Houthi group began targeting ships in the Bab Al-Mandab Strait, four major shipping companies have opted to reroute their vessels via the Cape of Good Hope, bypassing the Red Sea to mitigate risks.
The new route extends the transit distance by 40 per cent and entails increased fuel consumption and higher expenses for transportation and insurance. These factors have compounded global inflationary pressures.
In the wake of the ceasefire agreement between Hamas and Israel, the question now is whether the major shipping companies will risk returning to the Red Sea before securing assurances that the Houthis will not attack them.
Professor of transport economics and logistics Emad Al-Saei said that “navigating the Cape is akin to travelling through rugged mountainous terrain. The Red Sea is more like a paved highway for long journeys. Fuel consumption per nautical mile also increases dramatically on the alternative route, from approximately a quarter ton in the Red Sea to as much as three tons on certain segments of the Cape of Good Hope route.”
However, “the high cost of the Cape route, paired with the guarantee of safe passage, still outweighs the reduced cost of traversing the Red Sea, given the heightened uncertainty and risks associated with going through the Bab Al-Mandab Strait,” he said.
“The Houthi stance is part of the region’s broader geopolitical conflicts. Despite the recent truce in Gaza, hostilities between the Houthis and Israel are unlikely to subside. Tribalism and notions of honour, which dominate Houthi internal dynamics, will make it challenging to curtail the hostilities.”
“The Houthis are also not a cohesive group but instead are a collection of tribes driven more by tribal loyalties than by nationalism, which complicates efforts to secure guarantees to halt hostilities,” Al-Saei said.
“An individual tribe might independently initiate aggressive acts to assert its power or provoke a third party, bypassing collective decision-making.”
Hamdi Al-Barghouti, an expert in maritime transport, noted that there is currently a slowdown in maritime activity due to February being a holiday month in China, which has delayed shipments from Chinese ports.
Red Sea shipping is expected to remain subdued until the second half of March.
Egypt is unlikely to reduce transit fees through the Suez Canal to incentivise passage through the Red Sea, he said, adding that efforts will likely be made to enhance operational efficiency in preparation for an eventual uptick in maritime activity following the truce in Gaza.
The Suez Canal saw revenues fall by more than 60 per cent in 2024 compared to the previous year, amounting to a $7 billion loss.
Even with the Gaza truce, the resumption of normal navigation in the Red Sea will likely not occur abruptly, Al-Barghouti said.
Many shipping companies have already committed to contracts that involve the Cape of Good Hope route, with delivery schedules and logistics planned accordingly. These agreements typically span a year, and any shift back to the Red Sea will be gradual and contingent on the expiration of existing agreements and the reestablishment of stable shipping routes, he added.
“The most viable course of action is to enhance the operational efficiency of the Suez Canal, creating an opportunity to increase transit fees. This would allow for revenue lost over the past seven months to be compensated for.”
Transportation and logistics expert Mohamed Ali said that the four leading maritime shipping companies remain cautious about resuming their reliance on the Red Sea.
They think it would be premature to redirect their routes through the Red Sea without guarantees of long-term regional stability, he said, and they continue to favour the Cape of Good Hope route instead, despite its navigational challenges, extended duration, and occasional piracy, justifying this preference by lower insurance costs compared to those associated with the Red Sea passage.
Ali said that company decisions are not purely logistical but are also influenced by political and commercial pressures. The Panama Canal, often viewed as a partial competitor to the Suez Canal, has come under attention following remarks made by US President Donald Trump about its strategic control as part of a broader trade conflict with China, for example.
The competition is further complicated by the geopolitical significance of the Suez Canal and the Bab Al-Mandab Strait as critical components of China’s Belt and Road Initiative, which aims to revive historic trade routes connecting east and west.
* A version of this article appears in print in the 30 January, 2025 edition of Al-Ahram Weekly
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