As geopolitical tensions continue in the Red Sea region, so will the disruptions rippling throughout global trade. While we cannot predict the future, a deep history of uncertainty is tied to the Red Sea region and international trade.
The passage between the Gulf of Aden and the Suez Canal serves as a primary link between Asia and Europe. Today, this maritime shipping route through the Suez Canal and Bab-el-Mandeb accounts for about 12 percent of trade and 30 percent of world container ship traffic. Disruptions, be they geopolitical, natural disasters, or other factors impacting traffic, cause significant challenges today, as they have in the past. Not only consumer goods, but the movement of oil and liquefied natural gas from this region to be exported globally has also been greatly impacted.
The Red Sea has played a crucial role in global trade as far back as the ancient Egyptians. Its strategic location has made it a key passage for trade, cultural exchange, and geopolitical influence throughout history. African, Islamic, Ottoman, and European governments have controlled the passage through the Red Sea and used it for expansion and trade for many generations.
On each side of the Red Sea are narrow passages, The Suez Canal and Bab-el-Mandeb, which are challenging to navigate. Bab-el-Mandeb (Gate of Grief) is a strait located between Yemen and the Arabian Peninsula that connects the Red Sea to the Gulf of Aden. It is named because of its difficulty in navigation. At its narrowest, the Strait is only 14 nautical miles wide. The Strait and island of Perim was under British control and used as a coal refueling station until 1967 when the Peoples Republic of Yemen took control. Attempts to build a bridge connecting Yemen and Djibouti across the Strait have been attempted, but no bridge has come to fruition.
In 1869, the Suez Canal Company, operated by the French, opened the Suez Canal after ten years of construction, several feats of engineering, and a great deal of manual labor. Creating a free flow of seawater, the opening of the Suez Canal reduced the maritime journey between Europe and Asia by approximately 4,300 miles and made larger vessels able to navigate this passage with deeper and wider openings. The Suez Canal has long been fought over as a key control area since its establishment by the French. In modern times, conflict in the region continues with closures of the canal to achieve a political objective; this can be seen in the Suez Crisis (1957), The Six-Day War (1967), The War of Attrition (1967-70), and the Yom Kippur War (1973), each impacted container traffic and flow of oil and goods through the region. The Suez Canal is now operated by the Suez Canal Authority, an Egyptian state-owned organization.
Not all closures have been in conflict. In 2021, when an average of 55+ ships per day crossed through the canal with an average of 11-16 journeys, all traffic came to a halt. The container ship, the Ever Given, became lodged sideways in the canal. The blockage took six days to clear and amplified the canal’s importance to global shipping, especially coming out of the global pandemic.
With disruptions, many of us, be it in the shipping industry or not, will feel the impact. For those who export, impacts are already playing out as many container ships are being rerouted around Africa or through alternative means of travel.
With closures and delays in the region, impacts include:
- Delay in shipping time from 10 days to over three weeks for vessels rerouted around the southern tip of Africa, the Cape of Good Hope.
- Increases in cost for container shipping, with longer voyages, there is more time, more fuel, and more staff that all take on additional resources.
- Increase costs for insurance of container vessels due to security and instability if vessel safety.
- Increases in cost for transitioning sea freight into air freight.
- Changes in sourcing and strategies to avoid the region.
Tensions in this region will likely continue for many years to come, but by considering some of the history, we can arm ourselves with a better understanding of the forces at play. Being prepared to protect and pivot as needed will be crucial in this ever-changing world.
The NDTO continues to support exporters of ND; if our team can be of assistance, please do not hesitate to reach out to us at info@ndto.com.