Freight traffic in the Suez Canal global trade artery has plummeted by 45% in just two months due to recent Houthi attacks, according to newly published data by the United Nations Conference on Trade and Development (UNCTAD).
UNCTAD warned that this significant decrease in tonnage could bring about heightened inflation, food security concerns, and escalating environmental impacts.
Shipping companies, responding to pirate attacks initiated by the Iran-aligned Houthi movement, have been compelled to reroute away from the Red Sea.
This is causing increased greenhouse gas emissions resulting from ships rerouting their shipping lines around South Africa, according to Jan Hoffmann, UNCTAD's head of trade logistics.
Hoffmann noted that this disruption is among three critical global trade route disturbances, including the impacts of Russia's invasion of Ukraine and the Panama Canal's reduced capacity due to drought.
"We are very concerned," Hoffman stated. "We are seeing delays, higher costs, higher greenhouse gas emissions."
On top of environmental and supply concerns, the Red Sea crisis is also leading to increased pressure on spot container rates.
The latest Drewry WCI composite index of $3,964 per 40-foot container is the highest since October 2022 and is 179% more than average 2019 (pre-pandemic) rates.
HSBC’s global head of shipping and ports research, Parash Jain, recently warned of a surge in air freight rates in the coming weeks due to the Red Sea attacks.
Earlier this month, Tesco PLC (LSE:TSCO) became the latest British company to warn of supply disruptions, with Tesco boss Ken Murphy conceding that customers could see higher shelf prices because of the crisis.