Freight going through the Suez Canal has plunged by nearly half since Iran-backed Houthi militants began attacking vessels in the Red Sea as a show of support for Palestinians in the Israel-Hamas war.
UNCTAD, the United Nations Conference on Trade and Development, which supports developing countries in global trade, says that 39% fewer ships than at the start of December transited the canal, leading to a 45% decline in freight tonnage.
Container shipments through the canal tumbled 82% in the week to January 19 from early December, while for liquified natural gas (LNG), the decline was even greater. The drop-off for dry bulk was smaller, and crude oil tanker traffic was very slightly higher, the agency said, according to Reuters.
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UNCTAD has warned of risks of higher inflation, uncertainty about food security and increased greenhouse gas emissions due to the sharp decline.
"We are very concerned," Jan Hoffmann, UNCTAD's head of trade logistics told a briefing late on Thursday. "We are seeing delays, higher costs, higher greenhouse gas emissions."
The Suez Canal is a critical shipping lane, given that it offers vessels a direct route between the North Atlantic and northern Indian oceans via the Mediterranean Sea and the Red Sea.
About 15% of world shipping traffic, including 30% of global container trade, passes through the Suez Canal. But to avoid being attacked or having their cargo stolen, many ships are instead sailing around the Cape of Good Hope, which is a much longer way around the continent of Africa.
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Container shipping giant Maersk suspended use of the Red Sea and Suez Canal at the start of the year after one of its vessels was attacked by the Houthi militants, and it warned of "significant" consequences for global growth as a result of the disruptions.
The U.S. and the U.K. have responded with strikes against the Houthi, which the U.S. recently relisted as a terrorist group. The U.S. and the U.K. on Thursday announced sanctions leveled at four senior Houthi officials in Yemen.
Hoffmann said there were now three key global trade routes disrupted, also including flows of grain and oils since Russia's invasion of Ukraine, and the Panama Canal, where low water levels from drought meant shipping last month was down 36% year-on-year and 62% from two years ago, according to Reuters.
UBS has estimated that routing ships around Africa – which increases the journey length by about two and a half weeks – reduces an Asia-Europe trip's effective capacity by about 25%. Hoffman said the longer routes and vessels traveling faster to compensate for detours means emissions are also rising.
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Spot container rates recorded their sharpest weekly increase of $500, affecting not just Asia-to-Europe shipments but also the non-Suez route to the U.S west coast, which has more than doubled. However, rates were still only about half of the peak hit during the COVID-19 pandemic.
Hoffmann said that food prices could feel the impact, too, although end-consumers in developed countries may take some time to see an effect. He said that about half of the increases in food prices seen since the war in Ukraine were due to higher transport costs.
"Passing on these higher freight rates to consumers takes time, up to a year until . . . we would really see them in the shop, whatever shop - Ikea, Walmart or something," Hoffman said.
Fox News' Megan Henney and Reuters contributed to this report.
