Suez Canal Disruptions to End and Stabilize - Desteia

Suez Canal Disruptions to End and Stabilize

Houthi rebels announced an end to attacks on incoming vessels on the Red Sea. We look back at their impact and initial market reactions.

Jose Luis Sabau
February 6, 2025
Macro

Earlier this year, one of the largest disruptions in logistics came to an end—or so, at least, did most experts conclude after seeing official press releases. Namely, the recent announcement from Houthi rebels where they promised a partial stop to attacks on commercial ships along the neighboring waters of Yemen.

For months, Houthi rebels have targeted incoming vessels in the Red Sea in an act they considered to be in solidarity with Palestinian forces fighting against Israel. The attacks, however, resulted in a blockade of the Suez Canal—arguably, one of the most important structures to global commerce. The canal allows vessels from Asia to enter the Mediterranean Sea—and, by extension, the European market—without having to circumnavigate the length of Africa. This significantly lowers the transit time of cargo while also decreasing the risk of encountering pirates along the way.

Last month, however, Israeli and Palestinian forces agreed on a ceasefire putting an end to their dispute. Houthis, in turn, promised to stop all attacks on commercial vessels with the exception of Israeli ships. This, in turn, fueled a series of speculations around the near future of trade routes.

We can’t underestimate the impact of the Houthi blockade. Before the Houthis began their operations against global shipping routes, it was estimated that some 41 vessels would cross the canal each day—that is taking the average of all daily crossings before the first Houthi attack on October 19th, 2023. Thereafter, average crossings dropped to 26—that is a 37.4% decrease in operations.

Cargo Ships Crossing per Day at the Suez Canal (2022-2025)

A line chart showing the number of ship crossings every day at the Suez Canal between 2022 and 2025

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Number of Cargo Ships

Source: IMF Get the data Created with Datawrapper

In total, during the 12 months in which the Houthis routinely attacked vessels on the Red Sea, there were a total of 163 recorded attacks. In the figure below, we reproduced the frequency of attacks over the period. Although there are some noticeable patterns, such as a decrease in attacks during the month of May, Houthis consistently attacked at least one vessel every two days.

All Houthi Attacks to Commercial Vessels (2023-2024)

An area graph showing the number of Houthi attacks to commercial vessels over time.

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Source: ACLED Get the data Created with Datawrapper

It should come as no surprise then that ocean carriers and freight forwarders soon took note of the risk. Soon after the Houthis began to attack the Red Sea, container ships began to shift their routes. Instead of heading to Europe through the Suez Canal, vessels would now take the much longer route around the African continent, passing through the Cape of Good Hope—the southernmost point in the African continent.

Number of Transits at Suez and Cape of Good Hope (2022-2025)

A line chart showing the seven-day moving average of vessels arriving to the Suez Canal and the Cape of Good Hope between 2022 and 2025.

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Suez Canal

Cape of Good Hope

Source: IMF Get the data Created with Datawrapper

Given the longer distances and the increased effort needed to re-route vessels at sea, the cost of shipping cargo increased drastically across 2024. At the start of the year, the cost to ship a 40ft container was quoted at $2,670 per container. By July, the cost had soared to $5,937 per container. That is equivalent to a 122% increase in the price of a container in the span of six months.

Not surprisingly, in a recent study by the United Nations, it was estimated that the Houthi attacks in the Red Sea were amongst the largest disruption to ocean trade last year. In the figure below, we replicated the data from the UN study to show the impact of each major disruption to the cost of shipping cargo across the world. As the graph shows, by June—a month before the peak of price increases to containers—, Red Sea Disruptions alone caused a 22% increase in container prices.

Baltic Dry Index: Impact of Panama Canal and Red Sea disruptions

A bar chart showing the spread of impact to the Baltic Dry Index by cause according to the UN.

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24% −3% 0% −3% 45% 5% 0% −3% 49% 3% 11% 0% 47% 18% 18% 0% 45% 5% 26% −2% 29% 11% 20% −1% 17% 5% 18% 0% 11% 12% 22% −1%

Source: UNCTAD Get the data Created with Datawrapper

The thing is, these disruptions have now come to an end—or so it seems. Once Houthis announced the end of their attacks, markets soon responded by decreasing the price of shipping a container from $3,855 to $3,445 in the span of a week. That is a 10.6% decrease in a short period of time.

The problem, however, is that markets remain somewhat skeptical. Despite this initial decrease, the price of shipping a container has stagnated. Weeks after the announcement, the curve seems to have ameliorated at $3,364 per container. In the figure below, we plotted the values for Drewry’s World Container Index (WCI) measuring the standard price to ship a 40ft container across the world. The Houthis announcement resulted in an initial dip, but prices remain significantly above 2023 levels.

Drewry's World Container Index (2022-2025)

A line chart showing the average cost to ship a 40ft container between 2022 and 2025 according to Drewry's container World Container Index

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Composite

Source: Drewry Get the data Created with Datawrapper

The above suggests that, despite the end of Houthi aggression, shippers are still doubtful about using the Suez Canal. This could well be the result of hesitancy around trusting the Houthis or also a signal that shifting routes might take longer than expected. But, for now, ocean carriers are keeping rates considerably higher than normal.