The world of trade saw headwinds in 2024. The beginning of 2024 went downhill for global trade as disruptions affected two most vital shipping routes- attacks on vessels in the Red Sea area reduced traffic through the Suez Canal- the shortest maritime route between Asia and Europe via which about 15% of global maritime trade volume has passed. This has resulted in damage and danger in several trade routes. Let us see how this began and escalated.
Significance of Suez Canal & Red Sea
The Suez Canal, a manmade waterway in Egypt serves as a vital shortcut for global trade that minimizes travel time between Europe and Asia which improves efficiency, lowers fuel costs, and enhances international commerce. On the other hand, the Red Sea serves as a vital link to the Middle East, Europe, and Asia.
The Red Sea and Suez Canal make for shipping corridors globally and provide the fastest and shortest way to travel between Europe and Asia. In 2023, more than 21,000 ships average 50+ vessels a day travelled through the 193 km (120-mile) long Suez Canal in Egypt making up 12% of global trade.
How the Somali Attacks Have Intensified?
Somali pirates have resurfaced. Their reemergence follows the Yemeni Houthi movement’s campaign to target Red Sea Shipping in support of Hamas in its war with Israel. In 2011, Somalia recorded a record high of 237 attacks costing the global economy nearly $7 billion that year. The 2023 hijackings of the Maltese-flagged MV Ruen and Bangladesh-flagged MV Abdullah in March 2024 signals possibility of Somali pirates coming back in full swing.
This has increased Trade voyages between China and Europe via the Cape of Good Hope. Just to avoid Houthi strikes, merchant ships have used the Cape of Good Hope, incurring an estimated $1 million cost per vessel. This rerouting has significantly increased the shipment journey by 3,000 and 6,000 extra nautical miles. Further, the cost of insurance and operational costs have been increased.
How Red Sea Turmoil Affected the Trade?
Many countries have been impacted by Houthi attacks in the Red Sea, including the United States, Britain, Turkey, Russia, China, Qatar, Iran etc. These attacks have sent shockwaves across the world and affected the trades in the world. Major trade has witnessed disruptions and severely affected the trade.
Consider the bilateral trade between India and Europe that has seen a sharp reduction towards the end of the Quarter of 2024. With increased security concerns, vessel diversions, and rising freight costs, Indian exports, including textiles, pharmaceuticals, and automotive parts, are experiencing delays. European importers are also grappling with supply chain disruptions, forcing businesses to explore alternative trade routes via the Cape of Good Hope, which adds transit time and costs.
The crippling effects of the attacks have caused significant trade disruptions across other regions. Reports suggest trade through the Suez Canal—the shortest maritime route between Asia and Europe—dropped by 50% in the first two months of 2024 compared to the previous year due to Houthi attacks. The disruption forced vessels to take a longer alternative route, increasing shipment delivery times by an average of 10 days, which significantly impacted businesses with limited inventories.
| Countries | Import/Export | 2020 | 2021 | 2022 | 2023 | 2024 |
| Middle East | Imp | 977.1 | 1235.9 | 1511.6 | 1548.3 | 435.55 |
| Exp | 1007.5 | 1419.7 | 1873.2 | 1741.31 | 322.87 | |
| Asia | Imp | 6803.7 | 8829.1 | 9832.5 | 9208.2 | 5355.1 |
| Exp | 7459.5 | 9593.4 | 10637.2 | 9977.98 | 6213.6 | |
| Europe | Imp | 6403.2 | 7977.9 | 8926.2 | 8480 | 3236.1 |
| Exp | 6569.19 | 8129.9 | 8842.9 | 8613.7 | 2946.8 |
Future Projections of this Prevalent Situation?
Houthi’s Stance on Attacks
The Houthis have mentioned they will stop attacks on cargo ships in the Red Sea & Israel only if no aggression comes from the US, UK or Israel could lead to escalations.
Rise in Threats to Maritime Security
Reports suggest Seahawk Maritime Intelligence has warned of growing ties between Somali pirates, Houthis and other regional areas. Analysts believe the Red Sea crisis has diverted counter-piracy naval resources, creating an opportunity for Somali pirates to stage a comeback.
Impact of Somali Piracy
Somali piracy threatens regional seafarers that may face greater risks as their crew can face higher risks including hijackings and ransom demand.
In a Nutshell
In conclusion, the growing instability in the Red Sea and the ongoing war in Gaza have diverted global attention from critical maritime security concerns, leaving vital trade routes vulnerable. As naval forces remain overstretched and piracy networks regain confidence, the risk of Somali piracy reaching its former peak is becoming increasingly real. Without a renewed global commitment to safeguarding these waters, commercial shipping will continue to face mounting threats.
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