We have seen a vast reduction in the number of vessels passing through the Suez Canal following the launching of these attacks. In November 2023, 2,068 vessels passed through the Suez Canal. In September of this year, only 868 vessels transited the canal – a startling drop of 57%. In terms of traffic by deadweight tonnage, a difference of 70% has been recorded.

The attacks have had disproportionate effects on certain types of vessels. The Red Sea and Suez Canal have become practicably unnavigable for vessels with ties to the U.S., the UK or Israel, and the situation has had a dramatic impact on trade between Europe and Asia. On the other hand, Chinese and Russian vessels are allowed to pass through unscathed. Larger vessels are also affected disproportionately, being targeted more often by the Houthi attacks. Very Large Container Ships (VLCS) and Ultra Large Container Ships (ULCS) have been the most common vessels to reroute around the Cape of Good Hope, a journey that takes approximately 10 to 15 days longer than using the Suez Canal.

From week 44 of 2023 to week 7 of 2024, a drop in VLCS traffic from 53 vessels per week to just 2 was recorded. Similarly, for ULCS, this drop was from 24 per week to 0. A corresponding increase of traffic around the Cape was also recorded, from 14 vessels per week to 82, and from 0 vessels to 21, respectively.

As a consequence, there is now much more marine traffic moving around the Cape, often smaller vessels or vessels with lower free board than would historically be the case. The Cape is notorious for its strong winter storms and abnormal swells, and it remains to be seen if this creates additional risks of vessel casualty. In addition, South Africa is well known for being a favorable arrest jurisdiction with its associated ship arrest regime. The influx of additional vessels, which previously might not have traded via South Africa, may create opportunities for unsatisfied maritime claimants. Increased bunkering in South Africa might also lead to additional port congestion and potentially delay.

The most immediate consequences are delays and increase in freight. These freight costs are being passed on to cargo interests. This is done by way of freight surcharges on containers.

Where vessels continue to trade the Red Sea, some have been “going dark,” turning off their AIS transponders to reduce their susceptibility to Houthi attacks. Although AIS is compulsory for vessels over 300GT, exceptions are in place should the master believe that the use of AIS would put the vessel in danger. Indeed, Aspides, the EU’s naval force, reported that missile strikes had 75% accuracy when aimed at vessels operating with AIS on, but 96% of strikes missed when AIS was switched off. Masters will need to find a balance, where turning off AIS reduces the accuracy of attacks but also hinders the tracking capabilities of naval support.

As a general rule, charterers and cargo interests cannot insist that vessels transit via the Red Sea and the Suez Canal, and owners are protected by charterparty clauses, such as CONWARTIME and VOYWAR.

The impact of all this has been significant, mainly for European cargo interests, supply chains and the vessel owners and charterers who service this market. It also affects different countries differently, with Egypt being deprived of much of the important revenue it brings in the form of canal dues and South Africa potentially benefitting from increased vessel visits, although this creates additional port congestion. These effects will continue to be seen in the foreseeable future.