The Suez Canal Authority (SCA) saw its revenue drop by approximately $2.2 billion year-over-year due to the traffic impact of attacks in the Red Sea.
In the fiscal year 2023/24, the SCA’s revenue declined to $7.2 billion from $9.4 billion the previous year, a decrease of around 23 percent. The total tonnage passing through the canal fell by a third, and the number of transits declined by about 22 percent year-over-year.
After half of the SCA’s fiscal year had already passed, the numbers partially reflect the canal’s normal business performance during the previous summer and fall. However, the current traffic levels are less encouraging, suggesting that the figures for the fiscal year 2024/25 may be even lower unless the security situation improves.
The Suez Canal is a critical source of revenue for the government of Egypt and one of the country’s top earners of foreign currency.
Ocean carriers benefit, but logistics disruptions mount
While the shutdown is reducing revenue for the canal, it has become a windfall for ocean carriers. The long diversion around Africa has absorbed most of the excess tonnage on the market, driving spot rates back up into profitable territory. The schedule changes from this detour have led to “bunching” at key transshipment ports, resulting in port congestion as far away as Singapore. Vessel deployments have also been shuffled and reorganized on trade lanes around the globe to free up more tonnage for the Cape of Good Hope route, which will have a ripple effect in seemingly unconnected markets.
Read more: Suez Canal forecasts $10.3 billion in navigation traffic, secures billion-dollar projects
Shipping industry grapples with capacity constraints
As Maersk CEO Vincent Clerc stated in an address to customers this week, “All ships that can sail and all ships that were previously not well utilized in other parts of the world have been redeployed to try to plug holes. It has alleviated part of the problem, but far from all the problems across the industry. We are going to have in the coming month missing positions or ships that are sailing that are significant different size from what we normally would have on that string, which will also imply reduced ability for us to carry all the demand that there is.”
Carriers benefiting from elevated rates
For carriers, this situation creates a major revenue opportunity. Rates between China and the U.S. are up 500 percent year-over-year, according to Goldman Sachs, reaching levels associated with the exceptional profitability of the late pandemic years.
For more news on logistics, click here.
