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Red Sea Conflict Hits Trade, Suez Shipping Plummets

Majors in the shipping industry are temporarily stopping Suez transits as they search for other route…writes Arul Louis

Sounding an alarm about the impact of the Red Sea conflict on the international economy, the United Nations trade body UNCTAD has said that the volume of international trade going through the Suez Canal has come down by 42 per cent during the last two months and is affecting energy exports to India.

“We are concerned that the attacks on Red Sea shipping are adding tensions to a context of global trade disruptions due to geopolitics and climate change,” Jan Hoffmann, who heads the Trade Logistics Branch of UNCTAD, told reporters on Thursday.

The longer trade distances and higher freight rates as ships avoid the Red Sea and the Suez Canal “could have cascading effects on food prices”, he said, warning of the spectre of inflation.

He said that according to the UNCTAD estimates, attacks by Houthi rebels on ships in the Red Sea region since November have led to the volume of shipping using the Suez Canal falling by 42 per cent.

Majors in the shipping industry are temporarily stopping Suez transits as they search for other routes, he said.

Some energy exports from Europe to India go through the Suez Canal, he said.

The Suez Canal which connects the Mediterranean Sea to the Red Sea is a vital link connecting Asia and East Africa with Europe and beyond and handled approximately 12 per cent to 15 per cent of global trade last year.

To avoid the Red Sea and the Suez Canal, ships have to go around the Cape of Good Hope at the southern tip of Africa.

UNCTAD – the UN Conference on Trade and Development – is the world body’s agency for trade and development.

Hoffman said that the Red Sea crisis comes on top of the problems in two other areas, the Panama Canal and the Black Sea.

While the Black Sea, a major conduit for foodgrains from Ukraine, has been affected by the war, the Panama Canal has been hit by climate change-related problems.

Droughts have reduced water in the canal to the lowest level in decades reducing the number and sizes of the ships that can transit it.

Hoffman said that the disruptions in key global trade routes have already led to a rise in energy prices.

“Prolonged disruptions in major trade routes would disrupt global supply chains, leading to delayed deliveries of goods, increased costs and potential inflation,” he said.

In Suez Canal affected by the Red Sea attacks by Houthi rebels, “the container shipping sector faces a significant challenge”, Hoffmann said.

Early data from 2024 showed that over 300 container vessels – over 20 per cent of global container capacity – were being diverted from or planning alternatives to the Suez Canal, he said.

Ships carrying gas have altogether stopped using the Suez because of the catastrophic impact an attack on them would have.

Container ship transits per week are down 67 per cent compared to a year ago while tanker traffic is down by 18 per cent, and in the category of dry bulk carriers, which transport grains or coal, shipping is down 6 per cent.

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Indian investors eye Suez Canal region as PM visits Cairo

Prime Minister Narendra Modi’s maiden visit to Cairo is happening later this week, reports Ateet Sharma

Egypt will pitch the development axis of the Suez Canal region, which includes a number of industrial and logistical zones, as a major investment opportunity for Indian companies during Prime Minister Narendra Modi’s maiden visit to Cairo later this week.

A delegation led by the Chairman of the Suez Canal Economic Zone (SCZONE) Waleid Gamal Eldien is currently in New Delhi holding discussions on India-Egypt economic engagement, especially potential investment opportunities in diverse areas like renewable energy, green hydrogen and infrastructure.

The touring party met Minister of State for External Affairs V Muraleedharan and called on Minister of Commerce and Industry Piyush Goyal on Tuesday evening.

Given its strategic location, Egypt has an ambitious plan to transform the country into a global logistical and commercial centre by linking the Red and Mediterranean seas through mega industrial and logistical zones.

Located around the main international maritime route of the Suez Canal passageway, which connects Europe, East and North Africa via the Suez Canal with Asia passing through the Arabian Gulf serving the majority of global trade, SCZONE aims to be one of the main logistics hubs in the region.

The government led by President Abdel Fattah El-Sisi has been quite gung-ho to open investments from Indian companies, especially in the field of green hydrogen production in Ain Sokhna located in the Gulf of Suez, north-west of the Red Sea.

During his India visit in January earlier this year, Sisi told a gathering of leading Indian businessmen that the Suez Canal region provides promising opportunities for companies wishing to benefit from Egypt’s strategic location as a centre for the production and re-export of products to various countries of the world, especially in the Arab and African regions.

“Our visions agreed to maximize the existing cooperation in various fields and move towards partnerships in new fields, including cooperation in the field of new and renewable energy and the production of green hydrogen,” the Egyptian President said in his speech after the bilateral talks with Prime Minister Narendra Modi in January during which the India-Egypt relationship was elevated to Strategic Partnership.

While there has been no government-to-government agreement or MOU on green hydrogen so far, Indian private companies have entered into major projects in Egypt.

Last year, SCZONE signed an MoU with Indian energy group ACME to set up green hydrogen and ammonia production facilities in an area of 4.5 million square meters in Sokhna with a total production volume amounting to 2.2 million tonnes annually.

Overall, more than 50 Indian companies have invested around USD 3.15 billion in diverse sectors of the Egyptian economy, including chemicals, energy, textile, garment, agri-business, retail, etc.

Meanwhile, ahead of PM Modi’s first visit to Egypt, the delegation led by SCZONE Chairman Waleid Gamal Eldien continues to hold extensive meetings in New Delhi with various Indian ministries and major companies operating in the sectors of new energy, iron, steel, and infrastructure.

Spotlighting the importance of cooperation between Indian companies and the economic zone in light of the close economic and trade relations between the two countries, Walid Gamal El-Din continues to emphasise the “great support and confirmation” of the political leadership of the two countries in strengthening partnership and also working to increase Indian investments in Egypt.

(India Narrative)

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Egyp to hike Suez Canal transit fees in 2023

The authority said on Saturday that rising energy prices, freight rates, and daily charter rates for ships, predicted to continue next year, are the main reason for raising transit tolls …reports Asian Lite News

The Suez Canal’s transit tolls will increase by 15 per cent for all types of vessels and 10 per cent for dry bulk and cruise ships starting next year, the Suez Canal Authority (SCA) announced in a statement.

The authority said on Saturday that rising energy prices, freight rates, and daily charter rates for ships, predicted to continue next year, are the main reason for raising transit tolls along the vital canal connecting the Mediterranean Sea to the Red Sea, Xinhua news agency reported.

“The (tolls) increase is inevitable and is a necessity in light of the current global inflation, which translates into increased operational costs and the costs of the navigational services provided in the canal,” SCA Chairman Ossama Rabiee said in the statement.

He added that the SCA adjusted the tolls through clear mechanism incorporating the changes in the maritime transport market, noting the canal remains the most efficient and least costly route compared to alternative routes.

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Suez Canal Adds $6.3 bn to Egypt in 2021

The revenues of Egypt’s Suez Canal in 2021 reached $6.3 billion, the highest in the waterway’s history…reports Asian Lite News

In a statement on Sunday, Chairman of the Suez Canal Authority (SCA) Osama Rabie said that the waterway has also registered the largest annual net tonnages of 1.27 billion tonnes in 2021, compared to 1.17 billion tonnes in 2020, an increase of 8.5 per cent, reports Xinhua news agency.

Suez Canal revenues hit record $6.3 bn in 2021

The revenues of the Suez Canal during 2021 achieved a significant increase of 12.8 per cent, said Rabie, noting that the revenues of the canal recorded $5.6 billion in 2020.

A total of 20,694 ships passed through both directions of the canal, compared to the transit of 18,830 ships in 2020, an increase of 10 per cent.

The Egyptian official stressed that the records reflect the flexibility of the SCA in dealing with crises caused by the Covid-19 pandemic.

In November 2021, the SCA announced it will increase the toll fees for the ships transiting through the canal by 6 per cent as of February 2022.

ALSO READ: Suez Canal revenue hits record high in 2021

The Suez Canal is a major lifeline for global seaborne trade since it allows ships to travel between Europe and South Asia without navigating around Africa, thereby reducing the sea voyage distance between Europe and India by about 7,000 km.

Some 12 per cent of the world trade volume passes through the man-made canal, which is a major source of hard currency in Egypt.

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Suez Canal revenue hits record high in 2021

The revenue of Egypt’s Suez Canal reached a record high of $6 billion in 2021, Chairman of the Suez Canal Authority (SCA) Osama Rabie said in a statement…reports Asian Lite News

“Egypt’s Suez Canal earned a revenue of $6 billion from January until the first half of December,” Rabie said, noting that it was the period’s highest-ever revenue.

Suez Canal revenue hits record high in 2021

The revenue of the Suez Canal reached $5.61 billion in 2020 and $5.8 billion in 2019.

The Suez Canal is a major lifeline for global seaborne trade since it allows ships to travel between Europe and South Asia without navigating around Africa, thereby reducing the sea voyage distance between Europe and India by about 7,000 km.

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Some 12 per cent of the world trade volume passes through the man-made canal, which is a major source of hard currency in Egypt.

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Navy holds exercises in the Red Sea, not far from the Suez Canal

INS Tabar is on an overseas deployment to Europe and Africa. Apart from Sudan, it has also conducted naval exercises with the Egyptian navy in the Mediterranean…reports Sankalp Gurjar.

On September 10, the Indian navy carried out a maritime partnership exercise with the Sudanese navy in the Red Sea. Despite building a strong energy partnership in the 2000s, it was the first time that Indian and Sudanese navies conducted such an exercise. From the Indian side, INS Tabar participated in the exercise along with the Sudanese ships Almazz and Nimar.

The exercise included ‘multiple activities covering a wide range of naval operations’ such as ‘co-ordinated manoeuvring, replenishment at sea [RAS] drills, helo operations, operations for interdicting suspect vessels at sea and communication procedures.’ The exercise ‘enhanced interoperability between the two navies significantly and widened the scope for combined operations against common maritime threats in future.’

INS Tabar is on an overseas deployment to Europe and Africa. Apart from Sudan, it has also conducted naval exercises with the Egyptian navy in the Mediterranean. Egypt and Sudan are important players in the geopolitics of the Red Sea and due to their proximity with the Suez Canal, are located along one of the most important maritime routes. Therefore, both of these exercises are of significant strategic import and point towards the expanding maritime horizons of the Indian navy.

Red Sea Geopolitics

The Red Sea links West Asia with Africa and is a critical geopolitical space where the rivalries between the Gulf powers are being played out. The Red Sea also links the Indian Ocean to the Mediterranean through the strait of Bab-el-Mandeb and Suez Canal. Large quantities of oil and trade pass through the Red Sea. It is a critical waterway for global energy security and the international economy. The recent blockage of the Suez Canal underscored the strategically important role of the Red Sea and Suez Canal for the global economy.

In the last few years, the Red Sea has emerged as a critical sub-theatre in the evolving geopolitics of the Western Indian Ocean (WIO). Foreign powers have established their military presence in the region and are taking a greater interest in the affairs of the maritime as well as continental space in and around the Red Sea. Russia, China, the United States (US), France, and Japan hold military facilities in the region. Even the United Arab Emirates (UAE) and Saudi Arabia are active in shaping the trajectory of regional geopolitics and security.

In fact, the presence of security threats such as terrorism and maritime piracy brought foreign powers to the region. US established its expansive network of bases in the WIO and Africa including at Djibouti after launching the Global War on Terror. Maritime piracy in the Gulf of Aden around 2007-08 was threatening global shipping and Somalia was unable to contain pirates operating out of its territorial waters. Therefore, a multinational maritime security effort was launched. The navies of major powers including Russia, China, Japan, and South Korea sent their warships to the region to participate in the anti-piracy operations.

Indian Naval Presence

The Indian navy too played a key role in the counter-piracy operations. India is a resident naval power with a willingness and desire to contribute towards the maintenance of regional security in the Indian Ocean including in the sub-theater of the Northwest Indian Ocean. Over the years, India has managed to regularize its maritime presence in the Gulf of Aden and Southwest Indian Ocean. Time and again, India has extended much-needed humanitarian assistance to the littoral states in the region. India has also positioned itself as the ‘preferred security partner’ in the region.

Indian navy is uniquely placed in the regional geopolitics of the Northwest Indian Ocean. It enjoys close relationship with the US, Japan, and France, and consequently, the Indian navy ships can access their naval bases in Djibouti. Russia’s upcoming naval base at Port Sudan also opens up opportunities for greater collaboration between Indian and Russian navies in the Red Sea and WIO.

Pic credits @indiannavy

India’s deepening strategic partnership with UAE could be strengthened further in the domain of maritime security in the context of the geopolitics of the Red Sea and the Gulf of Aden. India and Taiwan share an interest in containing Chinese power. The Taiwanese presence in Somaliland and UAE’s facilities along the Red Sea and the Gulf of Aden including Berbera could be leveraged for keeping a close watch on the Chinese activities in the region.

The entire region lying between the Suez Canal and Japan is seeing an expanding Indian maritime footprint. The growing interest in the region is demonstrated by regularly deploying warships for conducting naval exercises with friendly countries and for carrying out defence diplomacy. As a result, the Indian navy is indicating that Western Pacific and the Red Sea are emerging as integral parts of its strategic dynamics. The naval exercises with Egyptian and Sudanese navies demonstrate the expanding strategic maritime horizons and underscore the growing salience of the Red Sea in India’s security matrix.

ALSO READ-India, Australia navy exercise to promote stability in Indo-Pacific

READ MORE-INS Tabar participates in maritime exercise with Egyptian Navy

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Massive container ship freed from Suez Canal

The high tide on Sunday night helped to free the ship, reports Asian Lite News.

A massive container ship which had blocked the Suez Canal since March 23 has been freed and re-floated, maritime service provider Inchcape Shipping said on Monday.

The Panama-flagged ship, Ever Given, had veered off its course in a single-lane stretch of the canal during a sandstorm.

“The MV Ever Given was successfully re-floated at 4.3 a.m.. She is being secured at the moment,” Inchcape Shipping tweeted.

The high tide on Sunday night helped to free the ship, the service provider indicated.

The vital waterway is expected to be ready to resume traffic by 11 a.m. (local time), an Egyptian presidential advisor on the Suez Canal projects said on Monday, according to the Dubai-based television CNBC Arabia TV.

So far, there has been no official confirmation from the state Suez Canal Authority (SCA).

Online footage showed the vessel repositioned.

Ten giant tug boats were engaged in “pulling manoeuvres” to refloat the vessel, (SCA) head Osama Rabae said earlier on Monday.

Dredgers and tug boats had been working around the clock to free the massive 400-metre-long-vessel.

The blockage of the canal led to disrupted supply chains and sent ripples through global markets.

According to the canal authority, around 370 ships were waiting for passage on both sides of the canal, including 25 oil tankers.

Financial news wire Bloomberg reported there could even be 450 waiting ships.

The Suez Canal, which connects the Mediterranean to the Red Sea, provides the shortest shipping route between Asia and Europe.

The blockage was costing the canal operator $13 million to $14 million in losses per day, according to the head of SCA.

Egyptian President Abdel-Fattah al-Sisi had ordered preparations for the possibility of reducing the load of containers on the vessel to help free it.

At least 18,840 ships passed through the canal last year.

The Suez Canal provides one of Egypt’s main sources of income, alongside tourism and remittances from expatriates.

Revenue from the waterway reached $5.6 billion last year.

The Ever Given became jammed diagonally across a southern section of the canal in high winds early on Tuesday, halting shipping traffic on the shortest shipping route between Europe and Asia.

At least 369 vessels were waiting to transit the canal, including dozens of container ships, bulk carriers, oil tankers and liquefied natural gas (LNG) or liquefied petroleum gas (LPG) vessels, SCA Chairman Osama Rabie told Egypt’s Extra News on Sunday.

Crude oil prices fell after news the ship had been re-floated, with Brent crude down by $1 per barrel to $63.67. Shares of Taiwan-listed Evergreen Marine Corp – the vessel’s lessor – rose 3.3 percent.

About 15 percent of world shipping traffic transits the Suez Canal, which is a key source of foreign currency revenue for Egypt. The current stoppage is costing the canal $14-$15 million a day.

Shipping rates for oil product tankers nearly doubled after the ship became stranded, and the blockage has disrupted global supply chains, threatening costly delays for companies already dealing with COVID-19 restrictions.

Some shippers had decided to reroute their cargoes around the Cape of Good Hope, adding about two weeks to journeys and extra fuel costs.

Also Read-Panama celebrates 20 years in charge of Canal

Read More-Race against time to unblock Suez Canal

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Race against time to unblock Suez Canal

Around 10% of world trade flows through the canal, which is particularly crucial for the transport of oil, reports Asian Lite News.

A giant container ship remained stuck sideways Friday in Egypt’s Suez Canal, as authorities race to free the vessel and reopen traffic in a crucial East-West waterway for global shipping.

The Ever Given, a Panama-flagged ship that carries cargo between Asia and Europe, ran aground Tuesday in the narrow, man-made canal dividing continental Africa from the Sinai Peninsula.

The ship, owned by Japanese firm Shoei Kisen KK, has blocked traffic in the canal, leaving dozens of smaller ships stranded in the Mediterranean and Red Seas.

The vessel’s bow was touching the eastern wall, while its stern appeared lodged against the western wall – an extraordinary event that experts said they had never heard of happening before in the canal’s 150-year history.

The ship ran aground some 6 kilometers north of the southernly mouth of the canal, near the city of Suez, an area of the canal that’s a single lane.

The Suez Canal Authority, which operates the waterway, has deployed several tugboats in efforts to refloat the massive vessel, including a specialized suction dredger that is able to shift 2,000 cubic meters of material every hour.

As of Friday morning, the vessel remained grounded in the same position, with tugboats and dredgers still working to free it, according to Canal service provider Leth Agencies.

It reminded unclear when the route would reopen.

An Egyptian canal authority official called the refloating a “very sensitive and complicated” operation which needs to “be handled very carefully.” They want to avoid “any complications” that could extend the canal closure. The official spoke on condition of anonymity as he wasn’t authorized to talk to journalists.

NASA image of the Suez Canal, taken by the MISR instrument on the Terra satellite (Wikipedia)

A team from Boskalis, a Dutch firm specialized in salvaging, started working with the canal authority Thursday. The rescue efforts have focused on dredging to remove sand and mud from around the port side of the vessel’s bow.

The canal authority said late Thursday that they would need to remove between 15,000 to 20,000 cubic meters (530,000 to 706,000 cubic feet) of sand to reach a depth of 12 to 16 meters (39 to 52 feet). That depth is likely to allow the ship to float freely again, it said.

It wasn’t immediately clear what caused the Ever Given to become wedged on Tuesday. GAC, a global shipping and logistics company, said the ship had experienced a blackout without elaborating.

Evergreen Marine Corp., a major Taiwan-based shipping company that operates the ship, said in a statement that the Ever Given had been overcome by strong winds as it entered the canal from the Red Sea, but that none of its containers had sunk.

The Suez Canal also blamed bad weather for the incident.

The blockage has caused headaches for global trade. Around 10% of world trade flows through the canal, which is particularly crucial for the transport of oil. The closure also could affect oil and gas shipments to Europe from the Mideast.

At least 150 ships were waiting for the Ever Given to be cleared, including vessels near Port Said on the Mediterranean Sea, Port Suez on the Red Sea and those already stuck in the canal system on Egypt’s Great Bitter Lake, Leth Agencies said.

Using data from Automatic Identification System trackers on ships at sea, data firm Refinitiv shared an analysis with the AP showing over 300 ships remained en route to the waterway over the next two weeks.

Some vessels could still change course, but the crush of ships listing the Suez Canal as their destination shows that an even-greater backlog looms for shippers already under pressure amid the coronavirus pandemic.

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Read More-Egypt to expand Suez Canal