Egypt’s Suez Canal revenue shrinks 23% amid attacks on shipping, political tensions
“The effect on the Egyptian economy of the continuing conflict in the region is severe,” a producer source from a steel mill said.
“Not only are we losing the Suez Canal revenues, but the conflict is halting exports to East Asia. The higher freight costs also affect import costs of raw materials from that region,” he said. “Nobody knows when these issues will resolve themselves.”
Income gained from the shipping trade through the Suez Canal fell to $7.2 billion in the financial year ended July 1 this year, from $9.4 billion in the financial year 2022-23, the chairman of the Suez Canal Authority, Osama Rabie, announced on Thursday July 18.
The Red Sea-Suez Canal corridor was a major maritime route between Asia and Europe before the violence began in November 2023, when the Houthis started to strike at vessels which they believed were involved in trade with Israel. The Houthis are aligned with the Palestinians in Gaza, who are in conflict with Israel.
Since the escalation of the attacks from bases in Yemen, shipping operators have diverted vessels away from the Red Sea to avoid the conflict, trade sources said.
Yemen borders the Gulf of Aden to the south and the Red Sea to the west. At its narrowest, the strait between them is only 26km wide.
The loss of the income gained from transits through the Suez Canal, at the northern end of the Red Sea, linking to the Mediterranean Sea, has further intensified Egypt’s pre-existing struggles with a deficit of foreign currency, weakening the country’s import and export trade, market sources said.
A second steel mill source said that, because income from the canal was a source of foreign currency, the loss of that would increase the deficit in Egypt’s balance of trade. He added that the country needed to find a way to compensate for the drop in dollar-denominated funds.
Other sources said that any improvement in the situation for Egypt would depend on how the war in Gaza progressed and how the Houthis would respond.