Update on Red Sea trade flow impacts

While neither Iran nor Israel wants a full-scale war, Iran will likely encourage its proxies to adopt a long-term strategy of military engagement.

• The war in Gaza is the focal point, but growing conflict on Israel’s northern border with Hezbollah, and Houthi attacks on vessels transiting the Bab-El-Mandeb Strait have also been flashpoints of rising discord.
• The war in Gaza between Hamas and the Israeli Defense Force (IDF), looks unlikely to end anytime in the immediate future. A push for some type of ceasefire agreement from the Biden administration has been met with little interest from either the Israeli’s or Hamas, a reality that is unlikely to change for now.
• Israel’s northern border with Lebanon has also become a point of contention as both Hezbollah and the IDF lob rockets at one another. In mid-September, an apparent Israel detonation of Hezbollah pagers, a move that killed at least 12, and injured more than a thousand people, marked a fresh phase of escalation. A continued amplification of kinetic engagement between the two parties looks likely.
• This brings us to the issues in the Red Sea. Beginning in November 2023, the Houthi’s, a somewhat loosely linked Iranian proxy group located in Yemen, began to target commercial vessels passing through the Bab-El-Mandeb Strait, a key waterway linking the Indian Ocean to the Red Sea, Suez Canal, and Mediterranean. It is our view, that similar to Hamas and Hezbollah, the Houthis will continue to target vessels that attempt to transit the Bab-El-Mandeb Strait well into the foreseeable future.

Suez Canal currently accounts for 6% of seaborne crude flows, down from 10% before Houthi attacks began; a surge in Russian volumes via the Suez have provided a partial offset amid European import embargoes.

• Total crude shipments through the Red Sea fell to 2.48 Mbd in August, the lowest reading since January 2022. The Red Sea share of global seaborne crude volumes dropped to 6% last month, down from an intermittent peak of 12% in April 2023 (5.10 Mbd), marking a decline of 40% relative to the 12-month period through October 2023.
• Nonetheless, crude flows have been less affected than most other seaborne commodities due to a surge in Russian exports to Asia, a result of a European embargo on seaborne Russian crude. So far this year, 83% of Western Russian crude flows (i.e. exports of Urals, Siberian Light, and the Arctic grades) passed through the Suez Canal. So far this year, Russian oil exports via the Suez have averaged 1.9 Mbd.

Clean product shipments have largely re-routed around the Cape of Good Hope; like crude, Russian diesel and naphtha continues to flow through the Suez and Red Sea.

• Jet has faced the largest impacts. Just 2% of seaborne flows now transit the Suez, down from 30% (530 kbd) before Houthi attacks in the Red Sea began. Transits via the Cape of Good Hope have surged as an offset, holding at 520 kbd so far this year.
• Seaborne gasoil diesel shipments, of which roughly 15% flowed through the Suez before October 2023, have since fallen to 5%. Like jet, a significant rerouting via the CoGH has taken place. Of the 1.1 Mbd in East-to-West year-to-date, 640 kbd has transited via the CoGH. Russian exports to Asia, and shipments from Saudi’s Yanbu Refinery into Europe have remained sources of gasoil/diesel that are still utilizing the Suez.
• Seaborne naphtha flows have almost completely reshuffled to avoid Red Sea transits. Before October 2023, some 15% of seaborne global naphtha volumes passed through the Suez, a level that has since fallen to just 3%. On a year-to-date basis, West-to-East naphtha flows have managed at 530 kbd, in line with 2023 levels, albeit Suez transits have fallen from 470 kbd last year to 120 kbd since May 2024. These remaining flows are mostly comprised of Russian volumes.

LNG carriers rarely utilized the Suez Canal or Red Sea, even before Houthi attacks, albeit any transits that were taking place have ceased completely this year.

• In the twelve months prior to October 2023, just 8% of global LNG flows went through the Red Sea, a relatively low share compared to other energy and agricultural commodities. Roughly half of the Suez LNG flows last year (32 Mt) originated in the Atlantic Basin. By February 2024, shipments through the Bab-El-Mandeb Strait had come to a complete halt.

Impacts on dry bulks shipments vary depending on the commodity; metallurgical coal, and corn have seen large percentage declines while wheat transiting the Suez has hardly declined at all.

• Contrary to all other commodities that we cover in this report, seaborne wheat volumes in percentage terms moving through the Red Sea as a percentage of the global total have risen since Houthi attacks. In the twelve months prior to October 2023, 19% of all seaborne wheat moved through the Suez, a figure that has since risen to 22% in August of this year. This resilience is driven by continued exports from the Black Sea region to the EoS.
• Prior to October 2023, some 16% of total seaborne met coal volumes passed through the Suez. By August 2024, this metric had plunged to just 1%. In total, 49 Mt of met coal passed through the Suez last year, spread across three main Suez trade flows that have been interrupted by the Red Sea crisis, including Australia to Europe (17 Mt), US East Coast to Asia (15 Mt, to India/China/Japan), and Western Russia to Asia (13 Mt, mostly to India). While the first two routes have almost entirely been rerouted via the CoGH, 90% of Western Russian coal shipment to Asia are still passing through Suez.
• Prior to October 2023, some 12% of global corn volumes were shipped via the Suez Canal, a share that has since fallen to just 4%. US exports to Asia have shifted away from the Gulf Coast via Suez towards West Coast exports from Washington, Oregon, and California. As a result, and contrary to most other commodities, the year-to-date reduction in Suez corn flows has not led to a simultaneous increase in CoGH shipments above seasonal norms.

Geopolitical Backdrop

Issues in the Red Sea will persist for months or years to come as Iran looks to pressure Israel via its proxies.

Over the past 11 months, it would be hard to deny that tensions in the Middle East have not accelerated to a fever pitch. Following the Hamas terrorist attack on October 7, 2023, the region has descended into a chaotic state. Of course, the war in Gaza is the focal point, but growing conflict on Israel’s northern border with Hezbollah, and Houthi attacks on vessels transiting the Bab-El-Mandeb Strait have also been flashpoints of rising discord, and outright hostility. In this month’s Commodity Geopolitics update, we focus on the latter of these issues, examining the evolution of commodity flows through the Red Sea.

However, before diving into physical flows and pricing data, this report will begin with a quick update on the geopolitical situation in the Middle East with a particular focus on how things might evolve in the Red Sea. Our core thesis is that while neither Iran nor Israel want a full-scale war, Iran will likely encourage its proxies to adopt a long-term strategy of military engagement. This idea is encapsulated in Iran’s response to Israel’s killing of Hamas leader Ismail Haniyeh on July 31, who was located in Tehran. The move was not only highly provocative in itself but took place on sovereign Iranian territory. Nonetheless, despite expectations that Iran would escalate with a retaliatory strike, it’s been more than five weeks and yet no retaliation has taken place.

The lack of desire for a direct Iran/Israel conflict was also apparent earlier this year. In April, Iran, in what was an unprecedented escalatory move, launched a barrage of drones and missiles at Israel that originated directly from Iran, not from one of its proxies. The attack was in response to the Israeli killing of Iranian general Mohammad Reza Zahedi in the Iranian Consulate in Damascus. However, Iran’s attack was well choreographed, giving Israel plenty of time to prepare and shoot down much of what was fired. Furthermore, following the missile and drone barrage, Iran quickly de-escalated. Israel’s response, which included the bombing of several targets in Isfahan, was met with language from Iranian leaders that also appeared de-escalatory “The explosion this morning in the sky of Isfahan was related to the shooting of air defense systems at a suspicious object that did not cause any damage.”  

The war in Gaza between Hamas and the Israeli Defense Force (IDF), looks unlikely to end anytime in the immediate future, supporting our thesis that Iran will keep the pressure on Israel via its proxies. While Israel has taken control of large swathes of territory, the willingness on either side to sign any sort of ceasefire agreement looks far-fetched. On August 31, six Israeli hostages were found shot dead under the city of Rafah, a provocative Hamas decision that lessened the chances of any agreement. In comments made to Axios, the Biden administration currently believes that Hamas leader Yahya Sinwar does not really want a deal. Of course, the same could be said of Netanyahu, who likely wants to keep Israel in a state of war as well. Recently, Biden officials have expressed frustrations with Netanyahu, who appears committed to controlling the border between Gaza and Egypt, against the wishes of American policymakers. In comments made to the Financial Times, CIA Director Bill Burns said, “At the end of the day, it is a matter of political will and whether leadership on both sides is willing to recognize that enough is enough and that it is time to make tough decisions and make compromises.” US officials have since shifted focus towards using Egypt and Qatar as potential points of pressure on Hamas leaders to come to the table.

Israel’s northern border with Lebanon has also become a point of contention as both Hezbollah and the IDF lob rockets at one another. Tensions have steadily risen this year between the two groups and debates have intensified around the possibility of a direct conflict. In June, Netanyahu warned that there would come a time when the IDF would shift its focus to the north following an end to the “intense” phase of fighting in Gaza. On July 28, Hezbollah rockets killed 12 Israelis, prompting Israel to launch 100 IDF fighter jets in August meant to target missile sites and other military installation in Lebanon. Whether the location of the rocket strike Hezbollah initiated was deliberate or not remains an open question, albeit the move was clearly escalatory. In mid-September, it also appears that Israel was responsible for the detonation of Hezbollah pagers, a move that killed at least 12, and injured more than a thousand people in Lebanon, marking yet another amplification of tensions between the two parties.

Unlike Hamas, Hezbollah shares a close relationship with Iran. Both are Shiite and share broadly the same ideology, which includes a decidedly hostile stance towards Israel. Hezbollah also pledges commitment to the Iranian Supreme Leader, albeit internal politics within Lebanon can at times create rifts. Iran has long played a central role in training, equipping, and financing Hezbollah, making the group into a major power player in the Middle East. According to the US Department of State, Iran provides Hezbollah with upwards of $700mn per year, funds which have helped the group maintain a large arsenal of rockets. In our view, Hezbollah, like Hamas, will continue to antagonize Israel.

This brings us to the issues in the Red Sea. Beginning in November 2023, the Houthi’s, a somewhat loosely linked Iranian proxy group located in Yemen, began to target commercial vessels passing through the Bab-El-Mandeb Strait, a key waterway linking the Indian Ocean to the Red Sea, Suez Canal, and Mediterranean. These attacks, as we will cover later in this report, caused a sharp decline in transits from both East-to-West and West-to-East, with vessels either preferencing the route around the Cape of Good Hope or foregoing the journey altogether.

It is our view, that similar to Hamas and Hezbollah, the Houthis will continue to target vessels that attempt to transit the Bab-El-Mandeb Strait well into the foreseeable future. While the Houthi threat does not represent a direct engagement against Israel, Red Sea attacks send a clear message of alignment with Iran’s proxies in the Levant. Even if Houthi attacks slow or stop for periods of time, the likelihood of a return to normal is unlikely given wary insurers, and increasingly ingrained trade flows, which can often become difficult to redirect once established. There is also the issue of affiliation. Unlike Hezbollah, the linkages between Iran and the Houthi’s are weaker. This is evidenced by Houthi attacks on Russian- and Chinese-origin vessels. At some point in the future, it could be difficult for Iran to convince the Houthi’s to stop their engagements in the Red Sea. No matter what, we believe that it could take many months or even years before trade flows through the Red Sea are back to norms seen before the war in Gaza began.

Crude Oil and Condensate

Shipments via the Suez are down 40%, albeit Russian volumes via the Red Sea have surged following the European import embargo

Suez share of total seaborne flows: 12-months prior to October 2023 – 10%; August 2024 – 6%

Main trade flows affected: Iraq/Saudi Arabia to Europe; US Gulf Coast to South Korea, China, and India

When it comes to Red Sea transits, crude oil stands out as these flows not only pass through the Suez Canal but also utilize Egypt’s 1.3 Mbd Sumed pipeline connecting the Red Sea and the Mediterranean. Total crude shipments through the Red Sea fell to 2.48 Mbd in August, the lowest reading since January 2022. The Red Sea share of global seaborne crude volumes dropped to 6% last month, down from an intermittent peak of 12% in April 2023 (5.10 Mbd), marking a decline of 40% relative to the 12-month period through October 2023.

Nonetheless, crude flows have been less affected than most other seaborne commodities due to a surge in Russian exports to Asia, a result of a European embargo on seaborne Russian crude. These shipments continue to transit through the Red Sea. So far this year, 83% (1.9 Mbd) of Western Russian crude flows (i.e. exports of Urals, Siberian Light, and the Arctic grades) passed through the Suez Canal, while 16% headed to three refineries in Turkey (two operated by Tupras and one by Socar). The remaining volumes are comprised of the occasional odd cargo via the Cape of Good Hope and the Northern Sea Route. This year, Russian crude accounted for 50% to 70% of Suez crude transits depending on the month. Houthi attacks have largely avoided attacking Russian vessels, allowing for transits through the Suez to continue.

Monthly Seaborne Crude Exports via the Suez Canal (kbd, left) and Russian Share of Suez Transits (%, right)

Source: Kpler

Despite the risks associated with passing through the Bab-El-Mandeb strait, non-Russian crude continues to flow through Suez, albeit at much lower levels, driven by a favorable West-East price differential. A relatively low Brent-Dubai EFS spread (i.e. Brent is relatively cheap, Dubai relatively expensive), influenced by production cuts by Middle Eastern NOCs, has kept Atlantic Basin barrels attractively priced for Asian refiners. Year-to-date through 2024, the EFS spread averaged just $1.57/bbl, lower than in 2023 ($1.77/bbl), 2022 ($7.78/bbl), and 2021 ($3.18/bbl; Kpler calculations based on Argus Media pricing). Overall, the price competitiveness of West of Suez crude has made the extensive re-routing via the Cape of Good Hope (CoGH) economically viable, reflected in a significant jump in such crude flows in H1 2024 (see chart).

An extension of Saudi production cuts through 2025 currently forms our base case. Based on this assumption, the Brent-Dubai EFS spread is likely to remain narrow next year, keeping Atlantic Basin crude attractive to East of Suez (EoS) refiners. This, paired with a continuation of Western Russian crude flows to India and China will provide a floor to West-to-East Suez crude flows next year.

Monthly Share of Global Seaborne Crude Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Clean Products

Jet fuel flows through the Suez have collapsed to just 2% of total seaborne, down from 30% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 30%; August 2024 – 2%

Main trade flows affected: Middle East/India to NWE

Among oil products, jet fuel flows have been the most heavily impacted by the Red Sea crisis, at least in percentage terms. In the twelve months prior to October 2023, a massive 30% (530 kbd) of global seaborne jet fuel volumes passed through the Suez Canal, mostly East-to-West due to Europe being structurally short and Asia net long middle distillates. By August 2024, only 2% of global jet fuel flows (45 kbd) were shipped via the Suez Canal. Simultaneously, jet volumes around the Cape of Good Hope (CoGH) have surged this year, so far holding at 520 kbd.

Monthly Share of Global Seaborne Jet Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Gasoil/diesel flows through the Suez have fallen to 5% of total seaborne, down from 15% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 15%; August 2024 – 5%

Main trade flows affected: Middle East/India to NWE and Med

Before October 2023, roughly 15% of seaborne gasoil/diesel flows relied on the Suez Canal, a share that has since fallen to 5%. Like jet, a significant rerouting via the CoGH has taken place. Of the 1.1 Mbd in East-to-West year-to-date, 640 kbd has transited via the CoGH. Nonetheless, gasoil/diesel flows via the Suez have held up better than that of jet for two reasons. First, almost all East-bound diesel volumes through Suez are of Russian origin. This is an atypical trade flow considering that the Atlantic Basin is net short diesel. In the aftermath of the Ukraine invasion, Russia found new Asian buyers not only for its crude but also for its products that are now shunned by Europe. Second, most of East-of-Suez (EoS) diesel exports to the West-of-Suez (WoS) that still cross the Suez Canal are exported from Saudi Arabia’s Yanbu refinery located at the Red Sea but well north of the Houthi danger zone (230 kbd out of 340 kbd ytd).

Monthly Share of Global Seaborne Gasoil/Diesel Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Naphtha flows through the Suez have fallen to 3% of total seaborne, down from 15% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 15%; August 2024 – 3%

Main trade flows affected: Western Russia, Algeria, and US Gulf Coast to OECD Asia, Taiwan, and China

Similar to jet, seaborne naphtha flows have almost completely reshuffled to avoid Red Sea transits. While jet fuel is an East-to-West trade, naphtha typically flows in the opposite direction, delivering naphtha from simple refining setups in Russia and the Med to East Asian steam crackers in South Korea, Taiwan, and China. A significant 15% of seaborne global naphtha volumes used to pass through Suez. Nonetheless, these volumes have since plunged by a massive 82% following the issues in the Red Sea, prompting significant rerouting around the CoGH (beginning in December 2023). On a year-to-date basis, West-to-East naphtha flows have managed at 530 kbd, in line with 2023 levels, albeit Suez transits have fallen from 470 kbd last year to 120 kbd since May 2024. These remaining flows are mostly comprised of Russian volumes and some occasional cargoes from Greece and Algeria, meaning the additional downside to naphtha flows via Suez is limited.

Monthly Share of Global Seaborne Naphtha Flows via Suez and Cape of Good Hope (%)

Source: Kpler

LNG

No LNG shipments currently utilizing the Suez, albeit even before Houthi attacks began, the Red Sea only saw limited LNG transits.

Suez share of total seaborne flows: 12-months prior to October 2023 – 8%; August 2024 – 0%

Main trade flows affected: Western Russia, Algeria, and US Gulf Coast to OECD Asia, Taiwan, and China

Even before the Houthi attacks began, reliance on the Suez for LNG carriers was relatively limited. In the twelve months prior to October 2023, just 8% of global LNG flows went through the Red Sea, a relatively low share compared to other energy and agricultural commodities. Roughly half of the Suez LNG flows last year (32 Mt) originated in the Atlantic Basin. By February 2024, shipments through the Bab-El-Mandeb Strait had come to a complete halt. Since then, there has been a number of laden LNG carriers passing through the Suez Canal from North to South, but these cargoes were exclusively delivered to the Northern Red Sea (Aqaba, Ain Sukhna) without transiting the combat zone around the Bab-El-Mandeb, which is around 2,000 km to the South. While a missile attack poses a deadly threat to any vessel’s crew, the impact such an attack would have on an LNG carrier with its highly flammable cargo is even more devastating. Risk aversion is at its highest with LNG carriers.

Monthly Share of Global LNG Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Nonetheless, Red Sea disruptions have had some limited impacts on US, and Qatar shipments, among others.

The Houthi attacks have caused the re-routing of LNG sourced from several regions. US exports to the EoS (23.7 Mt), of which roughly 8.7 Mt originally transited the Suez have since been rerouted around the CoGH. Most volumes formerly exported via the Panama Canal are also taking the route around the CoGH due to transit limitations. The same applies to EoS exports from Trinidad and Tobago (1.5 Mt out of 8 Mt in 2023), the only other sizeable LNG player in the Americas. For other exporters such as Algeria (1.3 Mt EoS exports in 2023) and Egypt (Idku LNG at the country’s Med coast: 0.7 Mt) the Asian market has essentially been sealed off without the possibility of a Red Sea passage. Western Russian LNG, mostly from Yamal LNG, has also shifted towards the CoGH route after holding at 2.9 Mt through the Suez last year. Broadly speaking, most of the former West-to-East LNG export volumes have since shifted to transiting around Africa (US, Trinidad, Russia - Yamal), finding regional buyers (Algeria), or selling into the domestic market (Egypt).

LNG shipments from Qatar have also faced the prospect of re-routing. Qatari East-to-West flows, which totaled to 15.2 Mt in 2023, have entirely routed around the CoGH so far this year (currently 8.4 Mt year-to-date).

Monthly US + Trinidad & Tobago West-to-East LNG Exports by Route (Mt)

Source: Kpler; flows via Suez Canal do not include transit through Bab-el-Mandeb

Dry Bulk

Wheat flows through the Suez have risen to 22% of total seaborne, up from 19% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 19%; August 2024 – 22%

Main trade flows affected: Black Sea to Middle East and South Asia

Contrary to all other commodities that we cover in this report, seaborne wheat volumes moving through the Red Sea as a percentage of the global total have risen since Houthi attacks. In the twelve months prior to October 2023, 19% of all seaborne wheat moved through the Suez, a figure that has since risen to 22% in August of this year. This resilience is driven by continued exports from the Black Sea region to the EoS. Like the flow of Russian crude, and products, Russian wheat has been forced to seek out new outlets amid European sanctions. This has included structurally higher Russian wheat volumes towards Bangladesh and East Africa. While there have been instances of Black Sea originating cargoes diverting around the CoGH (1.5 Mt year-to-date), these volumes have been minor in comparison to other commodities. The elevated share of Russian wheat flowing to Asia should keep respective Suez transits at high levels for the foreseeable future.

Monthly Share of Global Seaborne Wheat Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Corn flows through the Suez have fallen to 4% of total seaborne, down from 12% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 12%; August 2024 – 4%

Main trade flows affected: US Gulf Coast to Japan, Ukraine to China

Prior to October 2023, some 12% of global corn volumes were shipped via the Suez Canal, a share that has since fallen to just 4%. Exports are largely split between Brazil (40%), the US (20%), Argentina (17%), and Ukraine (11%; for 2023). Asia typically receives 60% of these volumes. Due to limitations on Panama Canal transits and to avoid the Red Sea region, US exports to Asia have shifted away from the Gulf Coast via Suez towards West Coast exports from Washington, Oregon, and California. Elevated US production, led by record yields and high projected ending stocks, have made US corn exports extremely attractive. As a result, and contrary to most other commodities, the year-to-date reduction in Suez corn flows has not led to a simultaneous increase in CoGH shipments above seasonal norms.

Monthly Share of Global Seaborne Corn Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Soybean flows through the Suez have fallen to 0% of total seaborne, down from 5% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 5%; August 2024 – 0% (seasonal)

Main trade flows affected: US Gulf Coast to China (but limited overall)

The soybean trade is highly centralized, especially on the supply side. Brazil (69% of seaborne exports in 2023) and the US (26%) are the only two major seaborne exporters, while Asia imports more than 80% of the total. Among the three main grain commodities, soybeans boast the least reliance on the Suez Canal, hence limiting the degree of diversions.

Being highly seasonal, in the past, soybean flows via Suez were mostly comprised of Asia-bound US Gulf Coast volumes that were not channeled via the Panama Canal. These flows typically ramp up in late Q3 and peak in Q4. So far this year, we have not observed the normal uptick in US exports via Suez with re-routing instead happening via the CoGH. The volumes affected amount to around 9 Mt of US soybeans (i.e. only 6% of the seaborne market last year), which constitutes the major diversion in the soybean market.

Out of total US exports, only a quarter relied on the Suez Canal in 2023. Around 30% of exports were shipped from the US West Coast, 17% from the Gulf Coast to Asia via the Panama Canal, and 27% to destinations not requiring a Suez transit (Europe, Mexico, Africa). Brazilian exports logically pass via the CoGH on their way to Asia.

The shift of US soybean flows has been facilitated by a pronounced downward trend in US exports, which fell by 15.5% y/y in 2023 and are down 6.5% y/y on a year-to-date basis. This reflects a shift in Chinese buying towards Brazil and away from the US. Alongside a push to build domestic soybean inventories, China looks to be anticipating a broader trade conflict with the United States.

Monthly Share of Global Seaborne Soybean Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Thermal coal flows through the Suez have fallen to 1% of total seaborne, down from 5% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 5%; August 2024 – 1%

Main trade flows affected: Colombia to South Korea and China (but limited overall)

The Suez Canal only plays a subordinate role in global thermal coal flows (only 5% of volumes prior to October 2023). Indonesia, Australia, South Africa, and Far East Russia export more than 80% of global thermal coal volumes, and at the same time, Asia is the recipient of more than 80% of it. None of these flows between the major producers and the major buyers requires a Suez transit.

Metallurgical coal flows through the Suez have fallen to 1% of total seaborne, down from 16% before October 2023.

Suez share of total seaborne flows: 12-months prior to October 2023 – 16%; August 2024 – 1%

Main trade flows affected: Australia to NWE, US East Coast to Asia, Western Russia to India

Metallurgical coal, unlike thermal coal volumes, relied heavily on the Suez Canal pre-Houthi attacks. Prior to October 2023, some 16% of total seaborne met coal volumes passed through the Suez. By August 2024, this metric had plunged to just 1%. The major exporters, which include Australia, Russia, US, and Canada accounted for almost 90% of seaborne loadings last year. The top importers are Asia’s Big 4 (India, Japan, China, and South Korea) with a combined share of 64%. In total, 49 Mt of met coal passed through the Suez last year, spread across three main Suez trade flows that have been interrupted by the Red Sea crisis, including Australia to Europe (17 Mt), US East Coast to Asia (15 Mt, to India/China/Japan), and Western Russia to Asia (13 Mt, mostly to India). While the first two routes have almost entirely been rerouted via the CoGH, 90% of Western Russian coal shipment to Asia are still passing through Suez.

Monthly Share of Global Seaborne Metallurgical Coal Flows via Suez and Cape of Good Hope (%)

Source: Kpler

Red Sea Impact Summary

Following the Hamas attacks on October 7, 2023, the Yemeni Houthis began launching attacks on commercial shipping in the Bab-El-Mandeb strait in November 2023. The impact on trade flows varies significantly across different commodities depending on the global distribution of supply and demand, regional replaceability, differing freight market dynamics between tankers, dry bulkers, and LNG carriers, and the involved parties’ risk tolerance. The chart below illustrates how Suez Canal transits for each commodity (as share of its total seaborne flows) have changed between the twelve months preceding the October 2023 escalation and more recently. Black triangles indicate the extent of Suez volume reduction for each commodity.

Volumetric Share of Suez Canal Transits Before the October Attacks and Recently

Source: Kpler; LNG deliveries to the Northern Red Sea via Suez still ongoing, but no passage of the Bab-El-Mandeb strait

Overall, commercial Suez Canal transits remain subdued compared to year-ago levels. Seaborne trade routes of jet fuel and metallurgical coal have shifted most strongly, and only Suez flows of wheat have maintained at previous levels. Crude flows have been impacted less compared to other commodities due to a big increase in West-to-East Russian shipments towards China and India.

Compared to non-Russian commodities, cargoes of Russian origin (particularly crude, gasoil/diesel, naphtha, and wheat) continue to transit the Red Sea at a significantly higher rate. This can be attributed to political factors such as the Iran-Russia alliance, which has led to Houthis primarily targeting non-Russian vessels (though there have been instances of Russia-affiliated vessels being attacked, possibly by mistake). In addition, the capabilities of non-Western ship insurance, brokerage, and technical and commercial ship management have markedly improved since 2022, when Russia was forced to seek alternatives to Western firms. These service providers have been effectively navigating the complexities of Russia sanctions, likely resulting in a generally greater risk tolerance.

Percentage of Global Trade Flows Routed via the Suez Canal

Source: Kpler

Percentage of Global Trade Flows Routed via the Cape of Good Hope

Source: Kpler

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