Over recent years, several logistical projects have been proposed, centered on leveraging the geographic position of a single country or a group of allied countries to establish logistical corridors, which aim to serve regional and global trade routes passing through a specific region or connecting continents, particularly those linking East Asia with Western Europe and America. These logistical projects are diverse, encompassing alternative waterways that utilize open oceans, seas, and man-made canals for shipping, overland routes employing railways, roads, and pipelines for moving goods and oil products, and multimodal corridors that combine land and sea transport for the circulation of goods.

Egypt was well aware of the potential future threats these proposed projects could pose to the Suez Canal’s share of global trade, estimated at over 12% of total world trade in 2023. Some of these logistical projects are likely to gain commercial and logistical momentum in the short and medium term, which, in turn, will encourage the resumption of plans for similar competing projects. As a result, the Suez Canal may face a group of global competitors vying to attract as much internationally shipped cargo as possible. This anticipated logistical competition is expected to gradually erode the share of global trade passing through the Suez Canal, negatively impacting the Canal’s revenues and, consequently, the broader Egyptian economy.

This prompted Egypt to develop an integrated strategy to bolster its national logistical system, aiming to elevate its global position in trade and logistics. At the heart of this strategy were development initiatives for the Suez Canal region and its economic axis. These initiatives, once operational, delivered a series of historic successes for the Canal. The plan was to capitalize on these accomplishments and swiftly enhance their benefits, but the abrupt deterioration of the regional situation since October 2023 disrupted these plans. This situation could potentially lead to extended negative consequences in the future if its repercussions are not addressed effectively.

This final installment of “The Suez Canal amidst Global Competition” series will delve into the key initiatives Egypt has implemented over the past decades to solidify the Suez Canal’s position as a premier global maritime passage, while assessing how these projects have shaped the Canal’s activity within the framework of global supply chains. The report will also highlight the negative repercussions the Canal has endured in recent months, driven by heightened political and security unrest in the Middle East, especially in the southern Red Sea area and will offer a series of practical recommendations to ensure the Canal’s enduring global relevance, even as mounting challenges risk diminishing Egypt’s and the Suez Canal’s role in international logistics.

Aspirations and Obstacles

Barely two years after the Egyptian army’s triumphant victory over Israeli occupation forces in the Sinai Peninsula in 1973, Egypt announced the reopening of the Suez Canal in mid-1975, restoring its historic role as an artery for global prosperity. In the decades that followed until 2010 (see table 1), the Canal underwent a series of continuous upgrades that transformed it into the preferred maritime route for most international ships traveling between the East and West. Egypt consistently focused on deepening and widening the Canal’s navigational channel to accommodate h the drafts and beam widths of newer, larger commercial ships with greater cargo capacities.

Table 1: Stages of developing the Suez Canal (1965-2010)

Source: The Suez Canal Authority website

Continuous efforts to upgrade the Suez Canal have strengthened its position as a global logistics hub. From 1976 to 2008, the number of transiting ships increased by 22%, surpassing 21,000 vessels by 2008. Additionally, the amount of cargo shipped through the Canal grew by 79%, hitting 910 million tons over the same period. Nevertheless, signs and forward-looking indicators suggesting a possible decline in the Canal’s historical competitiveness started to grow at the close of the 20th century and into the early 21st century.

One of the indicators was the fear sparked by the Iraqi invasion of Kuwait and the Second Gulf War (1990–1991), which made some shipping firms wary of using the region’s shipping lanes. This crisis cost the Suez Canal $500 million in vessel transit earnings during the conflict. The invasion also had a lasting effect, prompting shipping companies to seek alternative routes bypassing the Suez Canal in the event of abrupt security issues in the Middle East. This strategy was implemented in parallel with a significant increase in pirate attacks on commercial vessels near Somalia’s coast from 2008 to 2011, leading to an average 18% drop in the number of ships transiting the Canal during that period.

There were also growing signs of diminishing ice along Russia’s Northern Sea Route during extended summer periods driven by climate change, leading to a substantial reduction in year-round snow cover, which enabled commercial ships to gain access to a route between Northeast Asia and Northern Europe that is 33% shorter than the conventional Suez Canal path, usable for more than six months annually, with prospects for even longer periods in the future.

In the last decade, a new logistical rival to the Suez Canal emerged with the Eurasian Land Bridge, initiated by China in 2011. This rail-based network, designed to compete with maritime freight transport, runs from Chongqing in central China to Duisburg in western Germany, connecting 35 Chinese and 34 European cities. Its operations have expanded significantly in recent years, in line with China’s efforts to deepen trade relations with Europe. In 2023, it handled 260 million tons of cargo and 3.2 million TEUs between Asia and Europe.

On another front, global shipyards have begun producing various types of modern, large-scale commercial vessels capable of navigating longer maritime routes than the Red Sea pathway at lower financial costs. This development has bolstered the idea of reverting to the longer cape of Good Hope (see figure 1) instead of transiting the Suez Canal, which requires paying passage fees and waiting times ranging from eight to eleven hours for clearance.

Figure 1: The Suez Canal vs. the Cape of Good Hope

Source: Image acslogco.com

 Synergistic Steps

In 2015, Egypt launched a comprehensive overhaul of the Suez Canal, a strategic move to outpace the mounting regional and international pressures facing this vital artery. This transformative project was executed through a series of coordinated measures:

• Amending and introducing legislation to better manage the Suez Canal Authority’s (SCA) assets, fully harnessing the Canal’s unique economic strengths.
• Expanding the Canal’s twin-lane stretch by more than 40%, easing vessel movement and cutting wait times to less than three hours.
• Revamping the Canal’s shipyards and subsidiaries to provide world-class logistical support for passing ships.
• Upgrading navigational control systems and refreshing the auxiliary fleet of dredgers, tugboats, and boats, enhancing the Canal’s operational and technical prowess.

Egypt has also worked diligently to expand opportunities for developing the Suez Canal Economic Zone, leveraging the country’s and Canal’s strategic location to maximize economic gains towards elevating Egypt’s status as a vibrant global player in industrial, logistical, and service sectors, rather than remaining a mere trade conduit that could be bypassed under certain conditions. To this end, development and construction efforts have focused on:

• Industrial zones in Sokhna, East Port Said, East Ismailia, and West Qantara.
• Logistics hubs and dry ports in Sokhna, East Port Said, and 10th of Ramadan City.
• A high-speed rail network connecting the Gulf of Suez to the Mediterranean.
• Modern seaports in Arish, Port Said, Adabiya, El-Tor, and Sokhna.
• A network of roads, land corridors, and local and regional logistics corridors.

Over the past ten years, the Suez Canal has notched up a string of remarkable successes, as evidenced by official statistics that vividly demonstrate the impact of Egypt’s ambitious upgrades to the Canal and its surrounding region. Starting with the digging of the New Suez Canal, followed by the revamp of maritime ports and nearby logistics centers, and extending to the broadening, deepening, and twinning of key waterway segments, the progress is striking. Reports highlight a 59% surge in the number of ships transiting the Canal between 2013 and 2023, reaching nearly 26,000 vessels in the final year. Cargo volumes soared by 71.29% over the same period, hitting 1.5 billion tons (see Table 2). 

Table 2: Annual ship traffic and cargo volume through the Suez Canal (2013-2023)

Source: Compiled by the researcher based on statistics issued by the SCA.

This momentum drove revenues to an impressive $9.4 billion in the 2022-2023 fiscal year (see Figure 2).

Figure 2: Suez Canal revenue by fiscal year (2012-2013 to 2023-2024, in Billions of USD)

Source: Compiled by the researcher using varied resources

A Passing Storm

The global community was stunned by the swift and unexpected success of dislodging the Panamanian Ever Given container ship, which had wedged itself across the Suez Canal’s southern passage, paralyzing all maritime traffic for six straight days. As the Canal authority poured extraordinary efforts into tackling the crisis, many regional and global media outlets fueled doubt, speculating that freeing the vessel could take weeks or even months. This wave of skepticism sparked immediate consequences, with some major shipping firms growing wary of routing vessels through the Suez Canal. Consequently, 48 ships were diverted to alternate routes, primarily the Cape of Good Hope, while global supply chains reeled, with average annual market growth shrinking by 0.2–0.4% during the ordeal.

The fallout from the Canal’s obstruction didn’t vanish when navigation resumed in late March 2021. Ongoing issues in the maritime shipping industry—such as heightened demand for shipping post-Covid-19, the global fleet’s limited capacity (particularly container ships) to handle this surge, and scheduling chaos from inconsistent global safety measures—gave competing logistics ventures, especially land-based and multimodal options, a chance to shine. These alternatives marketed themselves as credible substitutes for linking global trade networks, bolstering supply chains that had leaned too heavily on sea transport as a near-exclusive means of moving goods.

Over the two years that followed, the SCA worked diligently to repair the unwarranted negative perception caused by the blockage crisis. Leveraging prior upgrades to the Canal’s waterway and modernizations across its assets, the authority’s efforts paid off. The number of transiting ships rose by 13.5% in 2022 and surged by over 21.7% in 2023 compared to 2021 figures (see Table 2 above).

A Razor’s Edge

November 19, 2023, marked a startling turn for the Suez Canal when Yemen’s Houthi group struck the Galaxy Leader vehicle carrier near Yemen’s western shores, an incident that sparked a wave of random attacks by the group on commercial ships navigating the Bab el-Mandeb Strait, a vital corridor for vessels—many bound for the Suez Canal—traveling between East Asia and Western Europe. The Houthis justified their actions by alleging the targeted ships were tied to individuals, entities, or countries backing Israel, which has been engaged in a ferocious assault on Gaza’s defenseless civilians since October 7, 2023.

Yet, the data paints a different picture, undermining the Houthis’ assertions that their attacks solely targeted vessels connected to supporters of Israel, such as the United States or the United Kingdom. Reports confirm that the Houthis, alongside pirates from Yemen and nearby countries, struck ships owned or managed by countries neither involved in the conflict nor aligned with Israel. Strikingly, some of these countries—including Kuwait, Saudi Arabia, Turkey, China, Ireland, and others—are known advocates for the Palestinian cause (see Table 4). Furthermore, many of the attacked ships regularly called at Chinese, Russian, or Arab ports, not Israeli ones.

Table 4: Attacked Commercial Vessels by Flag, Owner, and Operator Country (Nov 2023–Dec 2024)

Source: ECSS’ statistics

Notes

* A vessel’s flag state, owner state, and operator state may vary, though some ships may share two or all three designations.

** The total reflects the overall number of civilian ships documented as attacked near the Bab el-Mandeb Strait, targeted through explosive projectiles, pirate assaults, or attempts at electronic disruption and intimidation.

*** Encompasses countries represented just once in the three categories (flag, owner, operator), including India, Pakistan, Iran, Kuwait, Saudi Arabia, Lebanon, Cyprus, Monaco, Seychelles, Belize, Cayman Islands, Gabon, Poland, Bulgaria, Ireland, Netherlands, St. Kitts, and the Faroe Islands.

****Countries not named in official reports for each category.

Indiscriminate Houthi assaults on civilian ships have led to an unparalleled reluctance among shipping agencies to navigate the Red Sea route through the Suez Canal. As a result, the number of vessels passing through the Canal from January to November 2024 fell dramatically to only 7,633, compared to roughly 24,300 in the same months of 2023. This collapse slashed the Canal’s 2024 revenue by 70%, equating to a $7 billion loss from the anticipated $10 billion. Without political resolutions to the complex tensions across the Middle East, these losses may well continue into the first quarter of 2025, while rival logistics routes seize the opportunity to gain from the Canal’s struggles.

The Widening Circle of Competition

To counter the Houthi attacks, major nations like the United States and Britain formed the Prosperity Guardian coalition, and the European Union initiated the Operation Aspides. Yet, these measures failed to extinguish the flames of a crisis that grew increasingly severe over time. This volatile environment forced logistics companies and shipping agencies to adapt quickly, applying lessons from past disruptions and activating pre-existing plans to navigate such crises. Consequently, they shifted heavily toward alternative routes to bypass the Red Sea and Suez Canal.

This strategic pivot yielded tangible success. Over the year following the crisis’s outbreak, logistics firms saw significant revenue growth, and global supply chains experienced no disruptions. This was mirrored in the financial results of key players like Denmark’s Maersk, which reported a 41% increase in third-quarter 2024 maritime transport revenues in October, forecasting annual revenues to climb from $5.2 billion to $5.7 billion for 2024. Likewise, France’s CMA CGM announced a 43.3% rise in third-quarter 2024 maritime transport revenues, which can be attributed to elevated freight rates driven by the longer Cape of Good Hope route.

The emerging Eurasian land corridor also thrived, with a 66% spike in demand for its services in the first half of 2024 compared to the same period in 2023, moving 189,000 TEUs between China and Europe. Concurrently, Russia is pressing China to fund infrastructure for the Arctic Northern Sea Route, tapping into China’s search for alternatives to the Red Sea and Cape of Good Hope. China is expected to adopt this project in the coming months and years, driven by the looming threat of renewed economic friction with the United States under President Trump, who aims to disrupt Chinese goods and supply chains through sanctions. Initial steps toward this shift are underway, with China launching a shipping route linking its Taicang and Rizhao ports to Baltic European ports via the Arctic Northern Sea Route.

A Rethink

The future of the Suez Canal may not unfold as smoothly as it has in past years and decades. The Canal’s unique strengths, unmatched by any other waterway, are now under strain due to multiple factors. For instance, rising security and geopolitical challenges in the Middle East and Red Sea regions are increasing insurance costs for goods and vessels passing through. Additionally, advancements in land and maritime transport technologies are enabling cheaper logistical services, even for longer distances or smaller cargo volumes. Moreover, the steady and incremental upgrades to the infrastructure of alternative logistical routes are cementing their role in global logistics, potentially positioning them as critical logistical hubs with loyal customers who might soon opt to use them entirely or predominantly over the Suez Canal.

These dynamics necessitate a recalibration of some long-held assumptions about the strategic planning and management of the Canal’s operations. It’s time to move beyond viewing the Canal solely as a waterway for transport and to recognize its dynamic role and positive, impactful contribution to global production and supply chains—from the extraction of raw materials or harvesting of crops to the delivery of finished goods to end consumers. Furthermore, there’s a need to redefine and highlight the unique value the Canal offers compared to emerging competitors, which will undoubtedly facilitate global trade and enhance worldwide prosperity.

It would be wise for the relevant authorities to account for the evolving standards driven by global and regional political, economic, and environmental transformations. Examples include certain regional countries joining alliances like BRICS or the Abraham Accords, as well as the push by advanced countries to integrate sustainability into most economic activities in the near and medium term, while reducing reliance on sources of global pollution. Additionally, consumers are becoming more aware of and concerned about the carbon footprint of the products they choose.

The state has already taken steps toward this forward-thinking strategy with the launch of the Suez Canal Economic Zone in 2015, designed to provide a comprehensive production ecosystem integrating port and logistics services with manufacturing hubs. This has been complemented by legislation encouraging investment across sectors, improved local transport networks linking manufacturing zones to nearby commercial ports, flexible pricing strategies appealing to various vessel types, and a suite of essential services for transiting ships. In addition, there are several other considerations that could further inform the process of redefining the approach to the Suez Canal’s management, which can be detailed as follows:

1. Monitoring Global Developments

Closely tracking the fast-paced and unpredictable political, economic, and scientific developments worldwide is essential to gaining a holistic understanding of the global logistics market. This enables more rational decision-making in the management of Egypt’s logistics sector. A steady stream of real-time, accurately analyzed information is central to the process of planning, deciding, executing, and evaluating decisions, ultimately increasing the likelihood of capturing a larger share of the global logistics market for Egypt’s logistics operations.

In this context, it would be advantageous for the SCA to partner with relevant governmental, academic, and private sector organizations—such as the Ministry of Transport, the Ministry of Investment, the Arab Academy for Maritime Transport Sciences, and key national shipping and navigation firms—to create or fund a specialized national research center focused on transport and logistics policies and economics. The center’s core task would be to track and evaluate domestic and international opportunities and threats to Egypt’s logistics framework, particularly the Suez Canal, while offering solutions, alternatives, and cohesive policies to optimize the economic benefits of this system for Egypt.

2.  Broadening the Stakeholder Network

The Suez Canal’s beneficiaries are split into direct and indirect stakeholders. Direct stakeholders are the shipping lines and companies whose ships navigate the Canal, paying transit fees to the Egyptian government. Indirect stakeholders include manufacturing firms whose products are shipped through the Canal by maritime agents, along with the consumers who receive these goods.

The Canal’s marketing strategy primarily targets transiting vessels, providing certain ships with financial incentives and discounts to stay competitive with alternative sea routes. Yet, it falls short in offering sufficient incentives to indirect stakeholders, despite understanding their characteristics, as indicated by periodic studies conducted by specialized national research entities.

It might prove valuable to create tailored lists of preferential incentives for commercial shipments coming from regions, economic alliances, or industrially dynamic countries with active trade relations with Egypt and the Canal, as well as countries that heavily import goods transiting the Canal. These incentives could also be extended to specific provinces or governorates within a country that the canal aims to strengthen logistical cooperation with and secure their loyalty.

3. Elevating the Brand Image

The Suez Canal has, over time, delivered numerous developmental milestones that have advanced the international logistics industry, playing a key role in boosting global economic growth and enhancing human prosperity. The Egyptian state can capitalize on this legacy to reinforce the canal’s pivotal role and importance among both direct and indirect stakeholders. This can be achieved by publicizing its direct successes, the major challenges it has navigated, and the regional or global achievements it has enabled, even indirectly—such as an economic boom driven by trade through the Canal for a country or a business among its clients.

It would also be valuable to promote the Suez Canal’s future development plans, which aim to streamline global logistics, making them more efficient, flexible, and cost-effective for end consumers. These plans should align with rising global trends emphasizing sustainability, environmental protection, and marine life conservation. The SCA has already taken concrete steps in this direction by announcing its green transition strategy, which aligns with national and international priorities focused on achieving sustainable development goals and promoting green economy practices.

4. Increasing Value-Added Services

Conducting an analysis of the goods passing through the Suez Canal each year and categorizing them by production stage—raw materials, semi-finished goods, or finished products—could open opportunities for Egyptian industrial firms to enhance some of these goods with additional manufacturing value. These upgraded products could then be re-exported with benefits like lower customs tariffs and partial exemptions from Canal navigation fees for the vessels transporting them. Such measures would motivate cargo owners and maritime transport executives to route more goods through Egypt for processing before reaching their final destinations.

Furthermore, efforts could be made to strengthen cooperation between Egypt’s national industrial sector and mining and agricultural production entities in regional countries—particularly those along or near the Red Sea—that lack industrial bases. Egyptian industrial facilities in the Suez Canal Economic Zone could process these raw materials, transforming them into finished products for re-export.

Additionally, it would be a successful strategy for the Egyptian government to spur the private sector to expand and develop shipyards and maritime service hubs in the Canal area and near its commercial ports. These centers could offer sophisticated, integrated services to a wide range of transiting commercial ships and maritime units, including maintenance, repairs, provisioning, and emergency rescue and maritime crisis management services at local, regional, and global levels.

5.  Securing the Canal’s Vital Sphere

Persistent security unrest and continuous acts of piracy and assaults on commercial ships navigating the Red Sea route, especially in the Arabian Sea and southern Red Sea basin, have caused hundreds of vessels to bypass the Suez Canal in favor of other maritime pathways, inflicting billions of dollars in losses on Egypt’s economy. This situation demands the establishment of enduring security stability in the waters spanning these two volatile areas, where tensions are likely to intensify due to worsening political and security instability in some of the coastal countries along their borders. Consequently, it is vital for Egypt to strengthen its naval and intelligence presence in the Red Sea basin and Arabian Sea to thwart any future efforts by criminal groups planning to target commercial vessels bound for the Suez Canal.

Sources

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