Suez Canal Considers Discount on Transit Fees as Red Sea Tensions Hit Revenue
- 14-May-2025 8:45 PM
- Journalist: Emilia Jackson
The Suez Canal Authority (SCA) is actively considering implementing discounts ranging from 12% to 15% on transit fees in a bid to revitalize traffic through the crucial waterway. This move comes as the canal's revenue has taken a significant hit due to the ongoing attacks on Red Sea shipping by Yemen's Houthi militants.
SCA chief Osama Rabie announced the potential discounts in a recent interview with privately-owned Sada al-Balad television channel. He indicated that the proposed fee reductions could be implemented within days, pending ratification by Egyptian President Abdel Fattah al-Sisi.
There has been a dramatic decline in the Suez Canal's revenue in the recent times. Central bank figures released earlier this month revealed a stark drop to $880.9 million in the fourth quarter, a substantial fall from the $2.40 billion recorded during the same period last year. This significant decrease directly reflects the impact of the Houthi attacks, which have deterred numerous shipping companies from using the Red Sea route and, consequently, the Suez Canal.
The Houthi group, claiming to target vessels linked to Israel in support of Palestinians in Gaza, has expanded its attacks to include a broader range of commercial ships navigating the Red Sea. This has led to increased insurance costs for vessels operating in the region, which has been designated as a high-risk zone by many shipping agencies. Consequently, many shipping lines have opted for the longer and more expensive route around the Cape of Good Hope in Africa to avoid the dangers in the Red Sea.
Last week, Rabie engaged in discussions with representatives from various shipping agencies. These representatives reportedly called for the introduction of temporary incentives to help offset the escalating insurance premiums and other operational costs associated with navigating the Red Sea. The potential discounts on transit fees appear to be a direct response to these concerns and a proactive step by the SCA to maintain the Suez Canal's competitiveness.
Interestingly, these developments follow a reported Oman-mediated ceasefire agreement between the United States and the Houthis. Under this accord, the U.S. has reportedly agreed to halt bombings in Yemen in exchange for the Houthis ceasing attacks on U.S. ships. However, this agreement does not extend to Israeli-linked vessels, leaving a significant portion of Red Sea shipping route still vulnerable.
The Suez Canal remains a vital artery for global trade, connecting the Mediterranean Sea to the Red Sea and providing the shortest sea link between Asia and Europe. It is a major route for the global trade of crude oil, chemicals, steel, and fertilizers. The Suez Canal is a vital link for transporting energy supplies, consumer goods, and components for machinery between Asia and Europe.