Container ships sail in Suez Canal.

Egypt’s Suez Canal Authority said it’s “closely following” tensions in the Red Sea and any impact on canal crossings, after Yemeni militant attacks on vessels hundreds of miles to the south prompted major shipping lines to temporarily avoid the region.

Since November 19, 55 ships have diverted to use the Cape of Good Hope route between Europe and Asia rather than the canal, SCA Chairman Osama Rabie said Sunday in a statement. So far that’s a small proportion of the 2 128 vessels that crossed Egypt’s waterway in the same period, he said.

Attacks by Houthi militants on merchant ships off Yemen’s coast have spiraled in recent weeks, as the Iran-backed group, in response to the war in Gaza, vows to target vessels it claims are connected to Israel. 

A.P. Moller-Maersk A/S and Hapag-Lloyd AG said Friday they were pausing voyages on the Red Sea, one of the world’s most important trade corridors. 

MSC Mediterranean Shipping and CMA announced similar moves on Saturday, a day in which the US military said it shot down 14 drones in the Red Sea launched from Houthi-controlled areas of Yemen.  

Suez Canal transit fees are a major source of foreign currency for Egypt, which is battling its worst economic crisis in decades. Revenue from the waterway hit $9.4 billion in the 2022-2023 fiscal year, up from $7 billion the year before.

Diverting vessels around the tip of Africa will have ripple effects on the world shipping trade. Flexport, a freight forwarding platform based in San Francisco, said in a blog post that taking the route around the Cape of Good Hope prolongs the journey by seven to 10 days compared with using the Suez Canal. 

But Citigroup analysts including Kaseedit Choonnawat estimated in a report that re-routing Suez transits for Asia-Europe trades to around Cape of Good Hope would add 10 to 14 days of travel.

On Monday, shipping stocks in Asia soared on expectations that disruptions to Red Sea routes due to militant attacks will push up freight rates.

A gauge of Japan’s shippers rose as much as 5.8%, the only industry sector that gained while the broader Topix Index fell 1.6%. South Korea’s Korea Line and China’s Ningbo Ocean Shipping both rose as much as 10%.

The threats to shippers around Egypt’s Suez Canal may pressure freight rates from Asia to Europe or to the US East Coast as ships take alternative, longer routes, according to Bloomberg Intelligence senior analyst Lee Klaskow.

If all trades via Suez are re-routed, there will be about a 6% effective supply reduction in the container industry on an annualized basis, the Citigroup analysts estimated.

“Given ships need to detour and the news would raise freight rates, it is positive to shipping stocks,” said Shawn Oh, an equity trader at NH Investment & Securities Co. in Seoul. 

Nippon Yusen was the top performer in Japan’s Topix index as it rose as much as 6.6%, the most in five months, while its peers Mitsui OSK Lines gained 5.6% and Kawasaki Kisen Kaisha advanced 6.5%. In China, firms including Nanjing Tanker, China Merchants Energy Shipping and Cosco Shipping Energy Transportation all rose 8% or more at their peak on Monday.

The alternative routes would help absorb shippers’ excess capacity, which is expected to rise through 2025, according to BI’s Klaskow.