Drewry reports that the Houthis’ announcement to halt attacks in the Red Sea has improved sentiment on Suez Canal traffic, though the sector remains cautious given the group’s shifting positions. Any easing of security risks and restored Canal transits would shorten voyages and increase effective tonnage supply in the product tanker market.
Following the late-2023 escalation in Yemen, many product tankers rerouted via the Cape of Good Hope (COGH), especially LRs. Drewry notes that the Middle East–Northwest Europe diesel voyage grew by about 4,700 nautical miles, adding more than 30 round-voyage days and supporting higher LR freight rates. Europe increased diesel imports from North America in 2024, while Middle Eastern diesel remained competitive and kept trade volumes stable.
Drewry’s investigation shows a recent rise in product tanker use of the Canal, particularly after the Gaza ceasefire. A full return to pre-crisis traffic would reduce tonne-mile demand and pressure LR rates. Voyage duration on the Jubail–Rotterdam route could fall from 82 days via the COGH to around 50 days through the Canal, lowering the EU-ETS cost to about USD 129,000 versus roughly USD 215,000. Shorter voyages and lower ETS liabilities could draw more refined product flows back to the Canal if security stabilises.
Europe’s planned restrictions on refined products processed from Russian crude may reduce diesel imports from India in 2026, shifting demand toward Middle Eastern suppliers if Canal traffic normalises. Drewry concludes that redirecting flows from the COGH to the Suez Canal, combined with potential increases in Middle Eastern exports, would cut tonne-mile demand and further squeeze LR rates, though strong crude tanker markets could attract some LRs and offer limited support.
Drewry is a commercial maritime research and consulting firm providing market analysis, data services and advisory work across global shipping segments.
Suez Canal is an international waterway operated by the Egyptian state-owned Suez Canal Authority, linking the Mediterranean and Red Seas under Egyptian jurisdiction.
