Israel's vehicle industry is preparing for the resumption of direct shipping of vehicles to Israeli ports from East Asia via the Suez Canal and the Red Sea instead of around Africa. This is providing the ceasefire in Gaza holds and security stability in the region is achieved. Industry sources estimate that in the first phase, direct shipping to Israel will resume by Chinese shipping companies for transporting vehicles, with the first shipments are likely to reach Israel via the Suez Canal in the coming months.
At the same time, importers report that they have received an unofficial assessment from ZIM Integrated Shipping Services Ltd. (NYSE: ZIM) that it could resume direct vehicle shipping to Israel via the Suez Canal in the second half of the year. ZIM is the largest carrier of vehicles to Israel on Asian routes. The company responded that "it currently has no announcement on the subject."
Direct shipping of vehicles to Israeli ports was suspended in November 2023 following Houthi attacks on shipping and the hijacking of a vehicle transport ship to the port of Hodeidah. As an alternative, all shipping companies transporting vehicles switched to a route that bypasses the Red Sea and the Suez Canal and circumnavigates Africa. Some companies have even stopped visiting Israeli ports altogether and unloaded vehicles at European ports, from where they arrived in Israel by cargo ship.
Circumnavigating Africa has added an average of 21 days to the arrival time of vehicles from China, Japan, and South Korea to Israel and increased shipping costs by tens of percent. A return to direct shipping from East Asia could provide a competitive advantage to vehicle importers, who will be able to transport the vehicles directly. This week, the EU extend the mandate of its naval patrol force operating in the Red Sea region until 2026.
Shipping companies are "monitoring developments"
It is still unclear if and when shipping of vehicles to Eilat port, which was previously the main vehicle import gateway from East Asia, will also resume, but no new vehicles have been unloaded there for over a year. A senior US military officer will arrive in Israel next month to discuss, among other things, the resumption of maritime transport to Eilat.
Sources in the vehicle industry say that expectations on the resumption of shipping to Israel via the Suez Canal are a result of "international understandings agreed behind the scenes." However, these understandings could change following adverse developments in stability in the region. Just on Tuesday, a British cargo ship was damaged in the southern Red Sea. It is suspected to have been hit by a Houthi drone, although there has been no official confirmation. In recent weeks, several large Western-owned international shipping companies have announced that they have decided not to resume direct shipping through the Red Sea for the time being and to continue with the much longer shipping route around Africa. They say they are "monitoring developments." So far, none of the non-Chinese shipping giants have returned to the Red Sea.
Among the considerations on the agenda is insurance rates
On February 12, a research survey by Drewry was published, in which most shipping companies estimated that traffic through the Suez Canal will resume towards the end of the year. This month, Suez Canal chairman, Osama Rabie, expressed a more optimistic view, estimating that commercial traffic through the canal will increase towards the end of March this year and return to full volume by the middle of the year, if the ceasefire in Gaza holds.
This month, the first vehicle carrier since the Houthi attacks began passed through the Suez Canal. The ship, owned by a Chinese shipping company, transported about 4,300 vehicles from East Asia, had a stopover in Saudi Arabia before continuing on to Turkey, Italy and Spain. The transport of containers to Israeli ports from East Asia via the Suez Canal is also expected to resume at the same time.
However, sources in the shipping industry say that the decision of foreign companies to unload directly in Israel still depends largely on the insurance rates of marine insurance companies, which have risen significantly since the start of the war.
Israel's Ministry of Transport said that leading companies shipping vehicles to Israel have not yet decided about taking their ships through the Red Sea. As far as Israel is concerned, shipping companies are allowed to unload vehicles at the port of Eilat or any other port, of the importer's choice.
Published by Globes, Israel business news - en.globes.co.il - on February 20, 2025.
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