Suez Canal Offers 15% Transit Discount to Attract Ships Amid Red Sea Ceasefire

In a strategic move to revive maritime traffic and revenues severely impacted by the Red Sea security crisis, the Suez Canal Authority (SCA) has announced a 15% discount on transit fees for large cargo vessels. This comes shortly after a ceasefire agreement between the United States and the Iran-backed Houthi militia, which had been targeting commercial vessels in the Red Sea since late 2023. The discount, applicable from May 15, 2025, is aimed at encouraging global shipping lines—especially container ships that were major revenue contributors—to return to the Suez Canal, a key global trade artery that has witnessed a dramatic fall in usage and earnings.

Why in News?

The Suez Canal Authority (SCA) has announced a 15% discount on transit tolls for large cargo ships from May 15, 2025, in a bid to lure back global shipping lines that had diverted vessels away from the Red Sea route due to Houthi-led attacks. The decision follows the announcement of a fragile ceasefire between the US and Iran-backed Houthi rebels, which raised hopes for the revival of maritime traffic through the critical Suez Canal corridor.

Background and Crisis Timeline

• Since November 2023, Yemen’s Houthi rebels, backed by Iran, began targeting commercial vessels linked to Israel and its allies in retaliation to Israel’s offensive in Gaza.
• Major shipping lines rerouted vessels via the Cape of Good Hope, bypassing the Suez Canal.
• The Suez Canal’s annual revenue dropped sharply from $10.3 billion in 2023 to $4 billion in 2024.

About the New Discount Scheme

• From May 15, 2025, cargo ships of 130,000 metric tonnes or more (net tonnage) will receive a 15% toll discount for 90 days.
• Announced by Admiral Ossama Rabiee, Chairman of the SCA, after a meeting with Italy’s Ambassador to Egypt.

Impact on Trade and Global Shipping

The Suez Canal handles,

• ~12-15% of global trade
• ~30% of global container traffic
• ~8-9% of global energy flows
• India relied on this route for 80% of its European exports.
• Post-diversion, shipping costs surged by 180%, freight rates rose, and voyage durations extended by 10–14 days.
• While Suez traffic plunged, daily transit via Cape of Good Hope increased and LNG shipments shifted almost entirely to the African route.

Traffic Volume & Revenue Impact

• Suez Canal’s TTV dropped to 484,137 mt on May 11, 2025 (from 1.35 million mt in 2024).
• Cape of Good Hope’s TTV stood at 4.38 million mt, indicating its current dominance.

Challenges & Industry Response

• Despite the ceasefire, Houthis threaten Israeli ships, making the Red Sea route still risky.
• Shipping majors like Maersk continue to prefer the longer route due to war-risk premiums and crew safety concerns.
• Shippers have adjusted to the Cape route and passed on the cost increases to customers, even profiting from higher freight rates.