Shabhaljazeera Net | Red Sea | Economy
Manufacturers in Israel are struggling to import raw materials and export products to overseas clients, leading to delays in production and delivery, harming their competitiveness, and resulting in the loss of clients and revenue, as ships linked to Israel continue to face frequent attacks by the Sana’a government.
The Israeli economic newspaper Calcalist states that air traffic disruptions are no longer limited to passenger flights and high ticket prices but have now affected air cargo transport to and from Israel, causing an additional rise in shipping costs that already surged by 200% in 2023 following the outbreak of war on October 7.
This coincides with the deteriorating security situation in Israel and the suspension of foreign airlines’ flights to Israel, while cargo shipments and raw materials to Israeli companies have been stuck at airports worldwide for weeks.
Israeli exporters, who are supposed to deliver goods to clients abroad, are unable to find available flights to meet their delivery deadlines.
Such a challenging situation is unprecedented for Israel and its exporters, and these escalating crises are damaging Israel’s export reputation and the ability of exporters to compete, leading to the loss of clients, new contracts, and revenue.
Port Blockages
Supply chains are suffocating due to the situation at Israel’s ports, including Haifa, Eilat, Ashdod, and Ashkelon, which are under rocket fire from Palestinian, Lebanese, and Yemeni resistance groups. Haifa Port, Israel’s most important and efficient port that meets global standards, handles around 30 million tons of goods annually.
However, import activity continues, particularly through Haifa Port, a regional trade hub with ports in Egypt, Greece, and Turkey. For example, 14 ships have recently made direct voyages between Turkish ports and Haifa and Ashdod.
Since the war began, Israel’s government had considered Haifa Port safe due to its location in a natural protected bay. However, after becoming a target, import companies have turned to Israeli airlines to transport goods due to the threat of bombing Haifa Port.
The The Marker economic newspaper confirms that security conditions and the targeting of Israeli ships by the Sana’a government have affected maritime traffic to Israel, as foreign passenger ships have stopped coming to Israeli ports, and it is expected that they will not resume services until 2025.
Ashdod, Israel’s second-largest port, is located less than 30 kilometers from the Gaza Strip, and ship traffic to it has decreased by 50% since the war began. It received around 21 million tons of goods in 2022, transported by one million trucks. However, ships heading to Ashdod from Asia must now take the longer route around the Cape of Good Hope, which delays their arrival by a month and increases shipping costs by an average of 40%.
Additionally, Ashdod and Ashkelon’s oil and gas terminal (only 10 kilometers from Gaza) are not equipped to handle large and numerous shipping containers, leading to delays in unloading and damage to food, vegetables, and fruits.
Reports indicate that Israel is benefiting from a land shipping route from the UAE through Saudi Arabia and Jordan after shipping and trade activities at the Eilat Port were crippled. Eilat, which handled 5% of Israel’s annual trade valued at $73 billion in exports and $103 billion in imports, declared bankruptcy. It used to receive giant cargo ships with a capacity of up to 20,000 containers.
Deadlock for the Aviation Industry
Calcalist states that most of the aviation work is now handled by “El Al,” “Arkia,” and “Israir,” which continue flying, but their fleets are limited, and their aircraft cannot meet the economy’s needs.
According to data from the Israeli Airports Authority, cargo entering Israel via passenger planes dropped by 48% in September, including important components for production that have been stuck at foreign airports for weeks.
These include materials for weaponry and military technologies from companies like Elbit and Rafael.
The report highlights the lack of interest in finding solutions for transportation to and from Israel, such as establishing regional hubs for air cargo transport or negotiating with Israeli airlines to dedicate some of their planes to regular cargo flights for the economy, potentially reducing passenger flights to holiday destinations worldwide.
Aviation activity has decreased in 2023, leading to an increase in air freight prices from around 3 euros per kilogram to about 9 euros. There are warnings that the continuous decline in supply, coupled with increased demand, will result in further price hikes.
Recently, Challenger Airlines, a Belgian airline under an Israeli airline group based in Malta, raised its air cargo prices by 30%, adding 0.7 euros per kilogram. The company holds a 32% share of Israel’s total air freight activity, while more than 55% of total air transport to and from Israel is handled by airlines operating in America.
In Q2 2024, Challenger Airlines saw its air cargo revenue rise by 110% compared to the same period in 2023, reaching nearly $60 million, and in September, it was responsible for about 70% of the total cargo transported to and from Israel by passenger planes, a 60% increase over the same month in 2023.
Source: Baqsh Economic Observatory