The Colombo port has experienced a significant surge in container traffic, with daily volumes increasing by as much as 80%, according to Sri Lanka Ports Authority Chairman Keith Bernard. This boost comes as the port becomes a key transshipment hub for the Middle East, with many shipping lines rerouting vessels to avoid Houthi attacks off the Yemeni coast leading to the Red Sea and Suez Canal.
The SLPA container terminals, which typically handle 5,000 to 6,000 twenty-foot equivalent units (TEUs) daily, now move 8,000 to 9,000 TEUs. This trend is consistent across other terminals in the port, Bernard told EconomyNext, Echelon’s sister concern.
The SLPA manages approximately 30% of the container traffic in its two terminals in Colombo, Jaya and East Terminals. The remaining traffic is divided between the Colombo International Container Terminal, operated by China’s CM Ports Group, capable of accommodating the largest ships, and the South Asia Gateway Terminals of John Keells Holdings.
A shift in shipping routes has been observed, with mainline ships now travelling around the southern tip of Africa to reach Europe, avoiding the Red Sea and Suez Canal. Consequently, containers are offloaded at Colombo and transported to the Middle East via feeder vessels.
The port’s current limitation lies in its capacity to store containers until connecting ships arrive, Bernard points out. Additionally, freight rates for westbound routes have risen for Sri Lankan exporters and importers.
In 2023, the Colombo Port handled 6.951 million TEUs, a 1.17% increase from the previous year. SLPA’s volumes grew by 2%, reaching 1.925 million TEUs.
Since mid-November 2023, Iran-backed Houthi rebels have been targeting commercial ships in the Red Sea, claiming to focus on vessels linked to Israeli interests. These attacks, often indiscriminate, have driven shipping companies from the region, risking supply chain disruptions and potential consumer price hikes amid declining global inflation.
The Red Sea, a critical shipping lane handling a third of global container traffic, faces threats of trade disruptions that could globally escalate costs. The U.S. has launched a security initiative to protect commercial vessels, but its effectiveness is debated, with concerns about insufficient deterrence and potential escalation into broader conflict. The impact of these Houthi attacks could globally increase prices of goods ranging from clothes to electronics.
The Gaza War, starting October 7, 2023, escalated when Hamas extended attacks into Israeli territory, resulting in over 1,300 deaths and 199 hostages. Israel’s subsequent declaration of war led to months of airstrikes and military actions on Gaza, leading to over 14,000 Palestinian deaths: 40% are children, according to the UN.
