The disruption to shipping through the Red Sea by Yemen’s Houthi militants is having a mixed impact on Egypt's apparel exporting industry.

Egypt, which is a key European nearsourcing hub, has seen shipping rates increase since the Red Sea crisis, and the import of raw materials from east Asia impacted. However, it has also experienced an uptick in orders from European clients to take advantage of Egypt’s proximity to Europe, without running the gantlet of Houthi attacks.  

Egypt exported $2.43bn’s worth of apparel in 2023, down by 2% on 2022, with the US its top export destination, at $1.03bn, followed by Europe, at $533m, according to the Apparel Export Council of Egypt (ECE).  

Since October 2023, shipping through the Red Sea to Egypt’s Suez Canal has been impacted by these attacks on cargo ships, made in response to the Israel war in Gaza. Over the past two months insurance costs have risen and container companies have stopped transiting the Red Sea. 

“Shipments are coming through the Red Sea, but the cost of shipping to Egypt has doubled or tripled, and there have been delays. The crisis has not stopped production,” said Mohamed Kassem, chairman and CEO of World Trading Company, a textiles and apparel sourcing organisation in Egypt, and board member of the International Textile Manufacturers Federation (ITMF). 

While Egypt has a fully integrated textile and apparel industry, the bulk of raw materials are imported from India and China. Samer Riad, general manager of the Riad Group, an integrated apparel manufacturer in Cairo, said the disruption to such imports had an immediate impact, prompting some manufacturers to start turning away from their traditional sources of raw materials. 

“These manufacturers are turning to Türkiye for the importation of their raw material needs, at somewhat higher prices, as freight charges and shipping times are now much more in Türkiye’s favour as compared with the far east,” said Riad. 

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Nancy Salam, export manager at Salamtex, a knitwear and lace manufacturer in Egypt, said the local industry could absorb the disruption if it had two to three months of raw materials and textiles in stock, and was able to factor in an additional month of shipping lead times for renewing inputs. 

To mitigate the risk of going through the Red Sea, some Egyptian manufacturers are using alternative routes, she said, such as having cargoes shipped to Oman. Cargo is then transported overland through Saudi Arabia, and then shipped to Egypt. “It is more expensive and takes longer, but better assures delivery,” said Salam. 

Over the past two months, Salam said the situation has been beneficial in terms of nearshoring orders from European clients. “Customers are much more interested [in Egypt] than before, due to the 15-to-30-day delay [in shipping around the Cape of Good Hope]. Being able to source nearshore is definitely more attractive,” she said.  

Yet while maritime traffic in the Mediterranean has been largely unaffected, said Riad, “US bound vessels have been adversely affected as the shipping route from the far east to the US via the Suez Canal is currently not the preferred route due to the situation in the Red Sea.” Instead, many shipping companies are sailing from Asia to the US across the Pacific, and not passing by Egypt, where they could pick up stock for the US market. 

This is of concern as the US is Egypt’s largest export market, in part due to the US Qualifying Industrial Zones (QIZ) programme, whereby Egyptian manufacturers have duty-free access if 10.5% of a product’s components is sourced from Israel. Kassem said such exports were continuing despite the war, although bilateral discussions between Egypt and Israel on QIZ were on pause.  

Kassem expects all Egyptian apparel and textile exports to expand in the second half of 2024: “In the the first half of the year demand is down, but in the second half we will see an increase. If we keep to the same levels as last year, that would be good,” he said. 

By Just Style