It’s all about fuel. Falling fuel prices mean that vessels can afford to take a route south of Africa that would normally take up to a week longer, depending on the origins. Now they can foot the bill to burn the extra fuel it takes to go faster, closing the time gap and making the Suez Canal—which charges a lot more for passage--less attractive.
Vessels sailing from Asia to the East Coast via the Suez Canal have to pay on average US$465,000 for passage, according to SeaIntel, which calculated that the South Africa route would save an average of US$235,000 per voyage. It also noted that some services could save as much as US$19 million a year at the high, and as much as US$7.3 million per year in the worst-case scenario.
This puts the Suez Canal is a tough spot. At the end of the day, it means it would have to slash its passage prices by half to compete and remain relevant while oil prices are low.