Suez Canal traffic levels show signs of recovery in 2017
Two years after the inauguration of the new Suez Canal, which is broader and deeper to accommodate larger ships, the investment ($8 billion) has not yet produced the return that the government in Cairo expected. The series of data on the earnings that the canal generated in recent years (2013, $5.1 billion; 2014, 5.5 billion; 2015, 5.2 billion; 2016, 5.0 billion) do not show any significant variation before and after its opening, which took place on 6 August 2015.
As a matter of fact, earnings decreased last year (-3.2%), and the downward trend only reversed itself during 2017. Canal Authority Director Mohab Mamish said that in the first nine months, including September, earnings increased by 2.2%, reaching $3.86 billion versus 3.78 billion for the same period last year. The number of ships also increased (12,934 +2.5%) and tonnage carried (781 million tonnes, +4.6%). In any case we are far away from the exponential growth in traffic that the government expected this project to produce. At the time of the opening, Mamish himself predicted that in 2023, earnings would reach $13.4 billion per year.
Egypt’s disappointment could become the disappointment of all the major Italian and Mediterranean ports, which also expected an increase in their traffic because of the opening of the new canal. However, the reversal of the trend in 2017, although the figures remain far from those that were predicted, could be a sign of hope, since it went along with signs of recovery in the European economy. The European central bank is predicting that the Eurozone GDP will increase by 2.2% in 2017, versus the 1.9% growth it achieved in 2016.
To stimulate this growth, in the last year the Canal Authority has offered a series of discounts for certain types of ships and on certain routes. This led to a price war with the other great global canal, in Panama, which inaugurated its expansion a year after Suez, on 26 June 2016. The latest discount on the Suez Canal was announced in September and affects tanker ships. A 30% reduction will be offered to ships carrying liquefied natural gas (LNG) into the Persian Gulf and as far as the port of Kochi. On the other hand, a 40% reduction in transit tolls will be offered to oil tankers heading east of the port of Kochi, as far as Singapore. Finally, the discount for Singapore and beyond will be 50%.
Discounts were offered for container carriers from 2016 through this summer, while discounts for bulk carriers were introduced in early 2017. The results seem to partly indicate the success of this policy, but marketing work still remains to be done. The Japanese Shipowners’ Association (JSA) recently published data from 2017 on the decreased use of the Suez Canal by ships flying the Japanese flag, which are increasingly attracted by the Panama Canal to reach ports on the Atlantic coasts of North and South America. In 2016, 1,066 Japanese ships used Suez versus the 1,172 in 2015 (-9%), for a 6.3% decrease in spending on transit tolls, which came to $352 million. In 2016, the number of ships that passed through the Panama Canal also decreased by 4.8%. But this was due to the fact that the ships used were larger, because the capacity of the ships that can pass through the canal increased from 5,000 TEU in 2016 to 14,000 TEU. The Japanese companies’ spending in Panama increased to $303.5 million, +2.6% compared to the previous year.
To fight the drop in earnings, Egypt is developing a major plan around the Suez Canal which will provide additional services to the entire logistical supply chain.
The plan for a free trade zone is particularly important. At the end of September, President Mamish announced that Mercedes-Benz will open a 50,000sqm distribution centre in this zone. And there is also a plan to build a series of tunnels connecting Egypt to the Sinai peninsula. In particular, 3 tunnels are being planned in Port Said, three in Ismailia, and later on, three tunnels in the city of Suez.
Source: The Medi Telegraph