New Suez Canal Transit Fee Discounts Offered

Posted by PortVision

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The Suez Canal Authority has offered shipping lines a discount if they prepay canal fees three to five years in advance, as reported in Ship & Bunker.

The 3% discount on transit rates would require a deposit with the Central Bank of Egypt from which deductions would be made each time a transit of the canal is made. Negotiations are ongoing and deals finalized could take effect as soon as the beginning of 2017.

The deal has been offered to the largest shipping companies that traverse the canal: Maersk Line, CMA CGM SA, Mediterranean Shipping Company SA, Hapag-Lloyd AG, China Ocean Shipping Company, and Evergreen. Maersk, CMA CGM and MSC account for more than 25% of the traffic in the Suez Canal (Maersk = 12%).

Based on 2015 data, the average prepaid deposit could reach $1.25 billion annually for each of these three firms. Ship and Bunker estimates the yearly revenue for all shipping transits of the canal is $5 billion, with a Reuters report stating that the Authority expects 2016 to top $5.7 billion.

Earlier this year, the Authority offered 45% discounts to VLCCs (Very Large Crude Carriers) originating from the Gulf of Mexico, the Caribbean and the north coast of South America as well as to containerships coming from the Port of Norfolk transiting to Port Kelang. In 2015, the shipping sector that most used the Suez Canal was containers. This new discount offering is, perhaps, meant to open up a new growth shipping sector to the canal.

It appears that the $8 billion expansion inaugurated in August 2015, has not completely solved Egypt's economic woes due to slow global growth which began in 2009. The expansion was intended to double canal traffic and move its annual revenue to $13 billion by 2023. That means an additional $7.3 billion increase in only 6 years. Part of that increase was to come in the form of transit fees. Bloomberg estimates that for the Authority to meet its goal, global trade volume would need to increase 9% a year.

The expanded canal is no longer a one-way canal and now has two lanes for traffic. Previously ships needed to wait to join three ship convoys to pass through the canal, from the Red Sea to the Mediterranean Sea. Navigation time then averaged 22 hours. It is now closer to 11 hours.

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Posted on Dec 28, 2016 6:07:00 AM

Topics: Container, Shipping