The Suez Canal celebrated the eighth anniversary of the inauguration of its second branch on 6 August, called the New Suez Canal and dug in order to increase the number and tonnage of ships passing through the famous international waterway.
This year saw another reason to celebrate, since in the 2022-23 fiscal year, which ended on 30 June, the canal recorded its highest annual revenues to date of $9.4 billion, up from $7 billion in the previous fiscal year.
It experienced a 20 per cent rise in the number of ships using the canal per day, setting a new record of 107 ships on 13 March.
“The higher revenues are largely due to the recovery in global trade, the rise in oil prices, and higher transit fees, though these are still cheaper than the alternatives,” said Mohamed Abu Basha, a macroeconomic analyst for the EFG-Hermes investment bank.
The canal’s higher revenues had already been observed some months ago when the Central Bank of Egypt (CBE) announced that revenues from transit fees had risen to $6.2 billion during the first nine months of the last fiscal year, up from $5.1 billion for the same period in the previous year.
This was due to a 14.5 per cent increase in net tonnage, reaching 1.1 billion in that period.
Revenues from the Suez Canal are one of Egypt’s main sources of foreign currency, which is crucial at this time of high pressure on the country’s foreign-currency reserves.
At the beginning of this year, the Suez Canal Authority (SCA) that administers the canal decided to increase transit fees by 15 per cent for all ships, with dry bulk carriers and cruise ships increasing by 10 per cent, according to head of the SCA Osama Rabie.
The hike in transit fees was made in the “light of continuous assessments of developments in market trends in the maritime transport sector, which has seen a steady rise in the cost of the time charters for most types of ships to unprecedented levels,” Rabie said.
“The rise is expected to continue during the forthcoming year.”
The SCA also raised transit fees for crude oil tankers by about 10 per cent starting on 1 April. According to a bulletin on its website, the additional fee is temporary and could be adjusted or cancelled depending on changes in the maritime transport market.
Abu Basha expects tariffs to continue to rise in tandem with the rising prices of oil while the growth in trade remains at reasonable levels. He also anticipates that the canal’s revenues will also continue to rise, albeit at a slightly slower rate this year.
In previous statements, Rabie said that the SCA was keen to apply a balanced and flexible pricing and marketing strategy that serves the interests of both the Authority and its clients and that takes into account global economic circumstances and other variables to ensure fair fees for passing ships.
In statements to Asharq Business on the side-lines of the Qatar Economic Forum currently being held in Doha, Rabie noted that the Suez Canal earned about $2.3 billion in the first quarter of this year and that he expects the same or slightly higher revenues in the second quarter.
He predicted that revenues would come to $8.8 billion by the end of the year, given the ongoing increase in the number of ships and tonnage since the end of the Covid-19 pandemic.
Mohamed Hassan, Investment Funds Director at Odin Investments, an investment firm, also attributes the rise in Suez Canal revenues to the global recovery in trade since the end of the pandemic and to the expansion of the canal itself.
The purpose of the New Suez Canal, which opened in 2015, was to enable two-way traffic, to reduce waiting time for transiting ships, and to accommodate larger container ships and to prepare for greater traffic in the future.
Since its opening, it has become the preferred route for commercial vessels, achieving excellent yields in terms of national income and job creation.
Hassan believes that the record revenues in 2022-23 were less a product of the hike in transit fees than of the increase in the number of ships that opted for the Suez Canal route, as even with higher transit fees it is still less expensive than alternative routes due to rising fuel prices.
Navigation not interrupted
CHAIRMAN of the Suez Canal Authority Osama Rabie announced on Sunday afternoon that work to raise the sunken tugboat Fahd would not impede navigation. Forty-five ships were scheduled to transit the canal in a southbound direction and 38 ships were northbound when the tugboat sank on Saturday after colliding with the tanker Chinagas Legend. Salvage operations began after the last vessel completed its transit.
One crew member died and six were hospitalised following the accident. The 230-metre Chinagas Legend was carrying 52,000 tons of liquefied petroleum gas. Divers from the SCA marine rescue team attached eight crane wires to the sunken vessel in order to lift the tugboat.
The Suez Canal is the shortest maritime route to Asia from Europe and one of the world’s busiest shipping lanes, catering to 10 per cent of global trade.
* A version of this article appears in print in the 10 August, 2023 edition of Al-Ahram Weekly