Suez Canal growth boosts logistics industry in Egypt

Ahmed Abdel-Hafez, Friday 18 Aug 2023

The higher volume of vessels transiting through the Suez Canal is ideal for the growth of the logistics industry.

Suez Canal growth boosts logistics
Suez Canal growth boosts logistics


Billions of tons of goods transited through the Suez Canal in the 2022-23 fiscal year, bringing in annual revenues of $9.4 billion, the largest in its history, the cabinet’s Information and Decision Support Centre (IDSC) announced last week, marking the eighth anniversary of the inauguration of the second branch of the famous international waterway.

The New Suez Canal, completed after only one year’s work in 2015, was built with the aim of accelerating traffic through the canal and avoiding queues at narrow points in the passageway.  

Mohamed Ali Ibrahim, an expert in transportation economics and logistics, attributed the record revenues and numbers of ships transiting through the Suez Canal to several factors.

The first is rising oil prices, which have driven up transportation and shipping costs, especially for large container ships, leading them to opt for shorter routes such as the Suez Canal.

The second is the new pricing and incentives policy that the Suez Canal Authority (SCA) introduced last year, enhancing the competitiveness of the canal compared to other maritime routes.

Thirdly, the expansion and deepening of the canal bed has made it possible to accommodate the mega-container ships that had previously been unable to pass through it.

In January 2023, Logos Hope, the world’s largest floating library housing more than 800,000 books, crossed the canal, the IDSC reported. The mammoth world-class cruise ship MSC World Europa and the world’s largest and most modern containership Ever Top also made their maiden voyages through the canal in November and December 2022.

“The increase in the volume of navigation through the canal opens opportunities to provide and expand three types of logistics services in the Suez Canal Economic Zone,” Ali Ibrahim said, namely ship transit services, global trade transit services, and logistics services for industries established in the zone.

Developing in this direction is “in keeping with the trend to transform the Suez Canal from a maritime corridor to a global commercial and logistics corridor,” he said.

Economics professor Emad Al-Saey, an expert on transport logistics who served as an advisor to the former minister of transport, agrees that Egypt needs to maximise the growing traffic through the Suez Canal in order to develop and expand its maritime service industries.

“We have a great opportunity to evolve into a transit hub for large container ships wanting to store and then distribute their loads to smaller ships and thereby reducing the number of trips for the larger ships,” he said.

Praising the tremendous expansion of the capacities of Egyptian port facilities thanks to the construction and development efforts of the Ministry of Transport, Al-Saey noted how this has helped to streamline and speed up the handling of vessels and goods in ports from Ain Sokhna and East Port Said to Alexandria, which may now have the fastest loading and unloading operations of all Egyptian ports.

Ibrahim drew a distinction between logistics that serve foreign trade and those that serve domestic trade. He believes that a major logistics zone in the Suez Canal area could link the two and support government plans to transform Egypt into a global hub for the transit trade.

Not only would this optimise the boom in the road and transportation sector and, above all, the growing network of communications between Egypt’s ports facilities, but it would also enhance the competitive edge of Egyptian exports.

According to logistics and transport expert and Managing Director of the Egyptian Transport and Commercial Services Company (Egytrans) Abir Leheta, the increase in maritime traffic in the Suez Canal and the expansion in the capacities of berths and other port facilities have given a significant boost to container exchange and transport companies operating in all the country’s ports, making them one of the fastest-growing logistics services.

According to Leheta, the transport and logistics sector in Egypt is growing at about nine per cent a year, or twice the global rate, with earnings expected to exceed $28 billion by 2025.

Egypt aims to become a global trade hub by taking advantage of the new opportunities arising from the African Continental Free Trade Agreement, which will make it possible to offer overland routes as an alternative to maritime and air transport routes in Africa, facilitating intra-African trade.  

This will add to Egypt’s competitive edge as a commercial hub, especially in view of Chinese, Turkish, and Spanish plans to use Egypt as a manufacturing base for exports targeting European markets.

However, Leheta observed that the cost of logistics services in Egypt was still very high. According to a World Bank report, it costs three to five times more to transport goods across the Middle East and Africa than it does in the EU.

* A version of this article appears in print in the 17 August, 2023 edition of Al-Ahram Weekly

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