Tough times ahead for Suez Canal

April 02, 2017
Big blow. A cargo ship passes through the new Suez Canal in Ismailia (Reuters)

Cairo - Five of the world’s largest shipping companies said they would move their operations to ports in Greece, Sudan and Israel because of the Egyptian Transport Ministry’s decision to raise ship­ping, cargo handling and storage fees in six ports operated by the Suez Canal Authority.
Independent estimates said the five companies represent almost 60% of all shipping activities in the six ports. Losing their business would be an irreversible blow to the Suez Canal region, maritime trans­port experts said.
Officials at the Suez Canal Au­thority and the Suez Canal Eco­nomic Zone Authority, which runs all four economic zones in the Suez Canal region, expressed alarm by the decision by NYK Group, Mol Shipping Line, Yang Ming Marine Transport Corporation, the K Line and Evergreen Marine Corporation to suspend activities. NYK and Mol Shipping are from Japan while Yang Ming Transport and Evergreen Ma­rine are from Taiwan and the K Line is a South Korean company.
“The withdrawal of the five com­panies will inevitably affect Suez Canal revenues,” said Hani al-Nadi, the head of the international rela­tions section at the Suez Canal Au­thority. “It will also significantly af­fect shipping activities at the ports operated by the Suez Canal Author­ity.”
Suez Canal revenues were $375.8 million and 1,286 ships crossed the waterway in February, compared to revenues of $401.4 million from 1,359 ships making the transit in February 2016, the Suez Canal Au­thority said.
“Higher service fees mean that shipping companies using the ports will automatically seek alter­natives,” said economist Rashad Abdo, director of Cairo think-tank the Egyptian Forum for Economic and Strategic Studies. “This is par­ticularly true as rival ports in the region offer the same services for lower prices.”
Beyond what Abdo described as an “uncalculated” Transport Minis­try move to raise service fees at the ports of the Suez Canal is Egypt’s desperate need to compensate for the loss of revenues from tourism.
Ahmed Darwish, chairman of the General Authority for the Suez Ca­nal Economic Zone, said there was “deep concern” over the five inter­national shipping companies’ sus­pending their activities.
“This decision will have a nega­tive effect on the volume of activity in the ports,” Darwish said. “Apart from affecting revenues, this deci­sion will affect investments in the Suez Canal region in general.”
Egypt spent $8 billion two years ago to dig an additional channel in the Suez Canal, making two-way transits possible for the first time.
The government hopes to turn the canal’s banks into an interna­tional investment magnet for the shipbuilding, ship refuelling, main­tenance and logistics sectors. The aspirations rely on intense traffic in the canal and its ports.
Although the five shipping lines’ withdrawal could be temporary, Darwish said he feared it could lead to additional withdrawals.
He said he was in constant con­tact with Transport Ministry offi­cials and the Suez Canal Authority to contain the crisis. Nonetheless, Darwish said the ministry was un­likely to reverse the increased ser­vice fees.
Nadi said high port service fees jeopardise the business of maritime lines using Suez Canal ports and create a competitive disadvantage with lines that use rival ports.
“The Transport Ministry needs to reconsider its decision to raise port service fees for the best interests of our clients,” Nadi said. “The rever­sal of this decision will also serve the ports’ best interests because it will keep their competitive edge against rival ports intact.”