By Drewry Shipping Consultants
The impressive ‘New Suez Canal’ project will improve capacity, transit times and reduce delays, not least because it will likely be used by far fewer vessels than expected by its sponsors.
The expansion of the Suez Canal into a two-lane maritime highway, from what could have been described as a congested single country lane, has gone slightly under the radar with more attention paid to the $5 billion widening of the Panama Canal that won’t be ready until next year.
The world is now paying very close attention, impressed as much by the speed of completion as the impact it will have. The ‘New Suez Canal’ project was first announced in August last year in an address to the UN General Assembly by Egypt’s President Abdel Fattah El Sisi, who said it would be the “Egyptian people’s gift to the world.” The $8.5 billion project was originally scheduled to take three years but was instead completed inside one year thanks to some political chivying with the lavish official opening ceremony taking place last Thursday (6 August) in front of thousands of dignitaries from around the world.
The Suez Canal Authority (SCA) estimates that 8% of the world’s maritime traffic passes through its canal and believes that more will come now that a second passage has been added. It expects the New Suez Canal will help to nearly double the average number of vessels transiting per day from 49 to 97 and more than double the revenue to $13.2 billion within 10 years.
The Egyptian people have invested a lot in the project with all of the funding coming from nationals within six days of asking, but without having seen the prospectus Drewry cannot see how the ambitious short-term projections can be met. The SCA’s net tonnage and tolls (based on NT) have been broadly flat for the past four years and have only just reached the pre-financial crisis levels of 2008. To achieve their ambitious targets, the SCA would somehow need to see toll revenue grow at around 10% yearly, when the outlook for shipping is nowhere near that level.
NEW SUEZ CANAL: KEY FACTS
- Project cost $8.5 billion, financed domestically through investment certificates returning 12% interest rate in local currency
- Expected to shorten transit times in both directions fro 18 to 11 hours
- Vessels’ waiting time expected to reduce to a maximum of 3 hours, instead of 8-11 hours at present
- Daily average of transiting vessels expected to rise to 97 ships by 2023, up from 49 ships at present
- Projected to increase Suez Canal revenues from $5.3 billion at present to $13.2 billion in 2023
Source: Drewry Shipping Consultants. Read full article here.