Egypt’s Suez Canal cost hike won’t have ‘huge’ impact on trade flows, analyst says

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Egypt announced on Saturday that it will increase transit tariffs for all types of ships passing through the Suez Canal by 2023.

According to a statement from the Suez Canal Authority, transit fees for tankers passing through the canal will increase by 15%. The increase for dry bulk carriers and tourist ships is 10%. The rate increases will take effect on January 1, 2023.

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“The increase is unavoidable and a necessity in light of current global inflation rates,” the head of the authority, Osama Rabiee, said in the statement.

He added that the decision took into account the impact of increased energy prices.

A ship in the Suez Canal in Ismailia, Egypt, on May 17, 2022. An analyst told CNBC that while the increase in Suez duties won’t have a huge impact on trade flows, it will fuel ongoing inflation.

Sui Xiankai | Xinhua Press Agency | Getty Images

Costs can fuel inflation

An analyst told CNBC that while the increase in Suez dues won’t have a “huge impact” on trade flows, it will fuel ongoing inflation.

“Oil prices are currently falling and so if the canal were to price itself against the competition (which goes around Africa), the Canal Authority would lose,” said Mandarin Shipping chairman Tim Huxley.

Global oil prices have had a choppy year — from skyrocketing to over $130 a barrel after the outbreak of the Russo-Ukraine war, to falling to about $80-$90 a barrel in recent weeks.

The Panama-flagged vessel Ever Given set sail for the northeastern Egyptian city of Ismailia before departing from the Suez Canal and resuming its voyage to the Dutch city of Rotterdam, on July 7, 2021. Egypt announced on Saturday that transit charges for all types of vessels passing through sailing the Suez Canal will be expanded in 2023.

Anadolu Agency | Anadolu Agency | Getty Images

Huxley added that the increased fees will be passed on to customers, which in turn will fuel inflation.

The US reported an 8.3% year-on-year increase in consumer prices in August. Rising food and shelter costs offset a fall in gas prices.

Still a cheaper route

Another analyst said that despite the rate hike, the Suez Canal is still a significantly cheaper route for ships.

A ship on the Suez Canal in Ismailia, Egypt, on Jan. 3, 2022. “The savings from sailing the Suez Canal are still very large, especially because of the current very high … bunker prices,” said an analyst.

Ahmed Gomaa | Xinhua Press Agency | Getty Images

“The savings from sailing through the Suez Canal are still very large, mainly due to … very high oil and bunker prices. In addition, the shipping markets generally see a high demand and low availability of ships. This also encourages shipowners to ship ships.” to steer by the fastest routes”, said Niels Rasmussen, chief shipping analyst at the Bimco shipping association.

Rasmussen said he doesn’t expect shipowners to turn to alternative routes, such as sailing south of Africa.

“Shipping markets generally see high demand and low vessel availability. This also encourages shipowners to steer vessels via the fastest routes,” said Rasmussen.



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