Future of Suez Canal revenues hostage to international currencies struggle

An analysis conducted by Daily News Egypt on traffic developments through the Suez Canal showed the change in each type of transient and cargo ships, which gives an indication of the future of traffic in the canal.

According to data, the Suez Canal succeeded in raising the number and tonnage of ships gradually over the past three years, with 16,596 vessels registered in 2013 at a total of 915.467m tonnes. In 2014, 17,148 ships transited the canal with a total of 962.748m tonnes. A total 17,483 ships transited the canal in 2015 with 998.652m tonnes of cargo.

Traffic data during this period suggest that despite maintaining growth in the Suez Canal, there was a decline. In 2014, the annual growth of the number of vessels increased by 3.33% and payloads by 5.16%. However the annual growth rate fell in 2015 by 1.95% in terms of number of ships, while cargo growth dropped by 3.73%.

The slowdown in traffic growth explained why traffic fees were unchanged in 2015 with the decision to amend the published navigational note No. 8 for 1994, which granted a reduction of 35% to liquefied natural gas tankers transiting the Suez Canal so that the reduction drops to 25%.

The roots of navigation note on LNG tankers go back to a decision in 1994 taken to support the Gulf states in reducing transit fees of gas shipments to Europe to make it more competitive. But the Research Department of the Suez Canal Authority showed that the reduction can be amended without affecting the competitiveness of Gulf natural gas prices.

The decision to maintain the fees in 2015 was made after increasing them by 5-7% in 2014 on crude oil, oil derivatives, chemicals, and LNG tankers for shipments exceeding 20,000 tonnes. Fees were increased on dry bulk carriers at rates ranging between 5 and 9%.

Fees on transit have not yet been changed in 2016 and there were expectations to keep them as they are to maintain the competitiveness of the channel, given the decline in oil prices and slowdown in economic growth in China and the Euro zone.

Head of the Suez Canal Authority Mohab Mamish announced giving promotional offers to shipping lines in a number of Arab countries to attract additional oil tankers to pass through the Suez Canal instead of the Cape of Good Hope.

Growth of loads, albeit at slower rates, suggests that the collapse of oil and the slowdown in the Chinese economy and the Euro zone economy were not the main reason behind the 1.09% decline in revenues of the canal, which is dominated by dollars, in 2015.

The decline however was rather caused primarily by the decline in the SDR unit against the dollar by 7.9% compared to 2015. The Suez Canal relies on SDR units in fee pricing. SDR is a unit comprising of four major currencies, the US dollar, the euro, the yen, and the sterling pound. The Chinese Yuan is expected to be included in the basket before the end of this year.

Statistics also revealed that the drop of oil prices only affected the growth rate of the ships passing through the canal, not their numbers.

In 2013, 3,594 oil tankers transited the canal with a total of 144,990 tonnes. Then in 2014, the number increased to 4,053 oil tankers, representing an annual growth of 12.77%. In that year, loads registered an increase of 12.48% boosting the tonnage to 163,085 tonnes. The canal saw passage of 4,316 oil tankers in 2015, a growth rate of 6.49%. The ships carried a total load of 177,782 tonnes, a growth of 9.01%.

The Suez Canal was been able to restore growth rates of LNG tankers, after having declined in 2014. In 2013, 649 vessels with a total load of 70,317 tonnes, passed through the canal. The number declined in 2014, recording only 614 ships with a total load of 66,894 tonnes. In 2015, the canal recovered and witnessed passage of 670 ships with a total load of 72,996 tonnes.

The same was repeated with general cargo ships. In 2013, 1,358 ships with a total 15,118 tonnes transited the canal. In the following year in 2014, the number fell to 1,259 vessels with a total of 14,824 tonnes before an improvement took place in 2015, boosting the number of vessels to 1,527 ships at a total of 16,060 tonnes.

In contrast, container ships, which represent the most important type of ships to the Suez Canal, declined during 2015 in terms of the number of vessels, while there was an increase in loads. The number of ships increased in 2014 to 6,129 ships at 536,316 tonnes versus 6,014 ships at a total of 508,220 tonnes in 2013. The number kicked back in 2015 to 5,941 ship with an increasing tonnage of 555,579 tonnes.

The contradiction between the low number of vessels and higher payloads shows a tendency to rely on bigger ships to save costs. The Suez Canal will have to cope with this development and maintain an appropriate depth to meet the requirements of these larger vessels.

Dry bulk vessels that ship grain, minerals, and liquid substances were unable to continue growing in 2015. Data showed that the Suez Canal saw passage of 2,873 ships with a total of 101,164 tonnes in 2013. The numbers increased to 3,051 ships with a total of 107,737 tonnes in 2014 before they fall back to 2,878 ships and payloads of 102,156 tonnes in 2015.

Car carriers continued to decline. In 2013, 1,024 vessels with a total of 61,579 tonnes transited the canal. They fell to 1,003 ships with 59,666 tonnes in 2014. The decline carried on in 2015 to 939 vessels with 56,927 tonnes.

Table showing the variable number of ships transited the canal over the past three years.

Table showing loads transiting the canal over the past three years (in thousand tons)

Revenues in million dollars