Suez Canal: Better Service to the Shipping Industry

Posted by Michelle Howard
Friday, August 08, 2014
Photo courtesy of Suez Canal Authority

According to the U.S. Energy Information Agency, one of the world’s oil transit choke-points is the Suez Canal, the Panama Canal being another. However, the recently announced Suez Canal expansion plans are more likely to cater for containership transits, in strong competition with the expanding Panama Canal, rather than respond to the demand from oil tanker transits.

On Tuesday, August 5, 2014, the Egyptian President Abdel Fattah el-Sisi unveiled the project, which is bound to be a multiyear, multibillion dollar one.

Through widening and deepening operations over several years, the Suez Canal will be able to accommodate all ships except fully laden VLCCs. As far as we can tell, the expansion plans would allow for speedier transits.

Chief Shipping Analyst at BIMCO, Peter Sand, said, "The world has two giant canals in operation that are competing for the container shipping market handling imports into the US East Coast from the Far East. As the Panama Canal Expansion gets nearer its completion, the Suez canal starts to feel the heat and pressure to retain its superiority in handling the biggest ships in the World.”

The Suez Canal provides the shipping industry with a significant shortcut (saving seven days), when sailing from the Far East into Europe. In recent years, the drive in the container shipping industry towards lower costs per transported container has led to the introduction of larger and larger ships and subsequently also cascading of ships. This has resulted in Post-Panamax ships calling US East Coast ports via the Suez Canal.

“Suez will lose its exclusivity in large containership transits soon. A way to retain an edge in the market will be to improve your product. With Panama holding the upside on sailing distance by a small margin, the key parameters left will be fast transits and a competitive pricing of the service provided. In addition to that, the development of a larger transhipment hub to serve the East-Mediterranean and Black Sea market could increase the attractiveness of the Canal", adds Peter Sand.

 

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