Suez to Lose Its Exclusivity in Large Containership Transits?

Egypt’s announcement on expansion of the Suez Canal by adding a parallel line to the current channel of a total length of 72 kilometres (44.74 miles), has got the shipping industry players thinking about who will benefit the most from the expansion.

The multi-billion-dollar plan could nearly double the canal’s capacity by 2023 thus significantly reducing the bottlenecks. The reduction is expected to solve the congestion problems by enabling ships to sail both ways as the waterway is currently too narrow for to allow two-way transit.

Nevertheless, as the ambitious plans are slated for completion by next year, shipping industry players doubt that this will be done in such a tight timeframe.

What is more, the 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, according to BIMCO.

“Due to widening and deepening operations carried out over previous years, the Suez Canal is able to accommodate all ships except fully laden VLCCs. As far as we can tell, the expansion plans would allow for speedier transits,” BIMCO explains.

Chief Shipping Analyst at BIMCO, Peter Sand, says: “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.”

The 145-year old existing Suez Canal is generating more than USD 5 billion income to Egypt on a yearly basis.

The Canal provides the shipping industry with a significant short-cut (saving 7 days), when sailing from the Far East into Europe.

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Press Release, August 11, 2014; Image: CMA CGM