Suez Canal increases tolls 10-15% – linked to massive profits by container shipping lines

The Suez Canal has been in action since 1869 as an artificial sea-level waterway connecting the Mediterranean Sea and the Red Sea creating the shortest maritime route between Europe and areas around the Indian and Western Pacific Ocean and also the fastest crossing from the Atlantic Ocean to the Indian Ocean.

Although it has been in action since 1869, the Suez Canal gained notoriety and worldwide attention in 2021 when the mega container ship Ever Given got stuck diagonally across Suez Canal on the 23rd of March 2021 till the 29th of March 2021, impacting ship movements in the Canal.

The Suez Canal Authority (SCA) announced on the 17th Sep 2022 that the Authority will be increasing the transit tolls for all types of vessels by 15% during 2023 except for dry bulk and cruise ships which will be increased by 10% from January 2023.

While the SCA statement stated that determining the Suez Canal transit tolls rests on a number of pillars, the most significant one being the average freight rates for various types of vessels, the announcement drew a clear link between the Suez Canal toll increase and the massive profits earned by the container shipping lines.

Adm. Ossama Rabiee, Chairman and Managing Director of the Suez Canal Authority said “There were considerable and consecutive increases within the past period; especially in containerships’ freight rates, compared to those recorded before the COVID-19 pandemic which will be reflected in the high operational profits that will be achieved by navigational lines throughout 2023 in light of the continued impact of the disturbances in global supply chains and the congestion in ports worldwide, as well as the fact that shipping lines have secured long-term shipping contracts at very high rates.“

Adm.Rabiee commented that the increases come in light of the SCA’s keeping up-to-date with all the market changes in the maritime transport sector which monitor the ever-increasing daily charter rates for most types of vessels that reached unprecedented levels and the forecast for next year shows a continuation in this rise.

“Clear examples of that are shown in the daily charter rates for crude oil tankers which increased on average by 88% compared to the average rates of 2021, and an increase by 11% in the average daily charter rates of LNG carriers compared to that of 2021,” said Rabiee.

The announcement confirmed SCA’s keenness to apply a balanced and flexible strategy on pricing and marketing that serves its own interest and that of its clients, and that takes into consideration the various changes in the global economy through clear mechanisms that include calculating a vessel’s transit tolls depending on the savings it achieves by transiting through the Canal.

Adm.Rabiee however also pointed out the impact the increased energy prices have on the equation of tolls calculation where the continued increase in crude oil prices over $90 per barrel, and the increase in the average LNG prices above $30 per million thermal units, have both led to a rise in the average prices of ships bunker and consequently an increase in the savings ships achieve by transiting through the Suez Canal compared to other alternative routes.

“The increase is inevitable and a necessity in light of the current global inflation rates that reached more than 8% which translates into increased operational costs and the costs of the navigational services provided in the Canal,” added Rabiee.

While there has been no comment yet from shipping lines on this increase, it is expected that these increases will be passed on to customers moving cargo on these routes.

Earlier this year, it was reported that Suez Canal revenues will reach $7bn for the 2021-22 financial year up 27% from $5.5bn in the last year.

In July 2022, the Suez Canal achieved the highest monthly revenue in its history reaching $704 million during July 2022, up from $531.8 million during the same month of 2021 with an annual increase of 32.4 percent.

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Source: shippingandfreightresource.com