Suez Canal in Talks with Foreign Carriers for Prepaid Transit Fees for up to 5 Years

by Ship & Bunker News Team
Thursday October 27, 2016

The Suez Canal Authority (SCA), along with the Central Bank of Egypt (CBE), is in negotiations with several international shipping companies, including Maersk Line (Maersk), CMA CGM S.A. (CMA CGM), Mediterranean Shipping Company S.A. (MSC), Hapag-Lloyd AG (Hapag-Lloyd), China Ocean Shipping (Group) Company (COSCO), and Evergreen, for the prepayment of transit fees three to five years in advance, Egyptian media reports.

"We are talking with the big carriers about a scheme to deposit a certain balance and every time their ships transit, a deduction will be made," said Mohab Mamish, SCA chairman.

"We will offer in return a discount of around 3 percent in transit rates," he added, noting that the talks are progressing well, with an agreement expected to be reached as early as next week.

Any resulting deal is reported to be likely to take effect at the beginning of next year.

"They have proposed a new payment method and presented it to us, and we are looking at it now," Reuters reported a Maersk Line spokesperson as saying.

Maersk, CMA CGM, and MSC are said to account for more than 25 percent of the ships transiting in the Suez Canal, of which Maersk accounts for 12 percent.

The average value transit fees paid by the three lines is estimated at $1.25 billion per year, while the average Suez Canal revenue is said to amount to about $5 billion per year.

The expected average value of the prepaid deposit of the three shipping lines is reported to be an estimated $3.75 billion, with the Suez Canal Authority basing the average value of transit fees on 2015's transit data.

The Suez is reported to be largely depending on an increase in petroleum-product cargoes, including liquefied natural gas (LNG) and ethanol, heading from the U.S. to Asia in coming years.

"The exports by U.S. refiners to Asia, and especially countries like India, will boost our revenue significantly," said Mamish.

On Wednesday, Ship & Bunker reported that Denis Bonhomme, senior vice president of business development in Asia for Engie, has said that a 0.5 percent global cap on sulfur on marine fuel could push demand for LNG bunkers to 30 million tonnes per year by 2025 to 2030.