EMEA News
Estimated Impact of Suez Canal Expansion Questioned
An analysis from Argus questions whether the recently completed expansion to the Suez Canal is capable of better accommodating the traffic rise seen since 2011 or encouraging further traffic to utilise the canal.
Argus notes that while the expansion now allows ships to travel concurrently in both directions and decreases waiting times, the expansion has not increased the tonnage allowance of the canal.
Argus also notes that some market participants say traffic is more sensitive to transit fees.
"Macroeconomic factors and toll levels may be far more influential in determining future shipment volumes than the introduction of two-way traffic," said Argus.
One freight analyst reportedly said that freight market is underwhelmed by the canal's addition and argues that transit times will not be significantly shortened as a result of the expansion.
The same analyst also suggested that a rate hike would likely push more traffic to take the Cape route, especially with low bunker prices.
Peter Hinchliffe, Secretary-general of the International Chamber of Shipping, commenting on the Suez Canal Authority's forecast that ship numbers will further increase with the expansion, said "I expect experience will tell over time as to by how much numbers will increase and [the expansion's] impact."
Meanwhile, crude traders are reportedly not expecting any changes to the regional market as a result of the expanded canal, noting that fully-laden VLCC tankers are still unable to sail through the canal.
The status quo is also expected for the naphtha market, which has reportedly never been restricted by the limitations of the Suez Canal due the size of the vessels it utlises, as well as jet fuel and liquefied petroleum gas shipments.
Liquid natural gas (LNG) shipbrokers have reportedly said that the expansion will have a limited impact on transit of LNG carriers smaller than Q-Flex, as LNG Q-Max and Q-Flex carriers will be still be unable to use the canal.
"Currently, very little passes through the Suez Canal, since that route saves U.S. cargoes only a day or two compared with the Cape, and eastbound shipments from North West Europe are now very uncommon. And, with the expansion of the Panama Canal, charterers looking to save time and money going to Asia Pacific will use that route instead," said Argus.
On Wednesday, Ship & Bunker reported that, after 11 months of work, Egypt has announced the completion the new Suez Canal, set be officially unveiled on August 6.
