Drewry says, due to slower growth in international trade, additional capacity of the Suez Canal will not fill up as quickly as projected.
Drewry Shipping Consultants Limited (Drewry) says the newly completed Suez Canal expansion will draw "far fewer" vessels than has been forecasted by project sponsors.
While the Suez Canal Authority (SCA) reportedly expects the New Suez Canal to nearly double the average number of vessels transiting per day from 49 to 97, as well as boost revenue to $13.2 billion within 10 years, Drewry's forecasts are more reserved.
"Given prospect of much slower growth in international trade following the end of the China export boom of the last 15 years and given changes in energy policy away from oil, the Egyptian Government should not expect the additional capacity of the canal to fill up quickly. It must be a long-term game," says Drewry.
The Egyptian Government should not expect the additional capacity of the canal to fill up quickly. It must be a long-term game.
"To achieve their ambitious targets, the SCA would somehow need to see toll revenue grow at around 10 percent yearly, when the outlook for the shipping is nowhere near that level.
"The speed of growth on those container trades that are linked by the canal will have a large bearing on tonnage and revenue."
While Drewry did concede that the expansion project will indeed lead to improved transit times and fewer delays as expected, it notes that this will largely be due to the canal being utilised by far fewer vessels than expected.
"The number of containerships sailing through the Suez Canal has barely changed in the past three years – the 2014 sum of 6,129 ships is some 2,000 down on the 2008 peak – because carriers have preferred to invest in larger ships, meaning that more cargo is consolidated into fewer ships and services," explains Drewry.
Further, Drewry notes that, "more so than the size or depth of the canal," the direction of the Asia-Europe container trade, which accounts for approximately two-thirds of all Suez Canal traffic in TEU, will be one of the key drivers of the canal's tonnage and revenue growth.
Asia-Europe volumes are down by 2.8 percent, meaning that growth in the following years has even further to rise to catch up with the SCA projections.
"Since 2010 the yearly growth of laden TEU through the Suez Canal has been 4.3 percent, while Asia-Europe two-way traffic has been even lower at 3.3 percent. That trade growth figure would have to more than double to yearly growth of 8 percent for the SCA to get close to achieving its 2023 target," adds Drewry.
"Regrettably, Drewry cannot see a way for this to occur. After five months of 2015 two-way Asia-Europe volumes are down by 2.8 percent, meaning that growth in the following years has even further to rise to catch up with the SCA projections."
Drewry further forecasts some of the shortfall in Asia-Europe volumes could possibly be compensated through increased Asia to U.S. East Coast traffic, noting that delays to the Panama Canal expansion has seen a number of carriers choosing to use the larger capacities the Suez Canal can accommodate.
However, Drewry says it does not expect any volume gains "will be sufficiently large to compensate for weaker growth in the core Asia-Europe markets."
In July, an analysis from Argus questioned 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.