Egypt’s Suez Canal fee hike won’t have a ‘massive’ impact on trade flows, analyst says

Egypt announced on Saturday that it will raise transit fees in 2023 for all types of vessels passing through the Suez Canal.

According to a statement released by the Suez Canal Authority, transit fees for tankers passing through the canal will rise by 15%. The increase for dry bulk carriers and tourist ships is 10%. The fee hikes will take effect on Jan. 1, 2023.

“The increase is inevitable and a necessity in light of the current global inflation rates,” the authority’s chief, Osama Rabiee, said in the statement.

He added that the decision factored in the impact of increased energy prices.

A ship in the Suez Canal in Ismailia, Egypt, on May 17, 2022. An analyst told CNBC that while the rise in Suez dues will not have a massive impact on trade flows, it will fuel ongoing inflation.

Sui Xiankai | Xinhua News Agency | Getty Images

Fees may fuel inflation

The Panama-flagged ship Ever Given set sail toward the northeastern Egyptian city of Ismailia for its departure from the Suez Canal and resumption of its voyage to the Dutch city of Rotterdam, on July 7, 2021. Egypt announced on Saturday that transit fees for all types of vessels passing through the Suez Canal will be increased in 2023.

Anadolu Agency | Anadolu Agency | Getty Images

Huxley added that the increased fees will be passed on to customers, which will in turn fuel inflation.

The U.S. reported a 8.3% year-on-year increase in consumer prices in August. Rising food and shelter costs offset a decline in gas prices.

Still a cheaper route

Another analyst said that despite the rise in fees, the Suez Canal is still a substantially cheaper route for vessels.

A vessel on the Suez Canal in Ismailia, Egypt, on Jan. 3, 2022. “The savings of sailing via the Suez Canal are still very large, particularly due to the present very high … bunker prices,” said an analyst.

Ahmed Gomaa | Xinhua News Agency | Getty Images

“The savings of sailing via the Suez Canal are still very large, particularly due to … very high oil and bunker prices. In addition, the shipping markets are generally seeing high demand and low vessel availability. This also encourages shipowners to send vessels via the fastest routes,” said Niels Rasmussen, chief shipping analyst of shipping association Bimco.

Rasmussen said that he does not expect shipowners to turn to alternative routes, such as sailing south of Africa. 

“Shipping markets are generally seeing high demand and low vessel availability. This also encourages shipowners to send vessels via the fastest routes,” said Rasmussen.

(With Inputs from cnbc)

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