Tuesday,21 November, 2017
Current issue | Issue 1358, (24 August - 6 September 2017)
Tuesday,21 November, 2017
Issue 1358, (24 August - 6 September 2017)

Ahram Weekly

Attracting shipping to Suez

The introduction of discounted transit fees through the Suez Canal has been positively received, writes Safeya Mounir

Attracting shipping to Suez
Attracting shipping to Suez

The Suez Canal Authority (SCA) and General Authority for the Suez Canal Economic Zone (GASCZone) have announced up to 50 per cent discounts on fees for loading and offloading containers in the Suez Canal Economic Zone.

Incentives include discounted rates proportional to the volume of trade at transit ports and a bonus on the annual volume of trade of container vessels, Mohab Mamish, head of the SCA, announced last week. 

The incentives aim to attract new shipping to ports in the region, increase the frequency of visits and the number of transit vessels passing through, as well as encourage investors to launch value-added activities in the Suez Canal Economic Zone.

Under the announced scheme, vessels carrying less than 200 containers will not receive a discount. A 10 per cent discount will be given to vessels transporting 200 to 500 containers, with 15 per cent for fewer than 1,000, 20 per cent for fewer than 2,000, 25 per cent for fewer than 3,000, 45 per cent for fewer than 3,333, and a 50 per cent discount for vessels transporting more than 3,333 containers.

Ahmed Al-Shami, a transport economics expert, said the decision was a way of improving the marketing of Egyptian ports, especially Ain Sokhna and East Port Said where there are already discounts on container handing and transit fees. 

He said that during the first half of this year, there had been a 2.4 per cent increase in container ships travelling through Egyptian ports. The government wants to see this figure climb since it generates greater returns for the state from container transit and unloading services.

According to Mamish, the incentives were chosen after thoroughly studying local and regional shipping markets, with the participation of many organisations including the Ministry of Transportation, the Ports Authority, and the GASCZone, as well as others in the field such as container companies, shipping and offloading companies, maritime agents, shipping lines and maritime chambers. 

The Administrative Control Authority had reviewed the proposed fees on entering, docking and guiding, he said, and he expected the discounts to raise the number of vessels passing through Egyptian ports, especially Port Said and Ain Sokhna.

Abeer Leheta, chairman of EgyTrans, a transport company, said the decisiion was a good step towards the return of international shipping lines again. The decision came at a very important time as a postiive indicator of the government’s understanding and responsiveness to the complaints of companies operating in the transport sector and its readiness to make amendments in previous resolutions, which gradually will lead to attracting shipping lines again and investments in the sector. 

Leheta noted that raisin the navigation fees did not have substantial impact on traffic in the Suez Canal. Few ships diverted their routes via the Cape of Good Hope not because of higher fees at Suez but because the drop in oil prices had decreased the cost of travelling that route instead of going through Suez.

Traffic through the Suez Canal constitutes eight per cent of global freight movements, and Egypt wants to increase that to 35 per cent by 2050.

However, Ayman Saleh, chair of the Damietta Chamber of Shipping, said that “raising fees certainly impacted many companies, and shipping lines were forced to change routes and go via the Cape of Good Hope, especially after the drop in oil prices.”

He explained that only urgent freight went through the Suez Canal, and as a result the government’s new decision to slash fees was a good move and showed flexibility in responding to global circumstances. 

The 192km Suez Canal shortens travel time between Asia and Europe to 15 days on average. In mid-December 2016, the government increased transit fees by seven per cent for payments in Egyptian pounds and three per cent for dollar payments. 

The decision was unpopular, and the Suez Canal Economic Zone issued a statement explaining that it had been taken by the Ministry of Transportation after discussion between the government and shipping specialists. The decision applied to all seaports where the ministry has the power to impose fees or revise them.

It resulted in five shipping lines withdrawing from Suez Canal ports and heading to the Greek port of Piraeus instead, including two Japanese companies, Nippon Yusen Kaisha and Mitsui OSK Lines, along with Yang Ming (Taiwan), K Line (South Korea) and Evergreen Shipping.

Suez Canal revenues in the first quarter of 2017 stood at $1.194 billion, a three per cent drop from the year before when they were $1.231 billion. In June, revenues dropped to $427.2 million from $439.8 in May, which is two per cent less than in June 2016.

Overall, revenues dropped by 3.3 per cent to $5.005 billion in 2016.

Mustafa Al-Deeb, an adviser to the Ministry of Transportation, said the decision to reduce the fees would protect investments in container stations worth billions of pounds as there could have been a risk that shipping companies would stop passing through the Suez Canal.

He did not expect an immediate response by the shipping companies to the new fee structure, as this could take five to six months. However, he expected Suez Canal revenues to pick up by 50 to 60 per cent compared to the same period last year.

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