News / Economy

Shipping Firms Brace for Suez Disruption as Egypt Turmoil Mounts

FILE - An oil tanker passes through the Suez Canal in Ismailia, Egypt.
FILE - An oil tanker passes through the Suez Canal in Ismailia, Egypt.
Reuters
Growing turmoil in Egypt is threatening to disrupt shipments through the Suez Canal and increase the costs for shipping lines as Cairo's cash-strapped government seeks ways of bringing in revenue.
 
Egypt's economy has been in crisis since the 2011 overthrow of Hosni Mubarak. The government of Islamist President Mohamed Morsi is grappling with a slump in tourism and falling foreign currency reserves as it seeks to obtain a loan from the International Monetary Fund.
 
“The government will try to generate some income in the short term through various creative surcharges - including, most likely, on transit fees through the Suez Canal. These measures will be counterproductive over the intermediate and long term,” said J. Peter Pham of U.S. think tank The Atlantic Council.
 
Rising costs will also hurt the shipping industry - now in the fifth year of one of the worst slumps on record - which relies on the 192-km (120-mile) waterway as the quickest route between Asia and Europe.
 
In May the Suez Canal Authority (SCA) raised tolls on the canal by two to five percent, following an increase of three percent in March 2012.
 
A spokesman for the authority said talk of another rate hike this year “will not happen”.
 
He added, “The system to announce tolls happens in the beginning of the year, so maybe in January there will be a decision to either raise, stabilize, or lower prices according to the global economy and other considerations.”
 
Tolls brought in around $5 billion annually in recent years, but revenues are falling due to reduced trade between Asia and Europe and a shift to bigger ships to save costs, resulting in less traffic.
 
“The rate hike earlier this year is simply not going to make up for overall revenue losses,” said Michael Frodl of U.S.-based consultancy C-Level Maritime Risks. “We think another rate rise is likely before the end of the year and could be applied almost immediately.”
 
A standard container ship bringing consumer goods pays tolls of around $1.2 million for a return trip through the canal, or around a quarter of the overall costs of a voyage between Asia and Europe, according to analysts' estimates.
 
Shipping industry sources say Cairo may turn to other charges to raise revenues.
 
A maritime security source active in Egypt said indirect surcharges were likely to be introduced, such as stepping up ship inspections for seaworthiness and checks on ships' security teams and weapons carried on board.
 
The Suez Canal Authority has said it may offer discounts or rebates to increase traffic through the canal. The security source said, however, “It is unlikely they will be able to act on it given the growing political and bureaucratic chaos internally.”
 
Protests ahead
 
Cities around Suez have already been flashpoints for violence this year, causing minor stoppages through the canal. Shipping sources say some vessels calling at Port Said also have experienced robberies in recent months.
 
Morsi faces nationwide protests on Sunday, the first anniversary of his inauguration, with opponents urging him to step down. Days of brawling between his supporters and the opposition have already left several people dead.
 
Egypt's military has said it will reinforce security around the canal ahead of Sunday's demonstrations.
 
“The Suez Canal is a main lifeline for us,” army spokesman Colonel Ahmed Ali said. “Protecting it is a responsibility for us toward the Egyptian people and toward the world.”
 
Klaus Holm Laursen of the Suez Canal Container Terminal said it planned to minimize any potential impact on customers.
 
Several shipping sources have said that if unrest escalates they may consider re-routing around the Cape of Good Hope.
 
“The smaller hassles and minor disruptions may also create unhappy costumers, and if [they are] not handled by the Suez Canal Authority, some owners may opt for avoidance of the canal,” Peter Sand, chief shipping analyst with trade association BIMCO, said.
 
“We can hope that the opponents of President Morsi understand the long-term economic implications of disrupting Suez Canal traffic. However, sometimes the logic of an uprising is not entirely fact-driven.”

You May Like

Ebola Death Toll Nears 5,000 as Virus Advances

West Africa bears heaviest burden; Mali toddler’s death raises new fears More

Jordan’s Battle With Islamic State Militants Carries Domestic Risks

Despite Western concerns that IS militants are preparing a Jordanian offensive, analysts call the kingdom's solid intel a strong deterrent More

Asian-Americans Assume Office in Record Numbers

Steadily deepening engagement in local politics pays off for politicians like Chinese-American Judy Chu More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Talks to Resume on Winter Gas for Ukrainei
X
Al Pessin
October 25, 2014 4:21 PM
Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Talks to Resume on Winter Gas for Ukraine

Ukrainian and Russian officials will meet again next week in an effort to settle their dispute over natural gas supplies that threatens to leave Ukraine short of heating fuel for the coming winter. VOA’s Al Pessin reports from London the dispute is complex, and has both economic and geopolitical dimensions.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video Comanche Chief Quanah Parker’s Century-Old House Falling Apart

One of the most fascinating people in U.S. history was Quanah Parker, the last chief of the American Indian tribe, the Comanche. He was the son of a Comanche warrior and a white woman who had been captured by the Indians. Parker was a fierce warrior until 1875 when he led his people to Fort Sill, Oklahoma, and took on a new, peaceful life. As VOA’s Greg Flakus reports from Cache, Oklahoma, Quanah’s image remains strong among his people, but part of his heritage is in danger of disappearing.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.
Video

Video US ‘Death Cafes’ Put Focus on the Finale

In contemporary America, death usually is a topic to be avoided. But the growing “death café” movement encourages people to discuss their fears and desires about their final moments. VOA’s Jerome Socolovsky reports.
Video

Video Ebola Orphanage Opens in Sierra Leone

Sierra Leone's first Ebola orphanage has opened in the Kailahun district. Hundreds of children orphaned since the beginning of the Ebola outbreak face stigma and rejection with nobody to care for them. Adam Bailes reports for VOA about a new interim care center that's aimed at helping the growing number of children affected by Ebola.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7893
JPY
USD
107.68
GBP
USD
0.6238
CAD
USD
1.1214
INR
USD
61.185

Rates may not be current.