The Suez Canal "toll" is going up again

According to the Associated Press, Egypt's Suez Canal Authority recently issued a statement saying that it will raise the ship toll fee of the Suez Canal in January 2023, the toll fee for cruise ships and dry cargo ships will be raised by 10%, and the toll fee for the remaining ships will be raised by 15%.

Suez Canal Authority Chairman Usama Rabiet said soaring global inflation led to increased costs of operation, maintenance and maritime services on waterways was the main reason for
the toll hike.

Price adjustments are frequent

Known as the "crossroads" of the world's shipping lanes, the Suez Canal is one
of the busiest waterways in the world.
About 12 percent of global trade, 7 percent of oil is transported through the Suez Canal, and 30 percent
of global container traffic.
The canal revenue is also an important source
of Egypt's national fiscal revenue and foreign exchange reserves.

It is reported that the Egyptian Suez Canal Authority has raised the canal toll three times this year, with increases ranging from 5% to 10%.

In July, Suez Canal Authority Chairman Usama Rabiye issued a statement saying that the canal's operating figures for the 2021/2022 fiscal year were a record $7 billion, up more than 20 percent
year-on-year.

"Historically, tolls for the Suez Canal have undergone many phases of adjustment
.
" Zhao Jun, an associate professor at the Middle East Research Institute of Shanghai Chinese University, told this newspaper that from 1956 to 1965, the Suez Canal was relatively unnavigated, and the difference in charges was not much
different from that of passing ships.
After the Fourth Middle East War, the Suez Canal reopened with differentiated charges
based on the type and tonnage of ships.
Due to the soaring oil prices caused by the war, the cost of oil tanker crossing has increased significantly
.
At the end of the 1990s, the Suez Canal formed a model of charging according to eight types of ships and different tonnage sections, which is generally used today
.
Until the late Mubarak regime, the Suez Canal maintained annual revenues of between
$4 billion and $5 billion.

According to public data from the Suez Canal Authority, in August this year, the monthly toll for the passage of ships on the Suez Canal reached a new high of US$745 million, more than 10%
of the canal's 2021/2022 revenue.
Usama Rabiye said the Suez Canal is expected to add another $700 million a year in revenue
after toll hikes in 2023.

"Price increases" are inevitable

In his statement, Osama Rabiye said that in the face of rising energy prices, freight rates and other issues, the canal's mark-up measures are "inevitable and necessary.
"
The British "Maritime News" reported that at the time of rising fuel costs, ship operators passing through the Suez Canal saved fuel costs on shorter routes, so the toll increase was reasonable
.

"According to the global market situation, the toll fee of the Suez Canal has long been in the process of
dynamic adjustment.
It makes sense that the Suez Canal will raise prices by 10% from 2023
.
Zhao Jun pointed out that oil, overseas Chinese remittances, canals and tourism are the four pillars of Egypt's
economy.
Egypt's energy and remittance revenues have suffered significant setbacks due to the COVID-19 pandemic and the international situation, and although they have rebounded today, there is great uncertainty, and the tourism industry is still difficult to be optimistic, with only the canal becoming the most stable source of
income.
Previously, in order to boost tourism, the Suez Canal was once exempt from cruise ship tolls
.
At present, Egypt's sovereign debt crisis is serious, plagued by foreign exchange shortages, and there is an urgent need to raise canal tolls to replenish foreign exchange reserves
.

In recent years, there have been occasional "boat jams" in
the Suez Canal.
On August 31 this year, a Singaporean-flagged tanker ran aground on a single-lane extension south of the Suez Canal, resulting in a brief suspension of the
course, Reuters reported.

"The number of ships passing by the Suez Canal is increasing year by year, and the infrastructure
needs to be continuously improved.
In 2014, the Suez Canal underwent a massive expansion, and so far the cost has not been fully recovered
.
At present, the canal is still widening and deepening the channel, and a lot of money
needs to be raised.
Zhao Jun said
.

The impact range is limited

The increase in the canal will provide important financial support
for Egypt's economic development.
Egyptian President Sisi recently announced that he will allocate funds from the income of the Suez Canal to build 3 yacht ports to support the national economy
.
Sisi said that as part of Egypt's comprehensive development plan in the Mediterranean and Red Seas, the port construction will create a large number of jobs and drive the development of
surrounding tourism.

"From the perspective of the global trade pattern, the rise in Suez Canal fees will be transmitted to shipping merchants and other entities, which may further push up global inflation and affect the global economic recovery
.
" Zhao Jun pointed out that after the Suez Canal increases the "toll", a small part of the shipping demand may be replaced
by air transport, rail and other modes of transport.
However, given the irreplaceable economic value of the Suez Canal for international commodity transportation, and the boom in international shipping, the impact of the increase in toll rates on the transport landscape of global trade is limited
.

Gilbert Lagart, chief executive of the East African Shippers Council, said the rise in the Suez Canal "toll" was mainly affecting East African traders
.
East Africa's trade with Europe and Asia is heavily dependent on the Suez Canal, and rising tolls will complicate the import and export of goods in the region, and some ships may change routes
for economies of scale.

"We should also take a wait-and-see attitude
towards this toll increase.
" Zhao Jun said that the Egyptian Canal Authority's previous price adjustments have been vigorous, and the toll adjustment is scheduled to take effect the following year, but in fact, there is some room for buffer
.
"At present, there is a downward trend in global oil prices, and whether the rise in Suez Canal tolls is implemented as scheduled, and we need to pay close attention to the trend of
energy prices.
"