The Suez Canal is a strategically placed waterway, and it makes things easier for all those using it. This is how Michael Christian Storgaard, a press officer for the Danish shipping company Maersk Lines, described the Suez Canal and its importance for his company. The company was one of the biggest customers of the Suez Canal, he said, explaining that liner shipping acted like buses running a fixed schedule through each port. Storgaard said that sailing around South Africa was costly and going through the North East Passage was presently not an option because of the need for ice-class vessels capable of navigating the icy waters, which Maersk Lines did not have. Storgaard said all the company's business between Asia and Europe, which represents 40 per cent of its total transported volumes, went through the Suez Canal. He added that today an increasing amount of trade was going from Europe to Asia, as the Chinese middle class was rising and a lot of Chinese wanted to buy European cars and luxury goods. But while the Suez Canal was essential for the company's business, Storgaard stressed that its continued utilisation of the canal depended on costs. He said that there was a need to wait and see what rates would be negotiated as a result of the planned expansion of the canal. The company did not know what its policy would be if costs suddenly rose, he said. A year ago Maersk moved its business from the Panama Canal to the Suez Canal, despite the latter being five per cent longer, because the Suez Canal's tolls were cheaper. He said that though changing routes was difficult, it was doable and was like choosing to take a different airport because the ticket was cheaper. The Egyptian journalists who spoke to Maersk were part of a study tour organised by the Danish-Egyptian Dialogue Institute to study the welfare system in Denmark and Sweden. The group also spoke with Lars Koch-Soelyst, chief commercial officer of the Suez Canal Container Terminal (SCCT) which is 55 per cent owned by APM Terminals, one of the core businesses of the Maersk Group. Other shareholders include Cosco Pacific, the National Bank of Egypt, the Suez Canal Authority and the Egyptian private sector. Koch-Soelyst said that as SCCT was celebrating 10 years in business this year, it was seeking to expand its business but was looking for Egyptian government cooperation. He also said that the company was operating at peak operating capacity. SCCT started in 2004 by servicing Maersk Lines, but now Maersk was about 45 per cent of its business, and 55 per cent was other customers. SCCT operations represent 50 per cent of the total container handling industry in Egypt. Koch-Soelyst said SCCT could currently handle around three million containers but could handle more if it had the ability to take more ships. He said that there were several factors that it needed to work on with the Egyptian authorities in order to expand the company's ability to take these, including a deeper draft and better navigational access. The draft is one of the restrictions affecting the Suez terminal, he said, and there was a need to increase this from 15.5 and 15 to 16 metres. The extra metre could enable a ship to take on 1,000 to 1,500 more containers, he said, adding that the Egyptian government should pay for this deepening. Another aspect where government intervention was needed was in the area of navigational access. Koch-Soelyst explained that with the current convoy system there were only three windows during which ships could access SCCT. He explained that convoys in the Suez Canal moved at certain times of the day to the south and at other times they headed north, since there only one lane in one direction. This created inflexibility, he said, because when the convoy was moving north, it was not possible for vessels to enter the port. With better access he believed the terminal would be able to handle five to six million containers. To resolve such problems, Koch-Soelyst said there was a need for a separate entrance channel that would give access to the port from the Mediterranean and enable continued access outside the convoy system. This too was an issue that the government should be handling as per its contract with the company, he said. When this was done, it would double the capacity of SCCT. According to Koch-Soelyst, the Egyptian authorities' share of the profits was $58 million annually. If the new channel was added, that number could increase to $85 million. Meanwhile the government had said that it respects its contractual agreements. Ahmed Amin, advisor to the minister of transport told Al-Ahram Weekly that officials from SCCT met with the Minister on Tuesday where they agreed to cooperate and smooth out their difference. Furthermore they were invited to investigate other investment possibilities in the sector. Amin clarified that the government understands its obligations within the contract and acknowledges the importance of the channel, but argued that they disagreed with the company on the immediate need for the access channel. He pointed out that several studies carried out by impartial expert houses showed that this access channel is important in the case of the existence of other container terminals in the area. Amin explained that this channel would cost around $8 to $10 million in maintenance annually. Nonetheless he said that they agreed to try and reach an agreement within a month on the timeline for the access channel and in the meantime a temporary solution of creating a channel that would allow smaller ships to access the port was discussed. “This would be easier to provide as a temporary solution and would not be very costly,” he said. As for the access channel, which would need a draft of 18.5 metres, he said they discussed the possibility that it can be executed next year when the dredging work in the Suez Canal'ssecond waterway is almost completed. “The dredging machines will be available and we can coordinate with the Suez Canal Authority (SCA) to use them to do the access channel.” As far as deepening the draft within the port, he said that is easy to carry out as well in coordination with SCA. In addition, Amin said that the company has agreed to look into the renegotiation of the 2007 annex to the contract which was found by several committees to be unbalanced against the government. It is that annex that stipulates the government responsibility for the new access channel and the deepening of the draft. He explained that among other things, the annex extended the concession period for the port from 35 years to 49 years. “A rough calculation of the profits that the company will make during those extra 14 years is $1.4 billion,” Amin said. Furthermore they were exempt from paying rent for a second phase of 600,000 meters squared for 17 years and they were exempt from paying handling fees for their first and second phase, also for 17 years. “It is estimated that the company will make $1.7 billion in profits as a result of these terms,” said Amin. This was in exchange for building at their own expense a 1,200 metre pier at an estimated cost of $80 million, which at the time the government was unable to finance. Furthermore they gave up their right to be the investor of first choice should the government wish to establish another terminal in the area. Estimates put investment in the new access channel at $80 to $100 million.
