Petroleum prices, international trade rates principal sources of Suez Canal income: Economists

International trade increases by 4% to 5% annually, hopes for 97 ships per day in 2023 instead of 49

Over the last period, before the opening of the New Suez Canal, there were many discussions held on Chairman of the Suez Canal Authority (SCA) Mohab Mamish's prediction that the canal's income will increase to reach $13.2bn in 2023.
Economic consultant to the Suez Canal Authority, Abdel Tawab Haggag, said that the new canal will work on eliminating the anchoring of vessel convoys in lakes or inthe El-Balah axis, waiting for other convoys to transit through the canal. He added that the new canal will allow both convoys to sail simultaneously in both directions.
Haggag said that the New Suez Canal will save at least seven hours for ships to pass, a fact that will increase the canal's revenues after implementing this new service. He added that increasing the canal's fees or fixing them depends on certain regulations, related to services and the situation of the global economy.
The last time the canal's fees were increased was on 1 May2014. The Suez Canal Authority stabilised the fees in May 2015.
An official at the SCA said that "the main reason behind stabilising fees this year is the decrease in petroleum prices worldwide. The next period there will be a new announcement about increasing the fees".
The official, who preferred to remain anonymous, said that the canal's authority added a new service and it is more than fine to receive a return for it. He added: "The companies that own the containers and vessels are welcoming the new project, as it shortens their transit trip."
The New Suez Canal Authority is expected to allow 97 ships to pass daily in 2023 instead of 49 ships currently.
"The international trade rate increases by 4% to 5% annually. After the New Suez Canal opening, we hope that our share of international trade will increase to 10.5%, instead of 9.5%, which is our current share," said the official. "The income will not only be achieved through applying fees, but through offering another services as well."
Mostafa Al-Ahwal, an investor in the field of maritime transport, said that in order for the canal to achieve the projected income of $13.5bn, a general plan, which includes new projects in the canal's east and west banks, should be implemented. Also, services for international marine traffic movement should be included.
Al-Ahwal believes that depending only on fees is not enough to achieve revenues.
In a statement by the Popular Front for the Suez Canal Axis, it was revealed that the idea of the Suez Canal Axis Development project is to convert the marine waterway to a global integrated
business centre, which depends on maritime transportation services such as repairing ships, fuel supply, towing and security services, among other important services which are important for international maritime lines.
According to the Front, the cost of digging the new canal was $4bn, including dry digging and dredging, and $2.8bn to establish six tunnels, three in Port Said and other three in Ismailia.
Assistant Minister of Transportation for Maritime Transportation Affairs Ahmed Amin said that the canal will save the time consumed in passing from the Red Sea to the Mediterranean Sea. He added that the canal's ability to save time enables it to compete with other marine waterways, whether the Cape of Good Hope or the Panama Canal.
In press releases by Panama Canal Chairman, Jorge Quijano, the Panama Canal's share of the international trade movement through the sea reaches 5%. This percentage is expected to jump to 10% after the new expansions expected to be completed at the beginning of 2016.
According the Deputy Transportation Minister for Maritime Transportation Affairs, the cost of transportation represents between 60% and 70%, adding that at the end of the day saving time is saving costs for the passing vessels.
Developing the marine waterway will not only include adding a new canal in addition to the main canal, but it will also include other projects, whether in the north-west of the Suez Gulf or in the East Port Said Port. This aims at adding value to the products and services.
Wael Ziada, who serves as Head of Research of Egyptian Financial Group Hermes Holding Co., said: "We do not know how it was expected that the canal's income will reach to $13.5bn in 2023, after the opening of the New Suez Canal. Does it depend on the international trade's annual growth rates, so the canal's share will increase? Or does it depend on other facts? We have to wait and see."
Ziada believes that the rates of international trade are not stable; every now and then they change. He added:"Once again, we have to wait for an official statement, which would clarify the bases upon which the above mentioned expectations were built."
The global economy has suffered from the slow growth rates in light of the Euro crisis and Europe's debts because of Greece, in addition to the growth of the Chinese economy over the past year.
The Chinese economy's growth, which depends on investments and exports, reached 7.4% in 2014, against of 7.7% in 2013. It is of note that the Chinese government was targeting a 7.5% growth rate over the past year.
Former head of the Nile Centre for Economic and Strategic Studies Abdel Khalek Farouk predicted that the expectation of $13.2bn in revenues by 2023 may be an exaggerated amount, and the amount may not exceed $12bn.
Farouk based this opinion on the global economy's slow movement, which will not last for long time. He added that the number of ships passing through the canal will increase between 1% and 2%, due to the Suez Canal new expansions.
He concluded that lifting the economic sanctions off Iran will benefit international trade movement passing through the canal, as Iran is an important country which produces and exports petroleum to Western Europe and the US.