The Suez Canal Relative Importance to Egypt and to the World

August 2015

§  Why is the Suez Canal important to the Egyptian economy? §  How has traffic through the Suez Canal been evolving since 1975?

§  How did the depth of the Canal evolve over time? And how does the current depth compare to

the Panama Canal? §  How much is the Suez Canal reliant on international oil trade? §  What are the top countries using the Suez Canal for trade (exports + imports)? §  How would transit dynamics change after the opening of the parallel waterway (New Suez

Canal)? §  Would the shorter transit time automatically translate into higher receipts?

Table of Contents

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2009/10   2010/11   2011/12   2012/13   2013/14  

USD  bn  

Suez  Canal   Tourism   Foreign  Direct  Investments  

SC  receipts  exceeded  tourism  receipts  in  2013/14  as  the  tourism  sector  was  adversely  affected  by  the  poor  security  situaIon  post  June  2013  

SC  receipts  exceed  net  FDIs  in  2010/11  as  the  laKer  declined  sharply  post  Jan  2011  

                   

Development  of  Selected  Key  Foreign  Currency  Receipts  (2009/10-­‐2013/14)  

Chart  1:    Why is the Suez Canal important to the Egyptian economy? Suez  Canal  receipts  represent  a  key  source  of  foreign  currency  in  Egypt;  whereby  it  reached  USD  5.4  bn  in  FY  2013/14.  The  relaIve  importance  of  the  Canal  increased  as  other  key  foreign  currency  generaIng  acIviIes,  like  FDIs  and  tourism,  faltered  post  2011  and  2013  revoluIons  (See  Chart  1).    

How has traffic through the Suez Canal been evolving since 1975? Average  daily  traffic,  in  terms  of  number  of  vessels  and  net  tonnage,  increased  steadily  between  2002  and  2008  associated  with  a  pickup  in  global  economic  growth  and  world  trade.  The  global  economic  downturn,  however,  led  a  significant  decline  in  traffic  in  2009.  InteresIngly,  the  average  daily  tonnage  increased  31%  between  2009  and  2014,  while  the  average  daily  number  of  vessels  decreased  marginally  by  0.4%  over  the  same  period.  This  is  explained  by  a  significant  increase  in  the  average  tonnage  per  vessel  post  2009  as  exhibited  in  Chart  3  as  the  internaIonal  shipping  industry  strives  to  minimize  marginal  cost  amid  a  slowdown  in  global  economic  acIvity  and  trade.  Hence,  the  depth  of  the  Canal  is  much  more  important  than  the  width.  

SC's  Daily  Average  Traffic  (1975-­‐2014)  Chart  2:    

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Daily  Average  Net  Tonnage  (1000  ton)   Daily  Average  No.  of  Vessels  (right  scale)  

SC's  Daily  Average  Traffic  (1975-­‐2014)  Chart  3:    

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Global  trade  is  becoming  more  reliant  on  bigger  vessels  with  higher  Dead  Weight  Tonnage  (DWT)  

A  leap  in  the  average  tonnage  per  vessel  post  the  financial  crisis  

         

How did the depth of the Canal evolve over time? And how does the current depth compare to the Panama Canal?

The  depth  of  the  Suez  Canal  has  increased  over  the  years  to  currently  support  vessels  with  maximum  draa  length  of  66  a  which  exceeds  the  maximum  draa  length  in  the  New  Panama  Canal,  expected  to  open  in  2016,  which  will  stand  at  49.9  a.  The  current  dimensions  of  the  Canal  support  100%  of  fully-­‐loaded  container  fleet,  95.4%  of  fully-­‐loaded  bulk  fleet,  64.2%  of  fully-­‐loaded  tanker  fleet  and  100%  of  other  fleet  types.  Some  bigger-­‐sized  unsupported  tankers  can  sIll  pass  through  Suez  Canal  not  fully-­‐laden  by  offloading  part  of  the  shipment  into  the  Suez-­‐Mediterranean  (SUMED)  pipeline  and  reloading  it  at  the  end  of  the  Canal.    

Suez  Canal  Maximum  DraQ  (Q)  Chart  4:    

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53  56   58  

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1869   1956   1962   1981   1994   1996   2001   2012  

Source:  U.S.  Energy  InformaIon  AdministraIon  

How much is the Suez Canal reliant on international oil trade? In  2014,  oil  tankers  and  LNG  ships  represented  27.2%  of  total  vessels  transiIng  through  the  Suez  Canal  (see  Chart  5).  Crude  oil,  refined  oil  products  and  LNG  represented  almost  25%  of  total  cargo  tonnage  carried  through  the  Suez  Canal  in  2014  (See  Chart  6).    

Breakdown  of  Total  No.  of  Vessels  by  Ship  Type  (2014)  Chart  5:    

Tankers  23.6%  

L  N  G  3.6%  Bulk  

Carriers  17.8%  

Combined  Carriers  0.0%  

General  Cargo  7.3%  

Container  Ships  35.7%  

Ro/Ro  Ships  1.3%  

Car  Carriers  5.8%  

Passenger  Ships  0.4%  

Others  4.3%  

Traffic  Breakdown  by  Cargo  Type  (2014)  Chart  6:    

Crude  Oil  &  Oil  Products  

22%   LNG  3%  

Other  75%  

What are the top countries using the Suez Canal for trade (exports + imports)? North  of  the  Canal,  Spain,  Italy,  Netherlands,  Egypt  and  U.K.  are  the  top  countries  that  used  the  Suez  Canal  in  2014.  While  in  the  South,  Saudi  Arabia,  Singapore  and  Malaysia  were  the  top  users  of  the  Suez  Canal  in  2014.    

Cargo  Tonnage  by  Country  in  2014  (North  of  the  Canal)  Chart  7:    

Spain  9%  

Italy  9%  

Netherlands  9%  

Egypt  8%  

U.K.  8%  

United  States  7%  

Turkey  6%  

Greece  5%  

France  5%  

Ukrania  5%  

Other  29%  

Cargo  Tonnage  by  Country  in  2014  (South  of  the  Canal)  Chart  8:    

Saudi  Arabia  21%  

Singapore  18%  

Malaysia  13%  

China  6%  

India  6%  

United  Arab  Emirates  

6%  

Oman  4%  

Srilanka  3%  

Iraq  3%  

Qatar  3%  

Other  17%  

How would transit dynamics change after the opening of the parallel waterway (New Suez Canal)?

The  newly  dug  35  km  waterway  increases  the  double  parts  of  the  Suez  Canal  to  115.5  Km,  represenIng  almost  60%  of  the  total  length  of  the  Canal.  This  is  expected  to  cut  the  average  transit  Ime  from  22  hours  to  11  hours.  

Would the shorter transit time automatically translate into higher receipts?

With  less  than  half  a  day  saving  in  transit  Ime,  projecIng  a  higher  market  share  for  the  Suez  in  global  mariIme  transit  would  be  premature,  especially  with  the  New  Panama  Canal  coming  on  stream  next  year.  The  total  traffic  passing  through  the  Canal  will  ulImately  depend  on  the  growth  in  the  volume  of  global  trade  which  is  currently  subdued.  However,  the  Suez  Canal  Authority  might  capitalize  on  the  transit  Ime  savings  in  order  to  increase  transit  fares,  but  such  increase  would  sIll  be  limited.  The  development  of  the  Suez  Canal  area  into  a  logisIcs,  industrial  and  re-­‐export  hub  provides  much  bigger  opportuniIes  to  the  EgypIan  economy  leveraging  on  the  strategic  locaIon  of  the  Suez  Canal  at  the  crossroads  of  internaIonal  trade  routes.  A  master  plan  for  the  project  was  presented  during  the  Egypt  Economic  Development  Conference  (EEDC)  held  in  March  2015,  and  key  legislaIve  amendments  had  been  made  to  allow  for  the  establishment  of  the  Suez  Canal  Special  Economic  Zone  and  grant  the  Suez  Canal  Authority  the  power  to  establish  companies.  

Sources:  Suez  Canal  Authority,  Central  Bank  of  Egypt,  BIMCO,  U.S.  Energy  InformaIon  AdministraIon  

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