Suez Canal Authority extended duration of discount for container ships, against the upcoming opening of the new locks of Panama Canal. The canal administration aims to compete Panama Canal and attract container vessels returning from US East Coast to Asian ports. In March 2016, the Suez Canal implemented discount of 30% for ships passing through, in order to reverse the trend of reorientation of ships on the route around the southern end of Africa, which has become economically viable in conditions of low fuel prices and a record drop in freight rates. Suez Canal Administration approved discount for 90 days, which expired on June 5.
However, the shipping industry environment did not changed during the last 3 months and Suez Canal extended the duration of discount with another 90 days until September 3. Moreover, the canal authorities increased the range of discount to 45%-65%.
Egypt seeks to recoup the billions dollars spent on completing the expansion of the channel, which provided an opportunity for simultaneous passage of ships in both directions. According to calculations of the Suez Canal Administration, the expansion was to ensure the growth of fees by 260% to 13 billion USD until 2023.
However, on the basis of 2015 the container traffic through the canal declined by 2.3% yoy to 41.2 million TEU. The number of container ships passed through the canal declined by 3% yoy to 5,941. The traffic in the first quarter on 2016 keep the decreasing trend and dropped by 3.3% yoy. At the same time in March, immediately after the introduction of discounts, the decline was 10.2% yoy to 456 container ships.
Meanwhile, at the end of this month should open the new locks of the Panama Canal, which will be able to skip container ships with a capacity of up to 14,000 TEU. Panama Canal is the main competitor of Suez Canal in terms of cost per container, but has restrictions in size of the vessels.