Date: 04.05.2020

The Suez strikes back

We reported a month ago that historic low fuel costs was tempting shipping lines to cut out the Suez Canal and sail the long way around Africa’s Cape of Good Hope, in a move that adds 7-10 days to the usual transit, but would save them millions by avoiding the toll charges. The Canal is moving to protect its trade.

In a circular issued on Monday the Suez Canal Authority announced big increases in their discount scheme, in an initiative that is clearly aimed at winning back lost business and preventing more container vessels from taking the long route around Africa.

For North Europe to Asia the Canal Authority now offer a rebate of 17% compared to the normal tolls, an increase from the previously offered discount of 6%, instituted from 1st of April which failed to prevent some vessels from going the long route.

For East Coast North America to Asia, the rebates have been increased to the range of 60-75% depending on the specific origin and destination, an increase from the rebate already in place of 45-65%.

The new discounts are in effect from 1st of May to 30th of June.

Presently at least eight vessels operated by the Ocean Alliance and the 2M Alliance either have, or are scheduled to bypass the Suez Canal and take advantage of the low oil prices versus the canal tolls.

Whether this new discount will be sufficient to prevent more bypassing will become evident when we see the actual routing of the large vessels over the coming weeks.