It is yet unclear whether the New Suez Canal will spur more traffic or better accommodate the major rise in throughput since 2011 as macroeconomic factors and toll levels may be far more influential in determining future shipment volumes than the introduction of two-way traffic, according to trade analyst Argus.
The New Suez Canal, scheduled for official opening on August 6, has taken the four double zones and six by-pass sections and joined them together to create a new channel, allowing ships to travel in both directions, with the aim of decreasing transit waiting time, reducing congestion and allowing more vessels to transit each day.
The USD 8. billion project should reduce vessel waiting times to three hours from up to 11 as well as allow two-way traffic in the canal, but has not raised the maximum passable tonnage.
The freight market is underwhelmed by the expansion, emphasising that maximum ship size will not increase and arguing that journey times will not, in fact, significantly shorten, Argus reported one freight analyst as saying. A hike in rates would push more traffic to take the Cape route, particularly given the weakness of bunker prices, Argus claims.
Secretary-general of the International Chamber of Shipping Peter Hinchliffe, while noting the canal authority’s analysis that ship numbers will rise further with the expansion, is cautious, saying “I expect experience will tell over time as to by how much numbers will increase and [the expansion’s] impact.”
Crude traders are not expecting any changes to the regional market stemming from the expansion of the Suez Canal. Currently, fully-laden VLCC tankers are unable to sail through the canal, and must part-discharge cargoes at Ain Sukhna to go through the Sumed pipeline to Sidi Kerir, reloading at the Mediterranean terminal. The expansion will not allow VLCC tankers to sail through fully laden, so oil companies will have to continue using Sumed to transport cargoes larger than 1mn bl from the Red Sea into the Mediterranean and beyond. They say delays passing through the Canal are not an issue for them.
The naphtha market has never been restricted by the limitations of the Suez Canal, Argus says, because of the size of vessels employed, and participants expect trade flows to remain the same. But there are concerns that transit fees may rise, with a knock-on effect on naphtha traffic. Jet fuel traders are similarly unmoved, saying increased flows are unlikely. Suez is not a bottleneck for jet fuel traffic, cargoes being limited by the availability of product.
LPG flows are also unlikely to be affected. Currently, very little passes through the Suez Canal, since that route saves US cargoes only a day or two compared with the Cape, and eastbound shipments from North West Europe are now very uncommon. And, with the expansion of the Panama Canal, charterers looking to save time and money going to Asia Pacific will use that route instead, according to Argus.
The Suez Canal Authority says vessels with a draught of up to 66ft (20.1m) will be able to use the new waterway, and LNG carriers over 100,000m³ have roughly the same draught of 12.5m (41ft). But LNG Q-Max and Q-Flex carriers will be still be unable to use the expanded Suez Canal because of lock size, rather than vessel draught. And LNG shipbrokers add that the expansion will have a limited impact on transit of LNG carriers smaller than Q-Flex.