High hopes for wider Suez Canal

Faster shipping times and more traffic between Asia and Europe - that is the expected flow-on from an US$8.5 billion (S$11.5 billion) expansion of Egypt's Suez Canal due to be completed next month.

Egyptian security officials said this week the famous canal, which handles almost 10 per cent of global shipping trade, had been targeted by terrorists, but the government is pressing ahead with a gala ceremony on Aug 6 to launch the so-called "New Suez Canal".

The celebrations will be attended by Egyptian President Abdel Fattah al-Sisi, who will look on as ships travel simultaneously in two directions along the canal for the first time in its history.

The project marks one of the biggest changes to the canal - Singapore's main shipping link with Europe - since 1869, when it first enabled ships to avoid the long way around Africa.

A 35km-long channel has been added to allow the two-way traffic.

The upgrade to also widen and deepen the canal is set to boost capacity from about 18,000 ships a year, while the additional lane will help cut transit times through the 193km-long passageway from 18 to 11 hours.

Egypt's government says the changes will increase the number of transiting vessels from 49 to 97 ships a day by the year 2023.

But analysts have questioned Egypt's lofty forecasts. They say the project may attract some extra ships, but will not transform international shipping patterns, particularly as global economic growth lags.

A senior analyst at Maritime Strategies International, Mr James Frew, said the canal was already the quickest route from Asia to Europe.

He said shaving 14 hours off a return voyage would not significantly affect large container ships, which take about 77 days to make a round-trip from Europe to Asia.

"I don't think it will significantly cause people to reroute vessels," Mr Frew told The Straits Times.

"By allowing more convoys and greater two-way traffic, it may generate very marginal trade that would not happen otherwise.

"I don't believe any additional major cargo ships will go through the Suez that would not be going through already."

But the project has been widely promoted as a source of national pride in Egypt, which has endured increasing poverty and several years of political turbulence following the Arab Spring of 2011.

Initially scheduled to take three to five years, the project has been completed in just one. It has involved 43,000 workers and the excavation of about 250 million cubic m of sand and earth. A spokesman for the Dutch-based dredging and marine services firm Boskalis told The Straits Times the project "mobilised the largest cutter construction dredging fleet ever".

The new lane of the canal will be 24m deep and up to 177m wide, while other sections have been deepened to 24m.

Further work is planned to complete a logistics hub to service vessels. Shipping firm Maersk, the largest single user of the canal, has welcomed the project and said the faster passage will reduce fuel costs.

However, Maersk and others have noted that traffic could decrease if Egypt tries to increase canal fees. Large container ships already pay more than US$1 million for a round-trip.

Some analysts have warned that falling oil prices could encourage some shipping lines to take the extra time to sail around Africa to avoid tolls.

But Egyptian officials are predicting that the project will increase revenue from the canal from about US$5.5 billion a year to about US$13 billion by 2023.

This is based on additional tolls collected due to expected increased traffic, as well as plans to enable extra servicing and repairs for ships.

"The New Suez Canal is more than just a new waterway and an astonishing feat of engineering," Admiral Mohab Mameesh, managing director of the Suez Canal Authority, said in a statement on the authority's website. "(It) will unleash a renewed sense of pride and a more prosperous future."

In a reminder of Egypt's continued unrest, the canal was said to have been targeted this week by 13 members of the Muslim Brotherhood, who were suspected of planting bombs to disrupt shipping.

The cell, arrested on Monday, allegedly included an employee of the canal authority.

Despite claims that the project may fail to live up to official hype, the Egyptian government will be hoping the swift completion of the vast undertaking will help build confidence in a nation still beset by political turmoil.

This article was first published on July 14, 2015.
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