Amid relatively restrained fanfare, Egypt inaugurated the East Port Said Canal, a 9.5 kilometer long side-channel that links the East Port Said Harbor directly to the Mediterranean Sea.
Previously, ships had to enter the harbor via the main channel of the Suez Canal, requiring them to wait to join convoys through the canal and adding to congestion at the northern mouth of the canal. According to the Suez Canal Authority, the new waterway is expected to increase the volume of traffic to the port, and will encourage investment in the canal region as a whole.
The project was completed in three months rather than the planned seven months, the authority added — a familiar theme following boasts that the Suez Canal extension completed in August 2015 was completed in one year rather than the three years originally planned.
The dredging of the East Port Said Canal, which began in November 2015, cost US$37 million and involved shifting 12.5 million cubic meters of earth the canal authority says. Work was completed in cooperation with US firm Great Lakes and Belgium’s Dredging International.
The ceremony was attended by Prime Minister Sherif Ismail, Suez Canal Authority head Moheb Mamish, and a collection of ministers and other officials, and prompted rapturous coverage on state television, complete with choruses of children signing patriotic songs.
However, it was a far cry from the parade of international dignitaries and lavish celebration that accompanied the launch of the so-called New Suez Canal in August 2015.
When the New Suez Canal project was announced in 2014, officials claimed it would lead annual revenue to more than double to US$13.5 billion by 2023. So far, the canal has failed to live up to that promise. Revenues fell in 2015, reaching US$5.175 billion compared to a record-breaking US$5.465 billion in 2014.
The decline in revenues is due to a combination of global factors.
The canal launched into a global shipping slump. With economies around the world slowing and demand falling, the anticipated flood of new canal traffic failed to appear. Instead, the canal saw only a marginal increase in shipping traffic after the opening of the extension.
Canal revenues have also been hurt by the strength of the US dollar, due to the way in which canal tolls are calculated.
Although ships transiting the canal pay their tolls in dollars, transit fees are calculated in Special Drawing Rights (SDRs), the composite value of a basket of currencies including the euro, the dollar, the pound sterling and the Japanese yen and, as of December, the Chinese yuan. Calculating fees this way protects Egypt against a crash in the value of the dollar, but lowers revenue at times — like the past year — when the dollar is outperforming other global currencies.
According to calculations by the Suez Canal Authority, SDRs weakened in 2015, dropping to an average value of 1.39 per dollar in 2015, compared to 1.52 in 2014. The authority has not yet released calculations for January, but the International Monetary Fund shows that value of the SDR remained below 1.39 per dollar throughout January and early February.
Persistently low oil prices could also have an impact on traffic through the canal, since low fuel prices can make it cheaper for some ships to make a week-long detour rather than paying to transit the Canal and risking piracy around the horn as Africa. As early as September, Bloomberg reported that some Europe-bound oil tankers were sailing around South Africa rather than through the Suez Canal. Research by industry media suggests that the trend is continuing, particularly for ships returning to their homeports without valuable cargo.
