It is now over six months since the Red Sea crisis began and as expected, Egypt’s Suez Canal has taken a hit with the economic impact now becoming clear. Data released this week for last month shows that revenues of the Suez Canal dropped by 64.3 percent to approximately $337.8 million, compared to $648 million recorded in May 2023, according to Egypt’s business newspaper Al-Mal news.
The number of vessels transiting the canal in May also dropped to 1,111, which is lower than 2,396 ships that crossed during a similar period last year. As a result of reduced ship traffic, the cargo volume passing through the Suez Canal dropped by 68.5 percent last month to about 44.9 million tons. In May 2023, the total cargo tonnage was 142.9 million tons.
As the Houthi onslaught on merchant shipping in the Red Sea escalates, major ocean carriers have been forced to avoid the Suez Canal, instead preferring the longer route around Africa.
In February, Egypt’s Finance Minister Mohamed Maait projected that the Suez Canal revenue loss could be absorbed by last year’s stellar performance. The returns during the fiscal year 2022/2023 hit a record-breaking $9.4 billion, representing almost two percent of Egypt’s GDP. However, Maait has cautioned that prolonged tension in the Red Sea could see further revenue loss. This will burden the state treasury, specifically due to rising fluctuations in the exchange rate against the dollar.
Meanwhile, in an attempt to bolster the competiveness of the canal, the Suez Canal Authority (SCA) last week extended fee discounts for a range of vessels on selected long-distance trades. Initially, SCA had introduced the fee reductions back in January, with some discounts as high as 75 percent for product tankers and crude carriers on voyages between Americas and Asia.
The new extension of discount rates will be valid until end of the year, covering 12 categories of ships including bulk carriers, containerships and LNG carriers.
In addition, yachts will also be entitled to a special discount initiative as SCA moves to boost marine tourism in the Red Sea region. This will see introduction of a 50 percent reduction on transit fees for yachts under 300 tons. The promotional measure will effect from July to October and will coincide with the sixth edition of the Egypt International Yacht Show.
