The Suez Canal took 10 years to
build and cost thousands of workers their lives.
When planners suggested
three years for a second one, Egypt’s president balked.
“Not three years, just one,” he ordered.
Twelve months later, Abdel-Fattah El-Sisi is hosting a party to
celebrate the biggest expansion of the canal since it first opened in
1869.
For the former army chief seeking to bolster his rule, the
symbolism is impossible to miss.
Less clear are the economic benefits of what billboards in Cairo and
New York’s Times Square dub “Egypt’s gift to the world,” which will
raise capacity and shorten the time it takes to sail the 193-kilometer
(120-mile) link between the Red Sea and the Mediterranean.
Thursday’s
ceremony, to be attended by dignitaries from French President Francois
Hollande to North Korea’s deputy leader Kim Yong Nam, comes amid
sluggish global trade growth to which the canal’s fortunes are linked.
“From a shipping industry point of view, this initiative to expand
the Suez canal was a bit of a surprise,” said Ralph Leszczynski,
Singapore-based head of research at Genoese shipbroker Banchero Costa
& Co.
“There was no pressing need or requests for this as far as I’m
aware.”
Suez has yet to fully recover since the global financial crisis
caused shipping to plummet in 2009. Though total tonnage has increased,
the number of vessels using the canal remains 20 percent below its 2008
level and just 2 percent higher than a decade ago, data compiled by
Bloomberg show.
Rather than a bottleneck, analysts say those statistics reflect
slower global trade growth, which the International Monetary Fund
expects to average 3.4 percent in the period 2007-2016, compared with 7 percent over the previous decade.
The Baltic Dry Index, which measures rates for shipping iron ore,
coal and grain and is viewed as a bellwether for the global economy,
slumped to a record low 509 points in February.
It remains about 90
percent below its all-time high of 11,793 reached in 2008.
The iconic project in Egypt is almost coming to an end.
On Saturday, the very first three vessels sailed through the new Suez Canal.
In the first week of August the new canal will be officially inaugurated.
A total of 200 million m³ was dredged in less than one year, which makes this iconic work the largest cutter project eve.
Lacking Details
“At the moment, speed is not a key factor for
container shipping, the shipping sector which most utilizes the canal,”
said Michelle Berman, the head of operational risk at BMI Research, a
unit of Fitch Group.
A bigger issue is a “surplus of ships” relative to
demand, with ever-larger vessels built for the Asia-Europe route
compounding the problem, she said.
The government hasn’t made public viability studies to show how it
will gain a return on its 64 billion Egyptian pound ($8.2 billion)
investment.
The expansion will meet future demand, with traffic expected
to double to 97 vessels a day by 2023, said Mohab Mameesh, head of the
Suez Canal Authority.
“By creating a second lane of the canal we are able to reduce waiting
times, which reduces fuel expenditures and costs, with no increase in
our toll fees,” he said in an e-mailed response to questions.
Global trade volume would need to rise by around 9 percent a year for
Suez to reach its traffic goal, Capital Economics said in a report on
Monday, describing the target as “unlikely to say the least.”
New Suez Canal had a trial run today.
Vessels sailing the new canal are nicely visible on MarineTraffic.
Canal Distraction
That hasn’t stopped El-Sisi and his government from talking up the new canal amid political challenges to its rule.
Hundreds of Egyptians, most of them supporters of the deposed Muslim
Brotherhood, have been killed and thousands imprisoned since El-Sisi, as
army chief, pushed his Islamist predecessor from office in 2013 after
mass protests.
El-Sisi was elected president last year.
The political turmoil has polarized Egyptians
El-Sisi supporters say
it saved the country from the deadly strife affecting much of the
Middle East, while opponents criticize the government’s human rights
record and what they regard as brutality used to restore stability.
A 1921 map of the Suez Canal, running South from Port Saïd on the Mediterranean, through Ismailia and the Great Bitter Lake, to the Gulf of Suez on the Red Sea
Suez Canal 1:250,000 Series 3753, Great Britain War Office, 1941 (Lib. Univ. Texas)
French Connection
Thursday’s party, with an estimated price
tag of $30 million, is a chance for the government to send a more
positive message by harking back to the events marking the canal’s 1869
completion.
French empress Eugenie attended -- her husband Napoleon III
was deposed a year later -- and a performance of Giuseppe Verdi’s
’Rigoletto’ opened Cairo’s new opera house.
The canal has since transformed global trade.
About 8 percent of the world’s cargo now passes through the canal,
according to the Suez Canal Authority. Traveling from Singapore to New
York through Suez reduces the distance by 19 percent compared with the
route via the Pacific and the Panama Canal.
From the Persian Gulf to
Rotterdam, Suez saves 42 percent by removing the detour around the Cape
of Good Hope.
“Even without any improvements, the canal would always be
attractive,” said Neil Atkinson, head of analysis at Lloyd’s List
Intelligence.
The finish of the Suez Canal project is in sight.
The dredging of more than a million cubic meters of sand a day is unprecedented.
And this assignment has also pushed back the boundaries in terms of speed, and the deployment of equipment and manpower.
Wider, Deeper
The second canal -- actually a new 35-kilometer channel and 37 kilometers of widening and deepening of the
original
-- allows two-way traffic and reduces transit time to 11 hours from 18,
according to the canal operator.
The expansion won’t allow larger
vessels to use the route.
New ports and logistical services are expected to follow, and the
project includes six tunnels under the canal.
The authority expects
revenue to grow to more than $13 billion by 2023, up from $5.5 billion
in 2014.
“‘Build it and they will come’ is not enough,” said Simon Kitchen, a
strategist with Cairo-Based investment bank EFG-Hermes, adding that
companies will require incentives to build factories and other
facilities.
“The government needs to give ships a reason to sail through
the canal,” he said.
Others are more positive.
Egypt’s economy grew at over four percent
in the nine months to March for the first time since 2010, mainly due to
infrastructure spending related to the canal upgrade, according to
investment bank Pharos Holding for Financial Investments.
Actual dredged quantities according to progress of works : 258.8 million cubic meters
Duration of execution : 12 months, including mobilization of dredgers
Consortium's first dredger to be employed in the project : Dredger "Al-Marifaa" on Nov. 5th,2014
Quantities of Dry excavation works : 250 million cubic meters
Highest daily rate of dredged quantities was achieved by dredger "Ibn Batouta" on April 6th,2015 230,000 cubic meters
Highest daily output of dredged quantities was achieved on May 31th ,2015 : 1.73 million cubic meters
Number of dredgers employed in the project : 45 dredgers
Number of sedimentation basins : 20 basins
SC1, Suez Canal, (Edition 1, dated 15th July 2015)
SC2, Suez Canal, (Edition 1, dated 15th July 2015)
Following the establishment of the New Suez Canal, the Suez Canal Authority along with Egyptian Navy Hydrographic Department have produced two charts to help mariners sail safely in the New Suez Canal.
Accordingly, sailing in the Suez Canal and vessel inspection will be performed only through charts SC1 and SC2 and no vessel will pass Suez Canal without the above charts being on board starting 06 August 2015.
Saving Money
A shorter transit may save up to 4 percent of
journey costs depending on the length, the Napoli-based economic
research center SRM estimates.
Shipping times : Northeast passage vs Suez Canal
Arctic shipping routes unlikely to be 'Suez of the north'
The North Sea route has become free of ice, but the navigation season is still just two-four months
The project “was a necessity to maintain the attractiveness of the
Suez Canal,” said Michael Storgaard, a spokesman for Maersk Line, the
world’s biggest container shipping company.
Even so, it’s too early to
say whether Maersk will route more vessels through Suez, he said.
Still, any future economic payoff is trumped by the political
implications for the government from building confidence in El-Sisi’s
leadership, according to Amr Adly, a scholar with the Carnegie Middle
East Center in Beirut.
“El-Sisi is trying to gain legitimacy through his government’s
achievements,” Adly said.
His thinking is that Suez “shows the
government can deliver, it can commit to something and get it done,” he
said.
Links :
