Q&A: The Suez Canal and Egypt's Political Unrest

Q&A: The Suez Canal and Egypt's Political Unrest

In this podcast, Senior Editor of Finance and Economics Joseph Bonney talks with Managing Editor Dana L. Brundage about the current status of the Suez Canal and how it and Egypt's ports could be affected by the country's political unrest.

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Q: How closely is the shipping industry following news from Egypt?

A: Very closely, primarily because of the Suez Canal. The canal is a linchpin for east-west trade. Most of the attention has been focused on the impact any disruption in the canal would have for oil. That’s understandable. Most of the lay public probably associates the Suez Canal with tanker traffic. Everyone remembers that when the canal was closed in the late 1960s and early 1970s, tankers from the Middle East had to go around Cape Horn. That resulted in a shortage of tonnage and a sharp increase in tanker rates.

But the world has changed in the last 40 years, and so has the mix of vessel traffic through the Suez. According to the Suez Canal Authority, the canal had nearly 18,000 transits last year. Of that number, nearly 40 percent were container ships. The number of container ships transiting the Suez was nearly twice the number of tankers of all kinds. The biggest container ships in use today are on Asia-Europe routes that use the Suez Canal. Any disruption at the Suez would have an immediate effect on carriers – and on cargo interests using those ships. Ships would have to add several thousand miles and several days to their voyages. The costs of that would be huge.

Q: How have the canal operations been affected?

A: The canal has stayed open throughout all of this. Convoys have continued uninterrupted. The Egyptian military has provided additional security. Apparently there have been no diversions of container ships around Africa as a result of this. The ships are continuing to move through the canal.

Q: How has the unrest in Egypt affected the country’s ports?

A: Egypt’s main ports, Port Said, Alexandria and Damietta, were closed for a few days after the demonstrations broke out. Since then, operations apparently have returned on a partial basis. Companies have had trouble getting all of their workers back on the job, largely because of security problems – in the cities, not at the ports. The terminal operators, such as APM Terminals, which has a majority stake in the Suez Canal container terminal at Port Said, did not want to put their employees at risk.

The reports indicate that the Suez Canal terminal is operating with a reduced number of gangs, but it is operating. APM’s terminal handles primarily transshipment cargo but there have been reports of backlogs at some of the other ports that serve as gateways into Egypt. Cargoes that are being discharged haven’t been moving out of the gate. How long will it take to get back to normal? That’s impossible to say right now because the situation is so fluid.