Despite coronavirus, Suez Canal records high revenues

CAIRO — Despite the negative effects and repercussions of the outbreak of the coronavirus on global trade, the Suez Canal recorded revenues of $5.61 billion in 2020 — the third-largest total in the history of the canal. 

The canal recorded its highest revenues in 2019 with $5.8 billion, and its second-highest in 2018 with $5.7 billion. This raised questions as to how the canal achieved these revenues amid the difficult circumstances and whether or not it will be able to increase such revenues in 2021.

Suez Canal Authority Chairman Osama Rabie said last month that the canal had $5.61 billion in revenue in 2020 despite the difficult circumstances caused by the coronavirus pandemic.

He said 18,829 ships passed through the canal during this same year with a total net weight of nearly 1.17 billion tons, thus achieving the second-highest tonnage in the history of the canal after 2019. That year witnessed 18,880 ships with a total net weight of nearly 1.21 billion tons pass through the canal. The difference between the years was 51 ships and 38.1 million tons.

The Suez Canal is the fastest navigation route connecting Asia to Europe. It is 193 kilometers (120 miles) long and is one of the main sources of foreign currency for the Egyptian economy.

Several experts and observers told Al-Monitor that the total revenue for 2020 is a success for the Suez Canal Authority and the marketing plans it put in place to counter the negative effects of the coronavirus. These experts expect an increase in revenues this year.

Suez Canal Authority spokesman George Safwat told Al-Monitor that last year's revenues were the result of hard work and planning.

Safwat said that after oil prices started dropping in early January 2020, the authority started to contact world shipping lines to try to figure out what this might mean in terms of the maritime movement of goods. The authority's economic unit was tasked with gauging the situation and developing a general perception of all scenarios and how to deal with them. He said that by the end of the month, the canal had drawn up plans to deal with the negative effects of the coronavirus.

Safwat said the canal authority contacted shipping lines all over the world to make offers that included reductions in transit fees for all types of ships — be they transporters of vehicles, goods, containers, dry bulk or even tourists — in order to provide incentives and encourage them to pass through the canal. He said these incentives were warmly welcomed by various shipping lines.

He said the authority placed emphasis on "green marketing," as large fee reductions were offered to ships fueled by natural gas to reduce harmful emissions to the atmosphere. This step, he added, lured shipping companies that support this trend as the biggest natural gas-powered ships passed through the canal, helping increase the number of canal patrons and positively affecting revenues.

“Also, we targeted distant markets that do not [usually] deal with the Suez Canal, such as the eastern coast of the US, Australia and South America, and we provided them with significant reductions in traffic fees, which increased the number of ships passing through the canal to 18,829 ships, of which about 4,087 came from the new markets with revenues of $930 million, accounting for about 16% of the total revenues achieved in 2020,” he said.

He said the Suez Canal Authority's digital transformation also provided incentives to many shipping lines to travel through the canal, as an electronic platform was established for making reservations and paying traffic fees; this allowed many ships coming from long distances to clearly see what their costs and savings could be.

He also said, “We will work on increasing the canal’s revenues this year, which are determined by the global trade movement in the wake of vaccines aimed at stopping the spread of the coronavirus in the world, and we have plans to deal with all scenarios to preserve and increase the canal’s historical revenues by providing further incentives.”

Some say the canal could have done more.

While Rashad Abdo, the head of the Egyptian Center for Economic and Strategic Studies, praised how the Suez Canal Authority kept revenues up in 2020 despite the pandemic, he said the canal could have done even better. He said the authority's failure to use international companies that specialize in marketing and promotion likely meant that Egypt missed out on an opportunity to increase the number of ships passing through the canal and a subsequent boost in revenues.

Abdo said greater world economic activity in 2021 amid an increase in oil prices will significantly contribute to an increase in the canal’s revenues this year.

Ahmed al-Shami, an adviser on maritime transportation at the Transport Ministry, also expects Suez Canal revenues to increase this year in light of the rise in global trade this year, due in part to the rollout of vaccines for the coronavirus.

Shami told Al-Monitor that a good market analysis and the eventual increase in global trade and oil prices last year contributed to the development of promotional marketing plans that contributed to Egypt's efforts to get as many ships pass through the canal as possible.

He said the incentives and price reductions offered by the Suez Canal are not only aimed at preserving its current customers but at luring new customers and achieving higher revenues, and that all this in turn would pump more foreign currency into the Egyptian economy.