Rising Suez Canal revenues to provide much-needed lifeline for Egypt in 2023


Al-Monitor Pro Members


Marc Español 

Freelance journalist covering Egypt and Sudan 



Jan. 11, 2023

Bottom Line:

The Suez Canal closed 2022 with record-breaking revenues, which represent a key lifeline for Egypt at a time when it is facing serious economic and liquidity issues as a result of the Russia-Ukraine war. While the outlook for 2023 is promising, the country’s urgent and vast needs are pushing authorities to look for ways to maximize income even further, including through an investment fund that has already received initial approval.

Background Facts:
  • The Suez Canal, operated by the state-owned Suez Canal Authority (SCA), is one of the world’s most strategic commercial arteries — as over 10% of global trade navigates it — and a major source of revenue and foreign currency for Egypt.

  • In 2022, 23,583 ships crossed the canal, the highest number in its history and up 15% from 2021, when it also registered a record 20,694 ships. In 2022, the waterway beat its previous year’s traffic numbers every single month.
  • The canal also managed to break the all-time record for net tonnage crossing its waters in 2022, with the figure forecast to reach 1.4 billion tons, up 10% from 1.27 billion tons in 2021.
  • The SCA reached a new revenue record from transit tolls as well. Although it has not made the amount public at the time of publication, its target was $7.8 billion. Considering the figure ($3.6 billion) for the first half (H1) of 2022 from the Central Bank of Egypt (CBE) and the number of ships (12,482) that crossed the canal during the second half (H2) of the year, revenues should surpass $7.5 billion. In 2021 they reached $6.3 billion.
  • When considering the fiscal year (FY), which runs from July to June in Egypt, revenues amounted to $7 billion in 2021/2022, up 18% from $5.9 billion in the previous FY. The best figures were recorded in H2, coinciding with the H1 of 2022.
  • The underlying reasons behind the record numbers recorded in 2022 include high oil prices and freight rates, trade diversions caused by the war in Ukraine, and the gradual recovery of supply lines following the Covid-19 crisis. Quarter on quarter, canal traffic increased in both oil and non-oil vessels.
  • However, the increase has been uneven, with the largest contribution coming from growing shipments of oil and LNG, mostly from the Gulf countries to Europe.
  • The number of oil tankers crossing the canal jumped after the outbreak of the war in Ukraine, as reflected in the year-on-year rise of 34% in Q4 of FY2021/2022 (April to June) and 45% in the Q1 of the current FY (July to September), according to the CBE.
  • The rise among non-oil ships was more moderate in both quarters: 5% and 6.5%. And the quarter-on-quarter growth in the number of LNG carriers after the war stood at around 20%.
  • The figures recorded in 2022 also reflect the success of the policies adopted by the SCA, which began to roll back the incentives and toll reductions introduced during the pandemic in order to respond to the slowdown in global trade.
  • Last February, the SCA raised fees by 6% for most vessels crossing the canal. In March it cancelled a 15% discount for LNG carriers. And in May it raised by 10% surcharges for ships carrying crude and petroleum products, liquid bulk tankers and chemical tankers, as well as by 5% for dry bulk vessels and 7% for the others.
  • Looking ahead, the canal’s short-term outlook is also promising. At least during H1 of 2023, the SCA will most likely continue to increase its revenues, mainly thanks to a 15% hike in transit fees for most ships introduced on Jan. 1.
  • The SCA expects that this measure will help increase its revenues by 15% and will enable it to close the current FY 2022/2023 at around $8 billion.
  • In parallel to the rate increase, the SCA has extended until June 30, 2023 most of the fixed rebates it grants to ships crossing the canal, but has included two types of amendments: it has lowered the rebates for crude oil and LNG carriers and increased them for some bulk carriers, containerships and LPG tankers.
  • The SCA is thus confident that average freight rates will remain high in 2023. It is also betting that oil and average LNG prices, and therefore ship fuel prices, will remain high enough to make the Suez Canal the most competitive shipping route.
  • As of H2 of 2023, the canal could also benefit from the expansion project it embarked on in 2021 in some parts of the waterway, which is scheduled to be completed in July and will increase the canal’s daily capacity by six ships.
  • However, the SCA’s scope to continue to grow at the current rate is limited. The initial jump in the number of oil vessels crossing the canal in April and June seems to have stabilized or at least slowed down. And the ability to continue to increase oil and LNG production and supply capacity is limited in the short term.
  • The slowdown in global trade that began in H2 of 2022 is also expected to worsen in 2023 due to high energy prices, rising interest rates, high inflation and adverse economic effects of the Russia-Ukraine war. And any slowdown in trade is bad news for the canal.
  • The waterway will also not be able to benefit immediately from an important part of its expansion project, which involves deepening a section of the canal. These works aim to attract even larger ships than those currently crossing it, but this can only start to happen when the entire waterway is leveled, and there is no timetable for that yet.
  • Given that the state is in dire need of more foreign currency income than the canal’s toll earnings can provide, authorities are looking for alternative ways to leverage its attractiveness and expand revenues, though all have limitations.
  • The first big bid is to accelerate plans to develop the Suez Canal Economic Zone (SCZONE), a mega-project launched in 2015 to turn the area around the waterway into an economic, industrial and logistics hub and attract foreign investment.
  • The second, which has recently gained particular attention, is the creation of an investment fund with powers to set companies and invest, buy, lease, rent and use the SCA’s assets. The fund has so far received initial approval from parliament.

Alternative Scenarios:

Scenario 1: The Suez Canal investment fund yields additional revenues

The details of how the Suez Canal investment fund currently under discussion would work are not yet clear. But the idea of the authorities seems to be to tap into part of the canal’s revenues — presumably those generated from its services and activities, not from transit tolls — to raise additional income. Even so, the benefit that this would entail for the state coffers also remains to be seen. As it stands now, and pending final ratification, the fund would have a paid-up capital of EGP 10 billion and a registered capital of EGP 100 billion.

The debate over the investment fund comes in parallel with SCA’s plans to IPO some of its subsidiary companies dedicated to activities such as shipbuilding, maintenance and mooring, in line with a controversial privatization plan launched by the government and currently on hold. SCA head Osama Rabie has said that some of the sectors they have their eyes on for future investments include ship manufacturing and green hydrogen.

Scenario 2: Egypt begins to unleash the potential of the SCZone

Turning the SCZone into a success story would be a game changer for Egypt. The SCZone comprises four industrial parks and six ports, and each hub specializes in specific sectors. It is managed by the General Authority for the Suez Canal Economic Zone, an autonomous body with regulative and executive powers, and it is in accordance with the goals outlined under the 2020-2025 strategic plan that aims to create a conducive ecosystem and legal framework, focusing on the maritime, manufacturing, ICT and energy industries.

The SCZone has already attracted the attention of several investors, most notably China, which sees it as a promising piece of its Belt and Road Initiative. The UAE, Russia before the war in Ukraine, and to a lesser extent some European nations have also shown interest. For now, it is home to 300 operational enterprises and has created 100,000 jobs, but aims to reach 1 million by 2030, following the successful example of China’s special economic zones. However, the SCZone has a long way to go and is a bid that will take time.

Conclusion - Most Likely Scenario:

The current international political and economic context, shaped by the war in Ukraine, combined with the policies adopted by the Suez Canal Authority (SCA), will allow the Suez Canal revenues to remain high and to continue to break some records in the near future. But the SCA already resorted to most of the tools at its disposal in 2022, which coupled with prospects of a global trade slowdown and a small possibility of seeing a further significant increase in the traffic of oil tankers and LNG carriers through the canal, limits its ability to maintain its rapid pace of growth for much longer. The main game changer lies in the SCZone, but this is a bid that still needs time and effort. An investment fund could also unleash additional revenues, but it remains to be seen how it could benefit the state’s coffers while fears of further privatizations of strategic assets mount. Overall, the canal will remain a lifeline for Egypt, and the current momentum creates the conditions for further development of the area. But it is highly unlikely that this will translate in the short to medium term into the bloated revenues projected — and desired — by the authorities.

Contributor Background:

Marc Español has been reporting on Egypt since 2017, with a focus on the economy and the human rights situation in the country. He has been a contributor to Al-Monitor since 2018 and his work has appeared in other publications such as El País and the think tanks Fundación Alternativas and the European Institute of the Mediterranean (IEMed).


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