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The expanded Suez Canal opens for business

The expanded Suez Canal opens for business
International ports and shipping businesses have reacted positively to the $8.3bn New Suez Canal, due to be unveiled later today, in the face of analyst concern that a global slump in container shipping means that it will take years for Egypt to reap the benefits it hopes to accrue from the project.

“The expansion is—in our view—a necessity to maintain the attractiveness of the Suez Canal,” Michael Storgaard, senior press officer, Maersk Line, told Seatrade Maritime News.

“Reduced waiting time in the canal will allow liners to deliver goods faster than before. Southbound transit, for example, will be reduced by six hours, which translates to savings of tens of thousands of dollars per call,” said a spokesman for Dubai Ports (DP) World.

“The expansion is important not only for Egypt, but also for the development of East-West trade.”

The official opening of the canal is a boost to the credibility of Egyptian president, Abdelfattah El-Sisi, as he battles Islamic militants affiliated to ISIS bent on stepping up attacks on army personnel in volatile the Sinai Peninsula, and seeks to revitalise the ailing local economy and spur job creation.

Egypt completed the work to dig a new section of canal 37km in length, and deepened a 35km section, in exactly a year, confounding the doubts of many international observers. A key facet of the expansion has been a planned uniform increase in draught to 66 feet (20-plus metres) to allow the world’s largest ocean-going mega-vessels to transit the waterway.

Ismailia, site of the Suez Canal Authority headquarters, and the governorate that bears its name, were under lockdown by 10,000 troops and police, as dignitaries from 100 countries gathered. French president Francois Hollande was guest of honour, echoing French participation, led by diplomat Ferdinand de Lesseps, in the original creation of the canal, which opened in 1869.

The ceremony will culminate tonight with a rendition of opera “Aida”, written for the opening that year.

Infrastructure development supports trade and economies and Egypt’s growth is something DP World said it was keen to support. “This theme is of key importance to the growth of nations. The Egyptian government has embarked on a range of major projects such as the new Suez Canal which will boost employment and trade, and we see it as a positive development for the country,” the spokesman said.

The Egyptian authorities expect the number of vessels going through the canal to nearly double to around 100 vessels by 2023, almost tripling annual revenues to $13.2bn. The impact on trade will encourage port infrastructure development in the Middle East and East Africa to meet demand.

“Safety will be improved by avoiding anchoring in the Great Bitter Lakes, and larger vessels will be able to use the Suez Canal,” Storgaard said.

“Also keep in mind, that today by and large all our vessels trading between Europe and Asia, including Far and Middle East, transit the Suez Canal. Similarly, vessels from [places like] South China trading to and from the US East Coast transit the Suez in lieu of the Panama Canal,” he said.

DP World also hopes key Egyptian installation, Ain El Sokhna Port, 40km south-west of Suez, will see throughput jump. “DP World Sokhna will provide an ideal port of call for lines making northbound trips from Asia, China, the Middle East and the Sub-Continent and on their return journeys. This will further strengthen Sokhna’s position as the gateway to Egypt on the Red Sea,” its spokesman said.

Bloomberg cited BMI Research, EFG-Hermes, Banchero Costa & Co., and others, to show how the Canal is unlikely to lead to an increase in ships passing through the Canal or much economic advantage, particularly due to current global trade volume levels.

(AFP) Fawaz Gerges, of the London School of Economics and Political Science, called it “a magnificent project” but added that it “does not resolve the structural challenge facing the economy.”