Good Hope for Suez Canal

The authorities of unrest-stricken Egypt have come to a decision to increase the Suez Canal toll. The response of the shipping community was contradictory – some announced a possible redirection of vessels to the route via the Cape of Good Hope, others think there is no alternative to the Canal anyway. Russia may turn it to her advantage if she ensures economically attractive conditions for the use of the Northern Sea Route.

Columbus’ dream


Christopher Columbus in his time discovered America incidentally when looking for a shortcut from Europe to India. Contemporary ship owners return to the old issue. The matter is that the Egyptian authorities intend to increase the Suez Canal toll by 2.5-5% from May 1, 2013 depending on the vessel type and tonnage. The Canal toll for tankers carrying crude oil, oil products and natural gas will be raised by 5%. Automobile carriers will have to pay 2.5% more, other cargo vessels will see a 3-pct increase. 

The response of the International Chamber of Shipping (ICS) was quite severe. ICS Secretary General, Peter Hinchliffe, remarked: “Most international ship operators are trading in the worst shipping markets in living memory due to there being too many ships chasing too few cargoes. This is not the time for the SCA to be announcing increases, which for some trades seem very dramatic indeed, and which many shipowners will find impossible to pass on to their customers. …We are also disappointed by the lack of consultation that preceded these increases. …The effect of these increases will be to give a spur to those owners who may already be considering the Cape route as a serious alternative.”

Meanwhile, as PortNews IAA learnt from ship owners whose vessels pass the Suez Canal, the announced increase will not lead to redirection of vessels to other routes.  They adduce an argument that the 2.5-5-pct increase is still below the inflation rate while the route via the Cape of Good Hope is almost twice as long hence no saving is possible, besides the transportation time will increase.

According to the comment provided to PortNews IAA by Dmitry Rusanov, deputy director of LNG fleets at Sovcomflot, there are just no other ways except for the Suez Canal for potential transportation of Russian LNG from Yamal to India. “There is no alternative transportation for Yamal gas. The route via the Cape of Good Hope is longer and transportation expenses become higher. Political instability in Egypt is still temporary and I hope it does not yet effect the operation of the Suez Canal – a significant source of income for the state economy,” Sovcomflot representative believes.

One more argument against the Suez Canal relates to a pirate threat in the Gulf of Aden. However, according to NATO Shipping Center, the number of pirate attacks in this region decreased by 80% in 2012. That should be attributed to a permanent patrolling by naval ships from a number of countries and accommodation of armed security onboard the commercial vessels as well as other antitakeover protection measures. Meanwhile, the number of attacks along the coasts of other African regions like Nigeria has increased, on the contrary. And that is the region where the Cape route lies.

Arctic instead of Africa?

Nevertheless, any excess of expenses in the context of a hard situation in the global freight market is sensitive for ship owners. Therefore, Russia could try to use the situation for attraction of additional transit flow along the Northern Sea Route. The Federal Law No 132-ФЗ “On amendments to specific legislative acts of the Russian Federation related to governmental regulation of merchant shipping in the water area of the Northern Sea Route’ has come into effect in Russia. As PortNews IAA earlier learnt from the source in the RF Transport Ministry, the draft order of the RF Government on setting up an Administration of the Northern Sea Route had been submitted to the Government. It is expected to be signed in the nearest future which is to create a legal ground for setting up of NSR Administration in the form of a federal state-owned enterprise.

A principal issue to affect the attractiveness of the Arctic route will be the tariff for icebreaking support and its application policy.   As it was earlier said by Konstantin Stasyuk, deputy head of Rosmorrechflot (Federal Marine and River Transport Agency), at the conference “Outlook of seamless logistics of Russian coal exports” held by PortNews IAA, the tariffs for icebreaking assistance will be regulated by the state through setting of a limit to enable nuclear icebreaker operator Atomflot FSUE respond flexibly to the market situation.

Besides, according to the opinion earlier expressed by Vyacheslav Ruksha, Director General of Atomflot FSUE (operating nuclear icebreakers), Ice3 vessels should be permitted to the Northern Sea Route (as of today ice class of vessels going along the NSR should be no less than Arc4). Ice3 vessels, in the opinion of Atomflod Director, could pass the Route with icebreaking assistance from July till late November.

As for cargo transportation from the ports of the North Sea and especially from Scandinavia to China, Japan and their neighboring states, the way via the Northern Sea Route is much shorter as compared with that via the Suez Canal, with the Cape of Good Hope needless to mention.

According to the data of RosMorRechFlot, the volume of transit cargo transported by the Northern Sea Route in navigation of 2012 amounted to 1.2 mln tons (25 vessels), which is almost 35% more as compared with the same period of 2011. First of all it is gas condensate, oil products, iron ore concentrate and coal. In 2012 the Ob River LNG carrier chartered by Gazprom Marketing and Trading completed the world's first LNG supply via the Northern Sea Route from the Port of Hammerfest (Norway) to the Japanese Port of Tobata. Almost all freight voyages were directed from west to east with about three forth of the voyages starting in Murmansk. 

“ In the future, commercial attractiveness of transit navigation along the Northern Sea Route will continue to grow with the development of the Route’s seaport infrastructure (in particular, I would remind about the construction of the world’s largest Arctic port for gas export – Sabetta) and with the implementation of the shippers’ projects on construction of large capacity vessels of Arctic ice-class,” said Viktor Olerski, Deputy Transport Minister of Russia.

We remind that the number of voyages along the Suez Canal dropped by 3.2% to 17,225 in 2012.

Vitali Chernov.