Suez Canal Announces A 15% Increase in Tolls! A Freight Hike May Fuel Inflation.

Egypt's Suez Canal Authority has issued a statement saying that starting in mid-January 2024, it will increase tolls for some ships traveling through the Suez Canal, CCTV Finance reported.

From January 15, 2024, the tolls for crude oil carriers, refined product carriers, liquefied petroleum gas (LPG) carriers, liquefied natural gas (LNG) carriers, chemical carriers and other liquid bulk carriers, container ships, vehicle carriers, cruise ships, and special floating facilities will all go up by 15 percent, the statement said.

And the tolls for dry bulk carriers, general cargo ships, ro-ro ships, and other vessels will go up by 5 percent.
However, container ships sailing directly from Northern and Western European ports to Far Eastern ports will not be affected by the new round of price increases.

The Suez Canal, which connects the Red Sea to the Mediterranean Sea, is an important international sea route (the shortest route between Europe and Asia) through three continents—Europe, Asia, and Africa—and is one of the busiest waterways in the world. About 12% of the world's trade needs to pass through this canal. Canal revenues are also a major source of Egyptian state revenues and foreign exchange reserves.

According to data released by Egypt's Suez Canal Authority in June this year, the Suez Canal's revenues reached $9.4 billion (about CNY68.7 billion) in the 2022-2023 fiscal year, up from $7 billion (about CNY51.2 billion) in the previous fiscal year. A total of 26,000 ships passed through the Suez Canal in FY2022, an annual growth rate of 17.6%.

Osama Rabie, chairman of the Suez Canal Authority, said the Suez Canal's revenues are expected to reach $10.3 billion by the end of 2023.

In response, leading financial blog site Zerohedge writes that with Egypt announcing that it will raise transit fees for all types of ships traveling through the Suez Canal, this latest adjustment is undoubtedly likely to further exacerbate concerns about the global inflation outlook.

The article notes that while the move will not have a huge impact on global trade flows, it is still likely that the increase in transit fees for carriers sailing through the canal will ultimately be passed on to consumers, fueling inflation everywhere. Currently, with geopolitical tensions driving energy prices higher again, there are already hints of a resurgence of inflationary data in several major economies around the world.