Suez Canal Authority: Canal Revenue May Drop 40% This Year

The discount of tolls to attract merchant ships is not enough to offset the safety concerns of shipping companies.

On the 25th local time, Rabie, chairman of the Suez Canal Authority, said in a televised statement that if tensions in the Red Sea persist, Suez Canal's revenue this year could fall to $6 billion, a drop of 40%. The Suez Canal earned $10.25 billion in 2023.

Houthi armed attacks on merchant ships continue to occur, shipping companies are diverted to the Cape of good Hope in order to avoid being attacked, resulting in a sharp decline in the number of merchant ships crossing the Suez Canal and a sharp drop in canal revenue!

Usama Rabie, chairman of the Suez Canal Authority, said that from January 1 to 11 this year, 544 ships passed through the Suez Canal, down 30% from the same period last year, and US dollar revenue was down 40% from the same period last year. Suez Canal tolls are an important source of foreign exchange in Egypt. Egypt earned $9.4 billion in canal tolls in the 2022-2023 fiscal year, Agence France-Presse reported.

Since the outbreak of a new round of Israeli-Palestinian conflict on October 7, 2023, Houthi forces have frequently attacked ships linked to Israel in the Red Sea waters to show their support for Palestine. The Houthi say the attacks will stop only if Israel holds a cease-fire and allows unhindered humanitarian supplies to enter the Gaza Strip.

Paul Toure, director of the French Advanced Institute of Marine Economics, said that revenue from the Suez Canal is directly managed by the Egyptian government, and the reduction in revenue "is not a problem for one month, but it will be worrying for two consecutive months."

Tension in the Red Sea has hit the global supply chain

As the "throat" of international shipping, the continuing tension in the Red Sea brings serious challenges to the global supply chain.

At present, the impact of rising costs, cut-off supply of raw materials and extended delivery time brought about by the Red Sea crisis is gradually emerging.

Affected by the shortage of parts, some carmakers have announced a moratorium on production. Tesla announced that the company will suspend production at the Greenhead plant near the German capital Berlin from January 29 to February 11. Earlier, carmaker Volvo said its plant in Ghent, Belgium, had been closed for three days because of delays in the delivery of gearboxes due to "realignment of sea lanes".

In this situation, the profit margins of automakers will be further squeezed. Industry forecasts for automakers' profits have fallen by five percentage points in the past three months, according to data compiled by Bloomberg. In addition to the automobile industry, many retail companies that rely on shipping have also expressed concern about the supply chain crisis.

Some retailers, including IKEA, have said they will bypass the Suez Canal and bypass Africa, delaying the arrival of products. British supermarket chains Tesco and Marks & Spencer say the continued rise in transport costs and costs may eventually be passed on to consumers through higher consumer prices.