FEBRUARY 4, 2013 — Peter Hinchliffe, Secretary General of the International Chamber of Shipping (ICS), is warning that new Suez Canal rate hikes will make more shipowners look at the Cape route as a serious alternative.

ICS, the principal international trade association for shipowners, representing over 80 percent of the world merchant fleet, has voiced serious concerns about the toll increases just announced by the Suez Canal Authority (SCA) that are to be implemented on May 1, 2013.

For all but the smallest ships, the increases range from about 3% to 5% according to tonnage and ship type. They follow across the board increases of 3% which were implemented in March last year despite industry protests.

"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," says Mr. Hinchliffe. "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 recognize that, with pressure on Egypt's tourism and its other economic problems, there is increased pressure on the SCA to maintain what is now the country's biggest source of foreign revenue," he adds. "But 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."

ICS says the route via the Cape of Good Hope is already becoming relatively less expensive as many ships resort to slow steaming in an effort to reduce costs and to deliver the reductions in CO2 emissions which are now demanded by their customers.

Moreover, the entrance to the Suez Canal, via the Red Sea and the Gulf of Aden, is already unattractive due to the continuing threat of Somali piracy, compounded by instability in the Yemen. Recent events in Egypt, including riots in Ismailia and Port Said, are generating concerns about the security of the Canal itself.

"We are also disappointed by the lack of consultation that preceded these increases," says Mr. Hinchliffe. "To the SCA's credit, the Canal has so far continued to function smoothly. But ICS will be repeating its request for full and proper consultation between the industry and the SCA, particularly whenever toll adjustments are being contemplated."

The ICS Board of Directors will be considering the matter further at its meeting in London tomorrow (February 5), together with the status of ongoing discussions between ICS and the Panama Canal Authority about a new toll structure which is being introduced to coincide with the expansion of the Panama Canal, expected to be completed in 2014/15.