As per the news report, the low price of oil is making cargo vessels to avoid the costly tariff travel by Suez and Panama Canals and takes the extended travel round Africa.
From October last year, 115 vessels transported goods from Asia to North Europe and the US East Coast, sailing around South Africa, instead of travelling through the canal, says maritime trade analysts, a report of this month.
The falling fuel prices can be used for sailing on a longer route at a faster speed, thus taking the same amount of time using the canal. The usage of South African route saves a sizable portion of expenditure, which would be a lift for cash needy carriers. Additional savings could be attained, if the carriers moved to other services or slowed down the backhaul. However this would be a bad sign for the canals.
Egypt, has spent a sizable portion of finance on expansion of the canal to allow two lanes of traffic and to reduce transit time through Suez Canal. A report from Suez Canal authority, shows an increase in ships passing through canals but the number of bulk carrier and container ships through the canal has decreased. The carriers sailing by Suez Canal contribute appreciable amount of earnings.
If the Canals wants to change the routing choices of the ships, the panama canal’s prices should cut by 30% and Suez Canal by 50%. Further the travel by South African route will have a big impact on the increased fuel consumption.
Source: CNBC
