Effective May 1st! Suez Canal 'Price Increase' Again Or Further Push Up Ocean Freight Rates

On March 22, the Suez Canal Authority announced that from May 1, the tolls of various types of ships in the Suez Canal will be increased by up to 20%. This is the second increase in tolls after the increase announced in early March. The Suez Canal has already raised tolls for ships by up to 10% from March 1.

The notice shows that the price increase will take effect from May 1, after which it may be adjusted or cancelled based on changes in global shipping.

Earlier on March 1, the authority had raised tolls for some ships. Among them, the tolls of liquefied petroleum gas ships, chemical tankers and other tankers will increase by 10%; the tolls of vehicles and natural gas carriers, general cargo ships and multi-purpose ships will increase by 7%; the tolls of oil tankers, crude oil ships and dry bulk carriers will increase by 7%. 5% increase.

Regarding this increase, the authority said that the new price increase is a revision to the increase in surcharges imposed on ships in March. The increase in tolls is to reflect the substantial growth in global trade and to improve canal waterway construction and services. According to the authority's announcement, the price increase will take effect from May 1, but the rate of increase may be adjusted or cancelled depending on changes in the global shipping market. Among them, a 15% general toll for oil tankers will be added, which is 5% higher than the current fee.

This adjustment:

The surcharge for chemical tankers and other liquid bulk carriers will increase from 10% to 20%,
The surcharge for fully loaded and ballasted dry bulk carriers will increase to 10%.
The surcharge for cars and general cargo ships, heavy cargo carriers and multi-purpose ships has increased from 7% to 14%.
For oil tankers equipped with ballast water treatment systems, the toll rate to be charged remains unchanged at 5%.

The industry pointed out that due to the current market performance, which belongs to the seller's market, the effect of the price increase in the first quarter of the Suez Canal has already appeared. After this price increase, the shipping company will transfer the increased cost to the cargo owner, which will be reflected in the freight rate in the second quarter.

It is worth noting that due to the impact of the Russian-Ukrainian crisis, the freight rates of the three major long-haul routes, including the US-West, US-East and Europe routes, have continued to decline in recent months, with the most obvious decline in the freight rates of the Europe route. However, the current overall freight rate is still higher than before, showing that the market is still in short supply, which is beneficial for shipping companies to pass on the increased costs to cargo owners.

The Suez Canal Authority said on its website on March 22 that the increase "is in line with the significant growth in global trade, improved ship economics, the development of the Suez Canal waterway and the enhancement of transit services".

Since 2021, the canal authorities have been working to widen and deepen the southern part of the waterway due to the world-famous stranding of the Naggi. That incident resulted in a six-day blockade that disrupted global shipping. Remember that about 10% of global trade, including 7% of global oil, flows through the Suez Canal, which connects the Mediterranean to the Red Sea.

First, despite the impact of the Covid-19 pandemic, 20,649 ships passed through the canal last year, up about 10 percent from 18,830 in 2020, authorities said. Annual revenue from the Suez Canal will hit an all-time high of $6.3 billion in 2021.

Secondly, the shipping industry is still under pressure from the epidemic, and the conflict between Russia and Ukraine has also exacerbated global economic concerns.

According to relevant personnel, in response to the possible impact of the Russian-Ukrainian conflict on global shipping, the authority is studying the necessary plans to maintain revenue, including providing protection for existing customers, attracting more customers, and following up on technological development.