The New Suez Canal Massimo DEANDREIS SRM Managing Director Cairo, November 29 th 2015
Main Topics of the Study The Growth of Mediterranean Trade Strategies and Trends Big Phenomena and the Impact on Ports and Shipping 2
South MED: a Fast-Growing Area The cumulative GDP of Southern MED countries in 2014 was almost 6 times higher than in 1970, with an average annual growth of 4.1% (Egypt: 5.6%). The EU recorded an annual growth of 2.2% in the same period. The cumulative Foreign Trade of Southern MED countries in 2014 was almost 750 bn (1/6 compared with EU s foreign trade). It was almost 5 times higher than in 1995, with an average annual growth of 9.4% (Egypt: 11.3%), higher than the EU s one (6.3%). GDP: South MED vs EU. Constant prices (1970=100) 1100 1000 900 800 700 600 500 400 300 200 100 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 South Med Source: SRM on Unctad data South Med Average Annual Growth: +4.1% European Union Average Annual Growth: +2.2% EU Foreign Trade: South MED vs EU. 1995=100 700 600 500 400 300 200 100 0 South Med South Med Average Annual G. +9.4% European Union Average Annual Growth: +6.3% EU 3
South MED: a Fast-Growing Area The cumulative GDP of Southern MED countries in 2014 was almost 6 times higher than in 1970, with an average annual growth of 4.1% (Egypt: 5.6%). The EU recorded an annual growth of 2.2% in the same period. The cumulative Foreign Trade of Southern MED countries in 2014 was almost 750 bn (1/6 compared with EU s foreign trade). It was almost 5 times higher than in 1995, with an average annual growth of 9.4% (Egypt: 11.3%), higher than the EU s one (6.3%). GDP: South MED vs EU. Constant prices (1970=100) 1100 1000 900 800 700 600 500 400 300 200 100 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: SRM on Unctad data Egypt Average Annual Growth: +5.6% South Med Average Annual Growth: +4.1% European Union Average Annual Growth: +2.2% South Med EU Egypt Foreign Trade: South MED vs EU. 1995=100 700 Egypt 600 Average Annual Growth: +11.3% 500 400 300 200 100 0 South Med Average Annual G. +9.4% European Union Average Annual Growth: +6.3% South Med EU Egypt 4
Italy-South Med Trade: +81% in the 2001-2015 period Trade relations between Italy and Southern MED countries (net of Energy products) is estimated at 35.5 bn in 2015, +81.2% compared to 2001; Italy-Egypt trade: 3.5 bn in 2015, +80.3% compared to 2001 Competitors performances in 2001-2015 period: France: +76%; Germany: +125%. Italian exports vs. Southern MED countries doubled in the 2001-2015 period ( 28 bn). Italy s exports vs. South Med and Gulf ( 45.9 bn) are equal to Italy s exports vs. China and the US combined ( 46.8 bn). Trade with the South Med Area: Italy and European Competitors. bn 55.2 Germany 25.0 24.6 19.6 Italy France Germany 44.1 35.5 France Italy 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Source: SRM on Eurostat and data * SRM estimates 5
Italy-South Med Trade: +81% in the 2001-2015 period Trade relations between Italy and Southern MED countries (net of Energy products) is estimated at 35.5 bn in 2015, +81.2% compared to 2001; Italy-Egypt trade: 3.5 bn in 2015, +80.3% compared to 2001 Competitors performances in 2001-2015 period: France: +76%; Germany: +125%. Italian exports vs. Southern MED countries doubled in the 2001-2015 period ( 28 bn). Italy s exports vs. South Med and Gulf ( 45.9 bn) are equal to Italy s exports vs. China and the US combined ( 46.8 bn). 37.7 25.0 24.6 19.6 Trade with the South Med Area: Italy and European Competitors. bn 57.8 55.2 52.6 44.1 35.5 USA Germany China France Italy 5.1 Italy France Germany China USA 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015* Source: SRM on Eurostat and data * SRM estimates 6
The Mediterranean Basin is Becoming a Central Item in the World Agenda: Italy is 1 st in Sea Trade The freight traffic in the Med basin increased by more than 120% in the 2000-2014 period. The Mediterranean catches around 19% of the global freight traffic; the percentage was 15% in 2005. With 36.4 bn, Italy is the biggest sea trade partner of the South Med Area. 76% of trade between South Med Area s and Italy travels by sea. Bn Southern Med Area s Maritime Trade with the Main EU Countries 36.4 41.0 Italy 37.0 France 30.3 32.0 Spain 27.8 31.6 Germany 26.0 Forecasts* Spain France Italy Germany 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Fonte: Eurostat, 2015 * Forecasts SRM 7
The Analysis of Container Ports by Geographic Area: a comparison between Med Area and North Europe UK* 7% Baltic Sea Atlantic 2% 2% Italy 7% NORTHERN RANGE IS SLOWING Black Sea 6% East Med 11% MED AREA IS GROWING Source: SRM on Port Autorities 2% 2% 8% Northern 7% Range 43% 7% 47% 2008 2014 7% West Med 12% 12% 8% South Med 10% In the 2008-2014 period, the ports of the East Med Coast increased their market share from 7% to 11%. The Southern Med Coast grew too. 8
Ranking of Container Hub Ports in the Mediterranean Basin: the Market Share Marsaxlokk 11% Valencia 16% Source: SRM on Port Autorities Cagliari 3% Piraeus 13% 5% 12% 2%2% 19% 7% 2008 18% Damietta 3% Tanger Med 11% 9 18% 17% Gioia Tauro 11% Algeciras 17% Port Said 15% 2014 2009 2014: The Market Share of Southern Hub Ports (Tanger Med; Port Said; Damietta) is stable at 30%. Algeciras ranks 1 st. Tanger Med and Piraeus have had a dramatic growth. Egypt plans to complete a side Channel in the East Port Said near the Suez Canal in order to speed up shipping and allow ships to enter the port by the end of June 2016 this new side channel will increase traffic.
New Centrality of the Mediterranean: The Emergence of Europe-Far East Route Within the three main deep sea East-West shipping services the Europe-Far East progressively gained traffic raising its share from 27% in 1995 to 44% in 2014. In 2014, the Europe-Far East and the Transpacific are definitely the two biggest trade lanes, accounting both for 22 mln. TEUs of traffic. As a result of this growth, the Mediterranean basin and its ports recovered their own centrality, thanks to the transit of (almost) all mother vessels via the route Suez. Estimated containerized cargo flows on major East West container trade routes, 1995 2014 (percentage TEU) 20% 13% 53% 27% 42% 44% Transatlantic Transpacific Europe-Far East Source: SRM on Unctad, 2015 1995 2014 10
The traffic in the Suez Canal: Ships and Cargo Transit goods account for 8-10% of the entire globe. In 2014, 822 million tonnes of goods passed through the Canal. Between 2000 and 2014, north-south container trade volumes grew by 187% while the south-north ones grew by 220%. 17.000 ships passed through the canal. Between 2000 and 2014 the Canal s traffic trends recorded a 120% increase in transit goods. 25 Ships Number of which containerships Cargo 900 Ships number (thousand) 20 15 10 5-2007 2008 2009 2010 2011 2012 2013 2014 2015 Source: SRM on Suez Port Autority, forecasts 2015 800 700 600 500 400 300 200 100 0 Cargo ton (million) 11
Main Cargo Flows Southbound through the Suez Canal. Var. % 2001-2014 416 mln tons Source: SRM on Suez Canal Authority, 2015 12
Main Cargo Flows Northbound through the Suez Canal. Var. % 2001-2014 406 mln tons Source: SRM on Suez Canal Authority, 2015 13
The Strategic Role of Ports and Logistics in the Gulf 16.000 14.000 12.000 10.000 8.000 6.000 4.000 2.000 - The UAE retained its position as the best performer among Arab countries and the broader region. Dubai Port ranks 1 st handling 15,2 million TEU in 2014 and growing by more than 36% in the period 2009-2014. Overall, the container traffic of the Area grew by more than 23% in the in the period 2009-2014. 2009 2010 2011 2012 2013 2014 Source: SRM on Port Authorities, 2015 Gulf Area s Container traffic 2009-2014 (000 of tonn) 14 Dubai Jeddah Khor Fakkan/Sharjah Salalah Dammam Shahid Rajaee Port Country % 2009-2014 Dubai UAE 36.9 Jeddah Saudi Arabia 35.9 Khor Fakkan/Sharjah UAE 38.2 Salalah Oman -13.9 Shahid Rajaee Iran -35.9 Dammam Saudi Arabia 42.6 Gulf 23.2
Two Big Phenomena in the Maritime Economy: 1. Increasing Ship Size New Panama Canal s Limit 13,200 TEU New Suez Canal 15
The Orderbook for 2018 16
2. The Big Alliances among Carriers The big alliances create economies of scale-reducing costs, improving profitability, services and environment. There is a relevant interest of big alliances for routes through Suez Canal. MARKET CONCENTRATION IN TWO ROUTES THAT INVOLVE SUEZ The big alliances «2M» and «Ocean Three» are mostly active on the route Asia- Med Asia - North Europe Asia -Med G6 23% CKYHE 26% O3 19% 2M 32% G6 8% CKYHE 20% Others 5% O3 27% 2M 39% Source: Drewry, 2015 17
An Example of the New Suez Canal Impact: Route Benefits The graph shows 4 examples of routes and the impact of the New Suez Canal Case studies on a panel of strings Suez Panama Trade route Distance (Nautical miles) Days of sailing Days of sailing Shanghai-Rotterdam 10,525 29 37 Hong Kong-New York 11,593 32 31 Shanghai-New York 12,370 34 30 Shanghai-Houston 13,932 39 28 = Route where Suez is already more convenient Route where Suez will be much more potentially convenient than Panama 18 = Route where Suez will be more potentially convenient than Panama Route where there are no significant effects
The Economic Impact of the New Suez Canal: Operational Cost Savings and Lower Costs of Immobilization SRM estimated that using the Suez route, any shipping company may have an average saving between 5% and 10% on the total operating costs (depending on routes, distances and companies characteristics). For each ship, the time reduction from 18 to 11 hours, due to the New Suez Canal, would lead to an estimated cost saving of: 10,499 for each ship (average) 12,004 for each containership 150,000 for each cruise ship If we consider that, in 2014, 17,148 ships passed the Canal, 6,129 of which were containerships: Total Average expected saving will be: 180 m per year South East Asia 61 m North West Europe, U.K. 49.4 m Arabian Gulf 48.4 m Lower costs of immobilization cargo will be: 154.6 m per year 19
Current and Future Benefits of the New Suez Canal Lower operational costs for maritime companies: 180 m Current benefits Lower costs of immobilization of cargo: 154.6 m Estimated benefits by 2030: Reduction of operating costs (net current value): 2.5 bn Lower freight immobilization (net current value): 1.9 bn New Suez Canal: The direct economic benefits for the operators in the transport sector 4.4 billion Indirect benefits: environmental benefits + reduction in the number of hours spent waiting and for anchoring operations of all the ships transiting the Canal. 20
The Economic Impact of the New Suez Canal on Italian Ports Case study only on one route: Far East-East Coast US A case study on the trade route Far East- East Coast US (accounts 7.4 million TEU) (Source: Alphaliner) 51% pass through Panama Canal 3.8 m TEU 49% pass through Suez Canal 3.6 m TEU 25% 1 m TEU 18% 171,000 If the New Suez Canal catches this Percentage of the total traffic through Panama The additional quantity of TEU that will sail the Mediterranean via Suez Italy market share of the Transhipment traffic in Med The amount of TEUs that Italy can intercept 21
The Effects of the Enlargment for the Cruiser Market may bring Development 170 ships operate in the cruise market, 67 of them passing through the Suez Canal.The enlargment of the Canal could increase the number of cruise for the major Egyptian ports (Hurgada, Safaga and Sharm El Sheikh). As a result: 1. New structured packages dedicated to the Red Sea could be offered as a new item by major operators. 2. It could de-seasonalize the offer extending the cruise season to autumn and winter also providing tours and cultural excursion across the South Mediterranean, the Red Sea and the Gulf. Estimated Benefits In the medium term, the impact could be about 4% of the market value of the Mediterranean, equal to 1,000,000 cruise passengers in the 5 main ports of the Red Sea. economic direct impact of 120 per passenger. 22
Conclusions The New Suez Canal will have a major impact on shipping and trade in the Mediterranean. It will increase the centrality of the Mediterranean as a bridge among Asia, the Gulf and the East Coast of the North America. The two phenomena of naval gigantism and shipping alliances will be emphasized by the New Suez Canal. Italy is one of the European countries that could benefits more from this new infrastructure. 23
SRM Mediterranean Observatory 2011 SRM Maritime Observatory 2014 Thanks for your attention Websites: srm-maritimeconomy.com srm-med.com 24