Biggest Customer Welcomes New Suez Canal

Maersk container ship

By MarEx 2015-08-08 17:14:40

All through the 20th and 21st century Egypt has acted as the bridge between Europe and Asia. From 2004 to 2014 container volumes transported via the Suez Canal has grown around 70 percent and the expansion confirms the Suez Canal Authority’s continuous commitment to accommodating growth in trade. 

As the largest customer of the Suez Canal with more than 1,400 transits in 2014, the Maersk Group has welcomed the expansion of the Suez Canal and the advantages it entails.

Maersk Group representative and CEO of Maersk Drilling, Claus V. Hemmingsen participated in the official opening of the Suez Canal along with COO of Maersk Line, Søren Toft.

“The Suez Canal is a key corridor on the East/West trade. Maersk has used the corridor for more than 90 years, and we welcome the easier transit and reduced transit times that the new expansion will bring,” says Hemmingsen.

Container Ship Transits 

The Suez Canal accounts for roughly 7.5 percent of world sea trade and container vessels account for over 50 percent of the canal’s tonnage passage. Maersk Line contributes with 20 percent of the container transits, and virtually all Maersk Line’s Asia-Europe cargo goes through the canal. This includes everything from Chinese textiles and Indian Basmati Rice to German machinery or French wine passing through the Suez Canal.

Prior to the extension, the southbound transit took 18 hours and the northbound took 11 hours. After the opening of the extension, both ways will only take 11 hours. With the current expansion the next generation of vessels should also be able to transit safely and without delay.

“The development in the number of transits through the canal underscores the need of having a canal that guarantees quick passage both ways and helps relieve bottlenecks, accommodating growth in trade and vessel sizes – an effort we welcome from all our partners and suppliers,” says Hemmingsen.

Future Trade

The company says that while trade is not growing as fast as previously and the Asia-Europe trade growth has stagnated, trade growth and volumes will increase overall. 

In the short-term Westbound volumes (i.e. from Asia into Europe) are currently declining. This is a direct effect of the weak Russian economy as well as European retail inventories depleting following last year’s strong build-up. Maersk expects both of these negative effects to gradually fade in second half of 2015. 

Otherwise, the European economy is doing relatively well, especially Spain, U.K. and North Europe (not the least Germany). Eastbound volumes (i.e. from Europe into Asia) have been declining during the last 6-12 months. 

Chinese imports of raw materials remain frail not just from Europe, but also globally. The reason is first and foremost depletion of inventories, says Maersk, but the Chinese housing market is also weak (e.g. marble out of Turkey has fallen 10 to 20 percent). In 2015, weak Chinese demand will continue to dampen Eastbound volumes. In 2016, Chinese inventories of raw materials are assumed to reach critical low levels which should lead to a needed lift in Chinese imports, says Maersk.