The Suez Canal reduced the cost of fees for ships returning from northern Europe to Asia

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Last year, the canal authorities increased the rebate for these return voyages to 17%, as carriers would otherwise find it advantageous to make the return voyage the long way south around Africa.

With the current environment of shortage of vessels and rising fuel prices, the authorities have again reduced the discount on the return voyage to 6% as of April.

Ultimately, the situation is a pure cost arbitrage game. For a carrier, the voyage around Africa consumes more fuel. In addition, it requires another vessel due to the longer sailing distance, a blank sailing due to lost time or the vessel speeding up.

This makes the round Africa voyage attractive when fuel prices are low and vessels are plentiful when compared to the cost of Suez Canal transit. This is, of course, what also caused the increase in canal rebates last year and, in turn, what has probably caused the reduction in the rebate now, as fuel prices are rising and vessels are scarce.

Source Linkedin

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