THE BLOCKED CHANNEL SUEZ CANAL NO LONGER VITAL TO WORLD TRADE

Press, Volume CVIII, Issue 31775, 4 September 1968, Page 14

THE BLOCKED CHANNEL SUEZ CANAL NO LONGER VITAL TO WORLD TRADE

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JAMES MACDONALD,

Shipping Correspondent of the “Financial Times”)

(Reprinted by arrangement)

If and when the Suez Canal resumes its role as an international waterway all the signs point to a completely different pattern of traffic; and the Suez Canal Authority—or whatever other controlling organisation may be in charge—must be paying considerable attention to this problem.

The basic point is that, after two expensive closures in just over 10 years, the shipping industry is viewing even the reopening of the canal with jaundiced eyes. Shipping and world transport have managed to do without it and, as ship sizes grow, there has been remarkably little disruption of world trade. The canal, when reopened, may be convenient, but it will never again be a qecessity. Already British and foreign ship-repairing companies are gearing themselves to handle, a much larger volume of traffic even after the canal reopens. The Swan Hunter group—a fairly cautious organisation when it comes to new ventures—will undertake a new ship-repairing project in Cape Town to cater for the enormous volume of traffic which has been diverted from Suez over the last year. Swan Hunter has joined with Dorman Long (Africa) and the Bonus Investment Corporation of South Africa to provide ship-repair facilities at Cape Town to attract business from the increasing number of ships—particularly large tankers—using the Cape route because of the canal’s closing.

Recently it was announced in Cape Town that 2000 ships had been diverted to Table Bay Harbour since the Suez closing. It is likely that many of these vessel’s owners will demand rock-hard assurances against a third canal closing before committing their ships again to a voyage routed through the canal. There is the sad experience

of the 15 ships who have been imprisoned in the Bitter Lakes for the last 15 months. Regardless of the rights or wrongs of the Arab-Israeli dispute, the commercial shipping world feels that it should not suffer again from any occasional eruption of ArabIsraeli anger. This all leads to a general feeling among British shipowners—and they are still regarded as the leaders in world commercial shipping opinion —that the Suez Canal must be a “real” international waterway when it reopens.

There is hard economic fact to support their claims. It centres upon the growth of oil tankers, on order and already in service, which can voyage from the Persian Gulf to Europe more economically than the smaller tankers using the shorter route through the canal.

Up to the time the canal was closed last year, oil tanker revenue accounted for about two-thirds of the waterway’s revenue. With the huge volume of tankers of over 100,000 dead-weight tons now on order in world shipyards the canal will find—when it reopens—that much of this tanker revenue has vanished. It is too early to say to what extent tanker revenue will decline, but there have been some estimates that its proportion of canal revenue may fall to 40 or 50 per cent. Silting Not A Problem It is, incidentally untrue that the canal, through disuse, is silting up and will need considerable dredging before becoming usable. Even biased experts in Europe say that silting of the canal occurs as a result of ships using the waterway, with the wash eroding the banks. It would need probably little work, after the wrecks in the canal are removed (and most of these are believed to present only minor problems) for the canal to be open for full use. But shipowners have been twice-bitten and are now excesively shy about the canal. Towards ‘the end of last month a director of P. and O. Line Passenger Services said that the P. and O. group believed the canal would not be opened by next year; and it was programming its services for 1970 on the assumption that the waterway would still not be operational. ' Lord Geddes, a tanker expert. this year’s president of the United Kingdom Chamber of Shipping and chairman of Trident Tankers (a member of the P. and O. group) has been openly sceptical about the value of the canal to some operators when reopened. Basing his theme on the growing size of tankers able to operate economically round the Cape and therefore not “bound” to the canal, he has posed the question: how

essential is the canal? His conclusion is that the tanker industry, with the enormous volume of supertankers on order, is becoming increasingly independent and that the major oil companies—the main charterers of other tankers—will be able to thumb their noses at the canal within the next two or three years. Tight-rope Balance The situation of dry-cargo ships Is much more complicated. When the canal is reopened, some cargo ships on the services to East Africa the Arabian Gulf, and India will obviously find it more profitable to use the canal again since in some cases they have had to impose “Suez Canal surcharges” of up to 50 per cent on voyages round the Cape. But in other cases the attraction of the canal is less obvious to cargo-liner operators. In the United King-dom-Far Eastern trades surcharges of up to 10 per cent have been imposed; but in a number of instances they have now been incorporated into the basic freight rates structure.

The question facing drycargo shipowners is to what extent they may have to pay higher Suez Canal charges as a result of the defection of a large proportion of the oil tanker tonnage which previously used the waterway. If the Egyptians, or the new canal authority, whatever it may be, decide to balance the loss of tanker income ny raising the rates for remaining traffic, the balance of decision between the Cape and Suez will be on a tight-rope basis for a number of drycargo operators. The future of the canal has been further endangered by the container-ship services which will operate from the beginning of next year between Britain and Australia. The nine ships on order, it has been estimated, could carry up to 80 per cent of Australia’s export trade to the United Kingdom; and this estimate has been carried out without reference to the Suez Canal. Nine container ships will eventually replace up to 70 conventional cargo vessels.. Whether or not they use the can-il, the canal revenue must drop drastically. As container-ship traffic grows between Europe and the Far East—not just to Australia, but to India, Japan, and New Zealand —so the actual volume of ship traffic through the Suez Canal will decline. Whoever operates the canal when it re-opens will have to recognise that it faces a considerable comj merical threat from ships which are quite capable of i avoiding Suez and. in fact, [suffer little loss from doing iso.