Suez Canal announces 15% toll increase! Higher freight rates could fuel inflation

Starting January 15, 2024, tolls for crude oil carriers, refined oil products carriers, liquefied petroleum gas carriers, liquefied natural gas carriers, chemical carriers and other liquid bulk carriers, container ships, vehicle carriers, cruise ships, and special floating facilities will all increase by 15 percent, the statement said.

Tolls for dry bulk carriers, general cargo ships, ro-ro vessels and other vessels will increase by 5 percent. However, container ships sailing directly from ports in northern and Western Europe to ports in the Far East will not be affected by the new increase.

The Suez Canal, which connects the Red Sea and the Mediterranean, is an important international shipping lane (the shortest route between Europe and Asia) and one of the busiest waterways in the world. About 12% of the world's trade passes through the canal. Revenue from the canal is also the main source of Egypt's state revenue and foreign exchange reserves.

According to data released by Egypt's Suez Canal Authority in June this year, the Suez Canal's revenue in the 2022-2023 fiscal year reached $9.4 billion (about 68.7 billion yuan), up from $7 billion (about 51.2 billion yuan) in the previous fiscal year. In fiscal year 2022, 26,000 ships passed through the Suez Canal, an annual growth rate of 17.6 percent.

Osama Rabie, chairman of the Suez Canal Authority, said it expects the Suez Canal's revenue to reach $10.3 billion by the end of 2023.

In this regard, the well-known financial blog website Zerohedge wrote that with Egypt's announcement that it will increase the transit fees for all types of ships passing through the Suez Canal, this latest adjustment is undoubtedly likely to further exacerbate concerns about the global inflation outlook.

While the move will not have a huge impact on global trade flows, it is still likely that higher transit fees for shippers sailing through the canal will eventually be passed on to consumers, fuelling inflation everywhere. Inflation figures in many of the world's major economies are already showing signs of rising again as geopolitical tensions push energy prices higher again.