Egypt’s scheduled opening of a widened Suez Canal corridor later this week is being hailed by President Abdel Fattah al-Sisi as a job-creating boost to national pride but is not expected to have much of an impact on B.C. companies.
The US$8.6 billion project, which officially opens August 6, is aimed at enabling ships to transit the 162-kilometre crossing in about three hours, down from the current 11.
The Panama Canal expansion, which is expected to be complete next year, is the canal project that is likely to have a much bigger effect on the B.C. economy, said Vancouver-based shipping industry expert Paul McGavin, who is also president of the freight transportation arrangement company Equinox Marine Inc.
That US$17 billion expansion would double the capacity of the Central American passageway.
Swifter transport and increased use at the Panama Canal could boost traffic at B.C. ports because ships that leave China and go through the Panama Canal almost always stop at ports along North America’s west coast, McGavin said. That means that more traffic through the Panama Canal would stimulate more traffic through B.C.’s ports.
“The reason we’re having the Port of Prince Rupert developed, and even Vancouver ports to a lesser extent, is because there’s no more room at California ports,” McGavin said.
For Vancouver entrepreneurs who want to do business in Egypt, however, the Suez Canal opening is great news.
Abenteuer Resources Corp. (TSX-Venture:ABU) signed an agreement with Sama Oil and Gas FZC earlier this year to form a joint venture to explore for oil and gas in Egypt and the surrounding region and then exploit those resources.
“When I’m going around trying to present a deal and people ask me where it is, they will feel better if they’ve heard about the Suez Canal being widened,” Abenteuer CEO Lewis Dillman told BIV.
“When you’re employing people, that’s a nice antidote to the terrorism business so this is going to be fantastic for Egypt. Internationally, it will present a country that is strong and stabilized. It will be a leader in the Middle East and North Africa region.”
Methanex Corp. (TSX:MX), which is one of the few B.C. companies that has operations in Egypt, is expecting little if any benefit because “we rarely, if at all, access [the Suez Canal,]” spokeswoman, Baljit Lalli, told Business in Vancouver.
The widened canal has the potential to send ripples of change across global trade routes, however, and that will make some shipments viable that are not currently economical – something that is good news for Vancouver’s Teekay Corp. (NYSE:TK), said BTIG managing director William Frohnhoefer, who is a New York-based analyst who covers the corporation.
He explained that this is because Teekay, which owns stakes in the oil shipper Teekay Tankers Ltd. (NYSE:TNK) and the LNG shipper Teekay LNG Partners LP (NYSE:TGP), charges clients daily rates to ship products.
That means shorter sailing times do not immediately trickle down in the form of higher revenue and profit – though increased business is possible if more customers ship their products through the canal because speedier transport means a lower shipping cost.
Still, Teekay spokesman Jonathan Anthony told BIV that reducing transit time by a few hours is “not the defining trigger” in rising demand for Teekay ships.
He stressed that the increase “is much more about global supply and demand.”•
