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Canal Tolls 2020

The Panama and Suez Canals are of great commercial importance to the shipping industry. They are critical to reducing voyage times and fuel costs, as well as the sector’s CO2 emissions.

These advantages come at a price, however, in the form of canal tolls, which for large shipping companies can amount to tens of millions of dollars per year. ICS therefore places much importance on maintaining dialogue with both the Panama Canal Authority (ACP) and the Suez Canal Authority (SCA), both of which are legitimately attached to profit maximisation to support their respective nations’ economies.

In February 2020, at very short notice, the ACP implemented an additional ‘freshwater charge’ of US$ 10,000 for ships over 125 feet transiting the Canal. The new charge is intended to address historic low water levels at the Panama Canal’s main water source, Gatun Lake, although no clear plan for implementation of the funds has yet been presented by ACP. This new cost was supplemented by a variable surcharge, potentially increasing transit costs for some ships by as much as 15%. Only two months later, on 1 April 2020, a substantial increase in toll rates came into effect, resulting in a further additional cost increase for some ships of up to 17%. All of these charges combined meant that some ships faced transit cost hikes of over 30% by April 2020. As ICS stressed in representations to ACP, this placed increased strain on the industry, as well as the wider global economy, at an already difficult time, and without sufficient warning for the industry to prepare.

During the first part of 2020, when there was a dramatic fall in bunker prices, an increasing number of ships opted to bypass these international canals, despite longer voyages, primarily for reasons of cost efficiency. Several ships opted for routes around the Cape of Good Hope, circumventing the Suez Canal altogether.

In response to these developments, and the COVID-19 outbreak, both the ACP and SCA announced temporary
relief measures to maintain revenues, which, due to the collapse of tourism during the pandemic, is now Egypt’s largest source of foreign income. The SCA introduced some reductions in transit fees for containerships going through the Suez Canal between 1 May to 30 June 2020, by providing rebates ranging from 17% to 75% (depending on the direction of travel). While the ACP did not provide any cost reduction measures, in April 2020, it altered the Panama Canal reservation system to allow ships to pre-pay their bookings before transit.