Turns out oil prices are so low it’s cheaper to sail 9,000km around Africa than cross the newly expanded Suez Canal

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This from the Mail & Guardian:

Essentially, it makes more business sense to sail the longer distance – even though the Suez Canal shortens the Europe Asia trade route by at least 9,000 km – and burn more fuel by increasing speeds.

With oil touching $30 a barrel, a recent analysis by SeaIntel, a maritime monitoring group suggests that if shippers can accept an extra week of transit time by sailing south of Africa, it would save them an average of $17.7 million a year per vessel, in transit fees.

According to the analysts the Suez Canal would need to reduce fees by around 50% – and the Panama Canal which similarly affected by 30% – for crossing to be commercially viable for long-haul ships.

Also:

That’s bad news for Egypt, which spent $8 billion on expanding the Suez Canal, opened with much fanfare last year. The expansion, accomplished in a record one year, was intended to reduce waiting times from 18 hours to 11 hours. Authorities said they expected canal revenues to more than double from the annual $5.5 billion in 2014 to $13 billion by 2023.

On a related note, if you are interested in shipping and global trade be sure to read Marc Levinson’s The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger. I recently picked it up and really like it so far.

H/T Charles Onyango-Obbo

 

Why is Barclays exiting its Africa business?

The FT reports:

Firstly, he said it would create “a very simple, clear vision for Barclays” as a bank focused on its two core markets of the UK and US.

Secondly, he explained that Barclays was “structurally challenged” as the majority owner of the African operation. It has all the downsides of owning 100 per cent of the business, but benefits from less than two-thirds of its profits.

……. The African operation produced an attractive 17 per cent return on equity last year in local currency, but this fell to 8.7 per cent at group level, below its 10 per cent target.

In addition, the Wall Street Journal reports that the bank is selling its Asian wealth management fund in order to focus exclusively on the US and UK markets.

According to the Journal:

Cutting the African division “was a very difficult decision,” Mr. Staley said. A U.K. tax on bank balance sheets and the regulatory costs that come with holding the unit outweighed the benefits of keeping it, he added. It is unclear when Barclays will start to sell out of the business.

In short, this data point does not reveal any new information on the state of the African economies in which Barclays is a major player.