Suez Canal: Turmoil Could Boost Shipping Industry

An international oil tanker passes through the Suez canal in Ismailia, Egypt.
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An international oil tanker passes through the Suez canal in Ismailia, Egypt.

If political unrest in Egypt causes the Suez Canal to be closed, it could have positive consequences for shippers and US oil refiners, Morten Arntzen, president and CEO of Overseas Shipholding Group , told CNBC Monday.

“[Shipping] Rates would move from unacceptable to moderately acceptable levels,” said Arntzen. “Nothing spectacular, but it would be healthy for the market.”

If the canal were to be closed, ships and tankers would have to go around the African continent, which would result in higher shipping rates that would be passed on to customers, said Arntzen. About 10 percent of the world’s trade passes through the canal.

However, as of today, traffic through the canal is “business as usual,” Bruce Chan, president and CEO-elect of Teekay Tanker Services , told CNBC Monday.

Chan said that Teekay has three ships in the Suez region, including one that’s in the Port of Suez and is scheduled to pass through the canal on-time tomorrow heading north.

“The port is telling us everything is normal,” added Chan. He said that the crew of the next ship scheduled to depart has reported no difficulties in the canal area, which is being patrolled by the Egyptian army.

“There will be a lot of unforeseen circumstances [if the canal were to be sealed off], and that’s good for the shipping industry,” added Arntzen.

Arntzen said US oil refiners could end up selling more product to Europe, and added: “Would others start storing more crude, as the US economy starts to pick up? Would there be more cargoes moving from the gulf, west to the US? If you get that combination, then it becomes more interesting.”

Chan said that regardless of what political faction ultimately wins in Egypt, it's in the country's best interest to keep the canal operating.