Last week, there were celebrations in Egypt as the construction involving the Suez Canal was finished. It was a $ 8.5 billion project and involved both new canals and widening of existing canals and the project was completed within 1 year. If you look at a map of the Mediterranean Sea -to the north is Europe; to the south is Africa and in the lower western corner is Egypt and a seemingly shortcut to the Red Sea which connects you to the Indian Ocean and China. The movement of goods over the sea is still the least expensive method and having a shortcut which cuts the time to go around Africa is a big deal for shippers. Egypt is hoping and expecting with the expansion more ships will pass through and each time they pass through the canal is a toll road – Egypt receives fees. If shipping increases by 30% per year and is constant the fees Egypt is looking at could rise to $13 billion from today’s $5 billion. If the shippers come through the Canal, the investment was worth it.

Linking to dividend paying stocks, as long as the trip is concentrated safe, shippers will send their ships through the canal for it is both less expensive and less dangerous than sending their ships around Africa. In simple terms, Africa is a barrier to entry and the only game in town or monopoly is the Suez Canal. From a shippers point of view they hope there is peace in the area. There are natural barriers for entry which allow companies to maintain an advantage, however there are always alternatives even if the alternatives are slower for the moment. The question to ask is how does the alternatives become more competitive and when that happens – there will be a migration to other sources until the market sorts itself out.

There are more questions than answers, till the next time – to raising questions.