Many blogs ago, I had written about the toll road economics. Here are some of the salient points:

1. The toll road offers a vital product or service.
2. There is almost no good substitute to a toll road. The alternatives either do not exist or are longer and more expensive to navigate.
3. The toll road is expensive to build. But once you build it, it doesn’t cost much to maintain it. And most of the expenses are fixed in nature like salaries, technology etc. There is hardly any variable cost.
4. The toll road becomes a monopoly.

Think about it- all of the above conditions apply to the Suez Canal as well.

1. Water transport is the cheapest form of transport.
2. Without the Suez Canal, it would take ships much longer to traverse all the way around the African continent raising costs for end consumers.
3. Nearly $10 B/day worth of Cargo and 12% of the world’s container ships pass through the Suez Canal every year.
4. It is owned by Egypt. It contributes about 2% to Egypt’s GDP.
5. I don’t know how much it costs Egypt but my uninformed guesstimate would be not more than a few hundred dollars a year. On the other hand, it earned $5 B in tolls collections.

And therefore in my opinion the Suez Canal is one of the biggest and most profitable toll bridges in the world. And is likely to remain for many, many years to come (as trade is likely to grow and water transport is the cheapest form of transport).

As an investor, you have got to love toll bridges. They are immensely valuable to society while being profitable to owners.

Featured photo by samuel hanna on Unsplash