Dubai - Plans to invest almost $40 billion to triple port capacity across the oil-rich Persian Gulf region are sailing against stiff global economic head winds, according to industry experts.
Before the global financial crisis weighed heavily on international trade, developers in the Arab states of the Gulf had plans to add 62 million 20-foot equivalent units, or TEUs, of capacity by 2028, at a cost of almost $40 billion, according to Zawya Projects Monitor data.
But a sharp downturn in container traffic has forced a rethink by some of the region's maritime planners.
Global container shipping is expected to fall 7% this year, according to industry experts. Volumes to the Gulf and Middle East are down around 20% or more on main Far East, European and transpacific routes. By August, 580 ships--1.5 million TEUs of capacity--10% of the global fleet, were laid up. In the next four years, half of the 200 container ships of 10,000 TEU-plus on order are likely to be deferred or canceled.
"Our anecdotal experience is that pretty much all port expansion projects, both in the Middle East and elsewhere, are on hold or under review, so severe is the global downturn," said Neil Davidson, head of research at Drewry Shipping Consultants in London.
Data from Drewry shows that 24.4 million TEU of cargo was shipped through the Gulf Cooperation Council, or GCC, in 2008, compared with a total capacity of 30.4 million TEUs. Over half GCC port throughput is transshipment and according to Drewry throughput at Gulf ports will fall 7% this year.
Still, regional port operators are being encouraged to move ahead with expansion plans to keep pace with rapid economic growth in the Gulf.
"Developers need to take things phase-by-phase," said Hans-Ole Madsen, vice president for business development for South Asia, Middle East and Africa at APM Terminals. "It's good to have a masterplan to create a 10 million TEU facility, but maybe try half a million first."
SAUDI MARKET
A drive to increase long-term capacity in the region will see two projects alone bring on at least 20 million TEUs each. Abu Dhabi Ports Co., or ADPC, is building Khalifa Port & Industrial Zone, or KPIZ, at Taweelah in the United Arab Emirates. In Saudi Arabia a new port at King Abdullah Economic City, or KAEC, is a central plank of a total of over $50 billion worth of projects at Saudi Arabia's largest new city at Rabigh.
Other expansion projects include the 6 million TEU New Doha Port at Al Wakrah in Qatar and Kuwait Gulf Link Port International's 3 million TEU Mina Saqr container terminal expansion at Ras Al Khaimah in the U.A.E.. But in each case there are signs that the global downturn could hit development.
Saudi Arabia's economy, the region's largest, has the most to lose from delays. According to the Saudi Ports Authority, some 12,000 ships visit Saudi ports annually, more than one ship an hour.
"The Saudi market is extremely interesting, reasonably strong and growing," said Iain Rawlinson, APM Terminal's commercial manager in Bahrain. "We don't see ourselves as a competitor to Saudi, so much as helping to improve the network, especially at Jubail, which has lacked investment."
King Abdullah Economic City in Saudi will add 20 million TEUs of capacity over five phases to 2020. Analysts say the Saudi government may have to fund the project, despite a decision to sell the assets.
Other projects in the kingdom that will cater to dry and liquid-bulk cargoes include the industrial terminals at Ras Al Zour, which will handle 70,000 dead-weight-ton vessels, and Jubail, where the Royal Commission for Jubail and Yanbu completed three new petrochemical berths this year.
In Dammam, in the kingdom's eastern province, a joint venture between the Saudi and Singapore ports authorities for a 30-year, 3 million TEU expansion is to go ahead, financed by the Saudi Investment Fund.
"The Jubail export market is very substantial and forecast to grow 60% in next 12 months," said Rawlinson, who sees the terminal as ideally placed for upper Gulf feeder runs.
POLITICAL WILL
Further south in Abu Dhabi the government is investing heavily on developing Khalifa port as part of a $100 billion program of infrastructure works. The terminal will eventually have a capacity of 22 million TEUs, scheduled for completion in 2028. The target for initial port operations was pushed back to 2012 earlier this year, when Abu Dhabi Ports Co. said it would award 17 contracts worth $2.7 billion for the offshore port and onshore free zone.
Jebel Ali, the largest container port in the Middle East, opened Terminal 2 in February to increase total capacity to 14 million TEUs. However, it reported an 8% fall in volume in the first nine months of the year.
On the East coast of the U.A.E., Khor Fakkan's capacity increased by a third to 4 million TEUs this year, and quay wall and gantries both increased 25%.
International consultants are optimistic work will finally go ahead on the Bubiyan Island project in Kuwait, where the schedule calls for creation of 2.5 million TEUs of capacity by 2013.
"All things take time in Kuwait, but there is certainly political will at the moment," said Bryan Willey, general manager of U.K. engineers Atkins in Kuwait. "It's going to happen."
Middle East container growth data 2007-11
2007a 15.7%
2008a 11.7%
2009e -6.9%
2010e 3.1%
2011e 6.7%
GCC ports throughput and capacity (TEU) 2008
Throughput Capacity Utilization
Bahrain 300,000 400,000 75.0%
Kuwait 880,000 1,150,000 76.5%
Oman 3,392,000 5,000,000 67.8%
Qatar 403,930 300,000 134.6%
Saudi Arabia 4,648,409 5,900,000 78.8%
U.A.E. 14,755,292 17,635,000 83.7%
TOTAL 24,379,631 30,385,000 80.2%
Source: COMMODITIESCONTROL
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