Opportunities abound

The dynamics of the Middle East container market are being re-defined in developments which have repercussions from Suez to the Subcontinent, a new report says.

Aden and Salalah have, not surprisingly, been stealing the headlines as they challenge the established UAE hubs such as Dubai, Khor Fakkan and Fujairah, but a whole lot more is happening, says Drewry's new report on the Middle East container port market.

It indicates that container traffic handled in the ports of the Gulf and Red Sea regions totalled an estimated 7 million teu in 1998. This included empty containers and transshipment traffic and compares with a total throughput in 1990 of only 2.9 million teu. Looking ahead, container port traffic levels are forecast to reach 16.1 million teu by 2015, of which just over half is expected to be transshipment activity. The rise in oil prices will underpin resilient local demand too, it says.

Underlying this is the fact that new opportunities for investment and private sector involvement in ports are opening up as the region embraces global trends. Meanwhile, the Indian Subcontinent, the biggest single focus of population in the region and a traditional feeder market, is being affected by port developments in India which are enhancing the attractiveness of direct services. Elsewhere, Iran and Iraq remain well placed to act as gateways to Central Asia (as well as being great economic imponderables in themselves), and their massive potential on both fronts is just beginning to manifest itself.

The development of Aden and Salalah is largely responsible for the projected increase in regional container port capacity of almost 50 per cent by 2003. However, despite the substantial additional capacity being brought to the market, this will need to be supplemented further in the long run. Depending on the average level of utilisation in the region, between 3.6 and 10.3 million teu of extra capacity will be needed in the period 2004-2015. Average container port utilisation levels in the region are estimated to be around 62 per cent at the current time, although within this transshipment capacity is more heavily utilised.

Drewry's report looks in detail at the relative merits of the existing hub ports versus the new threats posed by Salalah and Aden. While the report indicates that the new ports will have an impact on the market all the way from Jeddah in the west to Colombo in the east, the analysis clearly shows that no one port is best positioned to serve all markets.

A key observation demonstrated by the Drewry costing exercise is that the substantial amount of cargo for the region destined for or originating in Dubai has a strong bearing in terms of the economics of the alternatives. While Salalah and Aden clearly have very significant attractions, in particular due to their locations, Dubai certainly has not lost all of its advantages. The indications of Dubai's remaining competitive strength are borne out by analysing Dubai's reported throughout figures for 1999 which suggest that volumes have been maintained since 1998. Aden and Salalah have effectively absorbed the growth in traffic which might otherwise have been expected, as well as generating completely new port activity within the region. Clearly it is early days in terms of the influence of Salalah and Aden, but the effects so far have certainly not been as catastrophic for Dubai as some observers forewarned. In addition, the Dubai Port Authority's investment in Jeddah can be seen as a means of protecting it[QQ]s market share and spreading risk.

The strongest selling point of the new developments is that they offer savings in sailing time for mainline vessels due to their geographic locations. However such savings appeal mainly to "passing" east-west carriers that currently include the Mid-East Gulf as part of their Europe/Far East linehaul schedules.

The report's analysis of the economics of transshipment indicates that benefits to dedicated end-to-end Gulf services are less significant, primarily due to the additional cost of feedering from Aden/Salalah which would be incurred. This is especially true for carriers with a large market share and suggests that direct calls will continue to be a competitive alternative to the new transshipment options.

However, what is also clear is that Salalah in particular has generated entirely new transshipment business in the Middle East, both through the relocation of traffic from Colombo and by Maersk Sealand linking together over-lapping deep-sea services as it integrates Salalah into the global network. The creation of Salalah has made possible certain transshipment practices which were not feasible before, says the report.