Leading terminal operators are focused on boosting infrastructure investment in India and Africa and linking the Middle East to China through the Belt and Road initiative
Port volumes in the Middle East are set to be among the fastest growing in the world. According to Drewry’s 5-year regional container port demands forecast, volumes are set to surge by 5.1%, from 69M in 2018 to 89M in 2023.
This is faster even than Asia, which is set to grow by 4.9%. Africa follows with a growth of 4.1%, moving from 27M to 34M. This is followed by growth rates of: South America 3.7%, North America 3.6% and Europe 3.4%.
DP World is the terminal powerhouse of the Middle East – and is increasingly taking a large chunk of container port business in Africa and India as it expands and invests in these areas.
DP World underlines that it is a “global trade enabler”. Drewry senior analyst Neil Davidson points out how this is a growing trend within the terminal operating sector, in which DP World is dominant. In a webinar, he says “There is a desire [by some terminal operators] to be more widely involved in the global supply chain to be closer to cargo customers and this reflects the strategy of some shipping lines.
“…you could argue there is a switch from hardware to cargo owner relationships and being global trade enablers. DP World is at the extreme end of spectrum with a well-publicised global trade enabler strategy.”
He notes that “DP World is clearly moving forward aggressively with its global trade enabler strategy. As well as acquiring Unifeeder, P&O Ferries has also been moved under the DP World remit. However, it is early days and the task ahead is a substantial one, to integrate and to be able to offer a one-stop shop. It will be a step-by-step process, and the attractiveness will vary from customer to customer.”
Announcing the group’s half year results, DP World group chairman Sultan Ahmed bin Sulayem says “We have continued to make progress on our strategy to become a trade enabler and solutions provider as we look to participate across a wider part of the supply chain. We have invested significantly across our ports, logistics and maritime services businesses. The aim is to connect directly with customers to offer logistics solutions and remove inefficiencies in the supply chain to accelerate trade. We are seeing positive signs of progress in our new businesses that give us encouragement for the future.
“…Going forward, we aim to integrate our new acquisitions and deliver synergies with the objective of providing smart end-to-end solutions, which will improve the quality of our earnings and drive returns. ”
A major focus for DP World is India and Africa – it is investing billions in ports in these areas. New terminals and port infrastructure will be built in India and east Africa in the next decade to boost regional growth in maritime trade.
DP World is constructing port and warehouse facilities in India, the United Arab Emirates’ biggest trading partner and an Asian consumer superpower.
In the longer term, DP World intends to open new ports in Africa as part of a greater Indian Ocean trade expansion strategy, said DP World chief commercial officer Abdulla Bin Damithan.
In addition, DP World is investing US$3.4Bn to improve the UAE’s connections with China as part of the One Belt One Road Chinese trade strategy.
“We have established five terminals in India and we are investing in warehouse facilities and the supply chain,” said Mr Damithan at Dubai Maritime Agenda conference. “India’s economic growth will bring prosperity for both countries, so there will be further investment in ports and logistics.”
DP World already has port infrastructure in Mundra, Nhava Sheva, Cochin, Chennai and Visakha in India.
Within the Indian Ocean trading region, DP World is planning new port investments. “We see growth in east Africa as it is an emerging market with more shipments and investment,” said Mr Damithan.
“A lot of money will be needed in infrastructure and we will invest to connect India to the UAE and Africa. That will be our focus for the next 5-10 years – to connect continents and customers.”
Investing in new ports and container terminals will require marine services to be modernised in these regions, providing opportunities for tug owners and builders.
In the UAE, DP World is driving to ensure Dubai is a gateway to the Middle East Gulf nations, especially for Chinese products.
“For China’s One Belt One Road we are connecting the UAE with the Far East,” said Mr Damithan.
“Our US$3.4Bn investment is dedicated to two sites. One is a project logistics station in the UAE for Chinese companies,” he continued. “The second project involves importing products, processing them and then exporting them from the UAE.”
He wants to attract trading companies to this gateway to “take advantage of the low supply chain costs”.
This initiative comes as the UAE prepares to host a global exhibition in 2020 and to introduce new maritime laws to support the Dubai Government’s gateway strategy.
DP World operates the container port in Jebel Ali, UAE and one at Jeddah in Saudi Arabia. In Africa it operates the terminal in Berbera, Maputa, Mozambique and port of Dakar, Senegal.
UAE Federal Transport Authority minister advisor Salem Al Zaabi explained why the nation’s port operators are driving through these investments.
“Maritime growth means there are opportunities across the Middle East and beyond into the Indian Ocean,” he said. “We want to attract investment in sea ports and terminals and expand into Africa to find solutions and attract investment.”
Mr Al Zaabi explained the UAE has become a trade centre due to its location close to the Indian Ocean. “There is commitment from government to advance the sector, attract leading companies for sustainable growth in this maritime hub,” he said.
But DP World is not the only operator in the Middle East, and there are several operators making their mark, with Middle East mega-port projects planned:
Indeed, Drewry’s October webinar highlights the growth of trade at Abu Dhabi’s Port of Khalifa. In Q2 2019, its weekly connections soared by 62.5% compared to Q1 2019 after it won five weekly connections. Mr Davidson comments that this shows the effect of MSC and COSCO taking stakes in the port.
The longstanding economic relationship between China and the UAE was strengthened in 2018 with the official inauguration of the COSCO Shipping and Ports’ Abu Dhabi Terminal at Khalifa Port, positioning Abu Dhabi as the regional hub for COSCO’s global network of 285 berths at 37 ports.
Khalifa Port was only opened in 2012 and efficiency and technology are top priorities. Khalifa Port is connected to almost 70 international ports. Abu Dhabi Ports also owns free zone Khalifa Industrial Zone Abu Dhabi, an emerging industrial and logistics hub in the region, which is crucial to the port and part of ADP’s efficiency drive.
When Khalifa Port opened its doors in 2012, it was the first semi-automated terminal in the region. Furthermore, Khalifa’s free zone, integrated with the port, means the port and industrial zone are a stronger value proposition together.
Last year Abu Dhabi Ports launched Maqta Gateway, which is behind a port community platform that allows all data and document flow to be fully integrated with all stakeholders. It is also investing in blockchain and automation.
Rise of east Africa
The powerhouse of the east Africa, southern Africa and Indian Ocean islands trade is South Africa. According to Dynamar’s East Southern Africa 2019 report, southern Africa regularly accounts for around 60% of the total economy in the region. East Africa is however growing quickly and has seen its share rise from 34% in 2013 to 40% in 2017.
The report points out that this area has 22 ports called at by intercontinental liner services. Five are located along the east African coast, 10 in southern Africa with the rest located on Indian Ocean islands.
The ports called at within southern Africa are from Walvis Bay in Namibia on the South Atlantic coast, then moving south and east around South Africa before turning north again, along the Indian Ocean coast up to Nacala in Mozambique. From there on, east Africa is all direction north until the Horn of Africa, the easternmost point of mainland Africa. Near Berbera, the Indian Ocean flows into the Red Sea.
Dynamar says “The two largest ports, the only millionaires in fact, continue to be Durban with 2.7M TEU in South Africa and Mombasa with 1.2M TEU in Kenya. This latter port took second spot from Cape Town in 2011 and broke the million TEU mark in 2014. Combined, Durban and Mombasa handled 48% of total throughput in 2017.”
The report points out that there are few private terminal operators in the region. Of note are Hutchison Port Holdings (Dar es Salaam) and DP World Maputo. Bolloré’s activities are restricted to Indian Ocean islands with ties to France.
Construction of the multipurpose facility DP World Berbera is currently underway. DP World (51%), Somaliland (30%) and Ethiopia (19%) own “what could be a new gateway to landlocked Ethiopia”.
The Far East, Middle East/Indian subcontinent and Europe/Mediterranean are the main trade areas connecting with east southern Africa.
Dynamar says “Figures from 20 ports in the region show that combined port throughput totalled 8.2M TEU, representing 4% growth since 2013. The shares of containers handled reflect a slow drift away from southern Africa towards east Africa and the Indian Ocean islands.
“East Africa is growing and expanding its influence. From 2013 to 2017, GDP rose by 25% at the expense of southern Africa. It is the landlocked countries pushing GDP growth and not so much their coastal neighbours.”
It adds “Indeed, Mombasa and Dar es Salaam compete for hinterland cargoes to Burundi, Rwanda, Democratic Republic of Congo and Uganda in particular. State-controlled ports as they are, they are under increasing pressure to improve and develop their strained infrastructures.”