Building a logistics hub in Qatar

22 March 2011

Qatar has ambitions to become a major cargo hub for the region. With plans to pour millions of dollars into improving road, sea and air links, international logistics firms are looking on with interest

In numbers

1.4 million tonnes: Initial annual cargo capacity of New Doha International airport when it opens in 2011-12

$275m: The cost of Qatar Logistics City, expected not to open before 2013

Source: MEED

As Qatar goes about diversifying its economy and building new infrastructure, the need to upgrade its logistics infrastructure has become more pressing.

Import and export facilities are required to support new industries, such as petrochemicals and metals manufacturing. Movements of cargo are also expected to soar once construction and transport projects linked to the 2022 World Cup get under way.

At present, Qatar’s logistics sector is heavily congested. The main commercial port currently lies on prime waterfront in Doha city centre. Rush hour traffic jams have seen the authorities ban movements of heavy goods vehicles at peak times. This further restricts flows of goods at a port already hampered by its shallow draft and outdated handling systems, adding to congestion during busy periods.

Cargo bottleneck in Doha

Qatar Airways’ rampant growth should position Doha as a hub for intercontinental movements of bellyhold cargo, but forwarding companies complain that Doha International airport has struggled to cope with the pace of the carrier’s expansion and often suffers bottlenecks of cargo.

Meanwhile, trucks bringing goods into Qatar must transit through Saudi Arabia, a market that presents several barriers to rapid movement of goods. Forwarders report regular 20-kilometre tailbacks at the Saudi-Qatar border crossing, due to disputes over documentation, cargo inspections and delayed customs clearance.

There is a … need for this logistics city. But that means having the right infrastructure built into it from the start

Logistics company boss

“Trucking is not the first option for transport into Qatar,” says one Doha forwarder. “Most of our clients favour trucking only if the port and the airport are particularly busy. It can take a week or two to truck goods into Qatar from Oman and the UAE. Most imported goods arrive as seafreight, by feeder or breakbulk service through the ports of Doha or Ras Laffan.”

Given such constraints on the country’s infrastructure, forwarders say that the biggest local players, such as Qatar Petroleum and Qatar Chemical Company, often base their choice of transport on the size of the consignment, rather than on urgency or value of the cargo.

This turns conventional logistics planning on its head. In most markets, firms use premium-priced courier and airfreight transport only for the most valuable or urgently needed goods. In Qatar, restricted capacity and inefficiency mean big players often dispatch consignments of less than 100kg by courier and those of 100-500kg as airfreight. They weigh up the best option for consignments up to 9 cubic metres, sending outsized and project cargoes as seafreight.

For all these reasons, Qatar ranks among the most challenging regional markets when it comes to moving cargo. “There is still a fair journey for Qatar to overtake Dubai, which has a 40-year headstart in building a logistics infrastructure,” says Enver Moretti, chief executive officer Middle East for logistics firm DHL Global Forwarding.

But Qatar has grand ambitions to develop its transport infrastructure. Doha has pledged to invest $55bn in infrastructure over the next decade as it prepares to host the Asian Games in 2018 and the World Cup in 2022. Analysts expect the final figure to be somewhere between $65bn-$100bn. Plans include an inner-city mass transit system and an estimated $25bn rail network able to handle up to 11 million tonnes a year of freight.

A five-pronged rail strategy will develop a metro across Doha, light-rail systems between key urban districts, high-speed rail links between the new airport and Doha city, a domestic rail network to carry passengers and cargo between major towns and which also links into the planned GCC-wide rail network.

The $11bn New Doha International airport (NDIA) will be able to handle an initial 1.4 million tonnes of cargo a year when it opens in late 2011 or early 2012. Its cargo capacity will increase to 2.5 million tonnes when the masterplan is fully built, most likely by 2027.

One of Qatar’s most ambitious plans is to move commercial shipping from central Doha to a new $5.5bn port near Mesaieed. The port will handle 2 million 20-foot equivalent units (TEUs) when phase one opens in 2014 or early 2015. Capacity will increase to 6 million TEUs a year by 2025.

Port capacity in Doha

New Doha Port will cover a 20-square-kilometre site. It will have four container terminals, five general cargo terminals, a roll-on/roll-off berth for ferries and passenger vessels, a livestock berth and dedicated berths for tugs, pilot boats and service/supply craft. With a 17 metre-draft, it will be able to handle the largest modern vessels currently unable to access the existing port.

In January, China Harbour Engineering Company won the $880m construction contract to carry out the excavation works for the project. The project includes the excavation of 58 million cubic metres of material covering an area of 3.2 sq km to a depth of 18 metres, as well as the building of 8km of quay wall and a 5km-long rubble breakwater.

Qatar will need to persuade cargo firms to make a base at New Doha Port. To do this, it is planning a purpose-built logistics zone on a 500,000 sq metre site at Al-Thamamma, about 8km from New Doha Port. Qatar Logistics City is a QR1bn ($275m) project that will target transport, forwarding and supply chain management firms.

National shipping agency Qatar Navigation is in charge of developing Qatar Logistics City. The project will comprise dedicated warehousing, accommodation for up to 5,000 employees, workshops and fuelling stations. Qatar Navigation had originally planned for the project to be completed in mid-2012, but after a series of delays, the contracts have not yet gone out to tender.

In February 2011, Qatar Navigation announced it would open construction bids in May, having previously delayed the tender date from August 2010 and then January 2011. The delays mean Qatar Logistics City is now unlikely to open before 2013 and most now expect the port and logistics city to open at about the same time.

Project delay in Qatar

“Qatar Logistics City has seen quite a few delays and we are not sure why, because the project is not entirely transparent,” says Stephen Cooper, general manager in Qatar for German forwarder Deugro. “Bidding should have been completed in 2010, but has now been delayed again.”

Qatar Navigation told MEED in January that part of the project design had changed and the Urban Planning & Development Authority had also made changes to a highway that will eventually surround the logistics zone. This could explain why the project has been held back.

Logistics companies are watching with interest as Qatar reveals its investment plans. All see Qatar as one of the strongest regional growth markets for cargo over the next few years, and this has triggered an influx of logistics firms, particularly after the gas-rich state was named as host for the 2022 World Cup. With volumes stagnant last year, competition has been fierce. Several major difficulties undermine the market’s evident potential, however.

“Qatar is not an easy market,” says Moretti. “All trucking has to transit Saudi Arabia, which is always a challenge. To become a logistics hub, it will need to provide the right labour laws and greater flexibility when it comes to customs clearance. It needs to have several elements in place to attract logistics companies.” Logistics firms say Qatar also needs a coherent logistics strategy to achieve its ambitions.

Qatar Logistics City

“There is a definite need for this logistics city – but only if it is well thought-out, well built and well managed,” says one company boss. “That means having the right infrastructure built into it from the start. If Qatar Logistics City can provide all those things, the project is very welcome. If it does not, we could be facing a logistical nightmare.”

Moretti puts the argument even more forcefully. “All the countries in the Gulf are trying to emulate the growth model Dubai has adopted, there’s no question about it,” he says. “That goes for somewhere like Qatar too. But there’s a big difference between having the ambition and getting things done.”

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