With throughput almost touching 9 million 20-foot-equivalent units (TEUs) in 2006, Jebel Ali is by far the busiest container port in the region. But like everywhere in Dubai, traffic congestion is causing problems.
The number of containers using the port has grown by of 23 per cent a year for the past three years, and is expected to rise even further following the completion of an initial expansion in August that has added 2.2 million TEUs to the port’s capacity and increased its quay length by 1,200 metres.
But Dubai’s traffic problems are forcing containers to use rival ports in Sharjah, says Keith Nuttall, commercial manager at Gulftainer. His company handles containers at Sharjah’s Khalid and Khorfakkan ports. Trucks are often waiting hours to get into Jebel Ali, he says. “There is overcrowding at Jebel Ali and a lot of customers are now looking to Khorfakkan. We have had more interest from shipping lines in the past six months than I can ever remember.”
Last year, container throughput at Khorfakkan was 2.1 million TEUs. “At Khorfakkan, we are managing 200 box moves per hour, using just four gantry cranes,” says Nuttall. “This is at a time when fuel is more than $500 a tonne, and shipping lines are saving themselves millions of dollars by not travelling down into the Gulf.”
Khorfakkan is preparing for even greater demand in the future by deepening its draught to accept larger container vessels and expanding its quay, giving more space for handling containers. Last month, the Hanjin Qingdao began calling at the port. This new 2,500-TEU ship operates between the UAE, China, Korea and Southeast Asia. A further three ships will be added early in 2008.
Sharjah Ports Authority, which operates the ports at Khalid and Khorfakkan, claims the emirate is catching up with Dubai in terms of economic development, pointing to the booming ports traffic of the past three years.
Sharjah ports experienced a tremendous boom in container throughput over the past decade, reaching a peak of 25 per cent year-on-year growth in 2005. But this has now levelled off, with throughput falling by 7 per cent in 2006. The authority is adamant that the long-term trend remains positive and says 2007 will show an increase.
“Sharjah is catching up with Dubai,” says a spokesman at Sharjah Ports Authority. “You only have to drive from Sharjah to Dubai and you will see construction sites everywhere, from commercial properties to housing and hotel developments.”
The import of the raw materials for building this infrastructure is the main contributor to the growth in traffic.
Port Khalid, on the UAE’s west coast, was once a trans-shipment port for the GCC and Indian subcontinent, but in recent years it has succeeded in encouraging more mother vessels – large-capacity vessels that distribute loads to smaller feeder ships – to call at the port.
With a depth of only 11 metres, some of today’s larger vessels require a much deeper channel to enter the port. But dredging work already under way will take the depth of its three container berths and four general cargo berths to 12.5 metres.
“At the moment we can handle ships of 30,000dwt [dead weight tonnes], but this time next year we will be able to handle ships carrying another 1,500 containers, maybe even 2,000 extra containers,” says the spokesman.
The greater the ship’s capacity, the greater the draught required.
Meanwhile, Dubai Ports’ owner DP World is not only interested in expanding its prize strategic asset, Jebel Ali, but also has a vested interest in the nearby Port of Fujairah. Two years ago, it took over the handling of containers at the port, and in July it announced plans to upgrade the port to handle larger container vessels by 2010.
Many observers believe Fujairah is immune to political shocks. “Obviously, there are problems in Iran and the Strait of Hormuz could close again,” says a senior manager at a freight forwarding company. “Fujairah is immune to such problems because it is situated outside the Gulf.”
DP World’s plans for the port include adding another berth and taking the draught from 12 metres to 15 metres, enabling it to take vessels of much larger cargo capacity.
The port remains heavily reliant on the trans-shipment of non-containerised bulk cargo to India and Pakistan. But DP world is keen to boost containerised traffic, a move the manager says should have happened sooner. “DP World is now taking steps to correct that with the expansion,” he says.
Fujairah handled 16 million tonnes of bulk cargo in 2006, including rock boulders called ‘gabro’, which are used in construction projects throughout the GCC. Future demand is such that another bulk loader will soon be added.
The port also handled 29 million tonnes of oil in 2006 and could benefit from the crude oil pipeline that is being constructed from Abu Dhabi to Fujairah. The planned Fujairah oil refinery could also boost port traffic once it becomes operational.
A core stimulus to the region’s ports is the repetition of the Dubai business model throughout the other emirates. Ajman, Ras al-Khaimah and Fujairah are all experiencing industrial and economic growth, leading to an increase in business opportunities for port operators.
However, not all plans have succeeded. Two years ago, Ras al-Khaimah Port began a programme to turn itself into a major container destination. But as one industry source comments: “The container business there is non-existent. There is a natural shipper for the port, a tile manufacturer, but its plant is 60 kilometres away from the port, so volumes tend to go through Sharjah or Dubai.”
In the 1970s, Jebel Ali was also predicted to be a white elephant but it is now the biggest port in the region. But back then, there was little competition.
UAE ports must increase port and local transport infrastructure capacity to reduce delays for shipping firms.
Logistics: Investing in transport
Transport investment in the UAE is about to further boost the logistics sector
For the past decade, the global logistics industry has watched Dubai explode into a major supply chain hub, rivalling the likes of Singapore and Hong Kong. But perhaps the most eagerly awaited development is the opening of Dubai World Central.
The massive Jebel Ali-based project comprises six parts: Dubai World International Airport, Logistics City, Commercial City, Residential City, Aviation City and Golf City.
The initial phase of Dubai World Central will open in late 2008, when cargo aircraft will begin to use the new airport’s first runway. Passenger flights will follow six months later, with the entire airport due to be completed by 2015. Meanwhile, Logistics City will be fully operational by mid-2009.
“The first runway has been completed and we are going through the testing period,” says Michael Proffitt, chief executive officer of Logistics City. “Meanwhile, the control tower is being built, as is the cargo terminal.”
When it is completed, an entire aviation community will be operational next to what will be the world’s largest international airport.
Proffitt says Logistics City, which is set to become home to 150 companies, will strengthen Dubai’s role as the Middle East’s major cargo hub. “There is a clear focus for Logistics City to become a global hub serving Asia, the Middle East and the Indian sub-continent – anywhere within four hours’ flying time to Dubai,” he says.
Proffitt claims the logistics hub will serve all industries. With its shipping lines, airlines, trucking companies, freight forwarders and manu-facturers, the world central project will employ almost 1 million people when it is fully operational. “Dubai is bracing itself for the huge numbers of extra people Dubai World Central will attract to work in this city within a city,” he says. “A new metro system is being developed and the red line from Logistics City to Sheik Zayed Road [a 30-kilometre journey to the heart of the city] opens on 9 September 2009.”
“The existing free zones in Dubai, Jebel Ali and Port Rashid handled a total of 8.9 million TEUs [20-foot equivalent units] last year, with growth in excess of 20 per cent expected to continue well into the coming year,” says Abdulla al-Falasi, director for marketing and corporate communications at Dubai World Central. “Logistics City will revolutionise logistics in the region as the world’s first truly integrated multi-modal platform in a single customs-bonded free zone environment.”
Some of the other five emirates either already operate or are looking to develop logistics centres and free trade zones. Ras al-Khaimah Free Trade Zone, for example, is one of the most successful logistics operations in the northern emirates and in 2006, the 3,186 international companies based there invested $1.1bn. The operation began with just 17 companies seven years ago.
But Proffitt does not consider its rivals to be in the same league as Logistics City. “Most of the emirates are looking at logistics cities, but not with the same value proposition,” he says.
Competing with Dubai’s logistics mega-hub will not be easy for the rest of the UAE. Some emirates struggle to encourage transport carriers, particularly the airlines, to serve the emirates individually. The solution has been to launch national airlines. In August, Fujairah’s Kang Pacific Airways announced it would begin flying to the Indian sub-continent by the end of 2007.
In late November, RAK Airways, funded by the Ras al-Khaimah government, began flying to Dhaka, Beirut, Colombo and Sofia three times a week. Cargo operations will follow once passenger operations are fully established.
RAK Airways also plans to add more destinations to its schedule, including cities in the GCC countries, India, Nepal and Tanzania by the end of the second quarter next year. The airline also has plans for transcontinental flights over the next two to three years, with its ultimate goal being to cover about 20 destinations within the Gulf, Southeast Asia, the Middle East and East Africa.