It is unlikely that demand for port services will increase sufficiently to absorb the excess capacity
With the decline in maritime trade brought about by the slowdown in the world economy, many ports in the region are already suffering from overcapacity.
Yet governments and developers are continuing with numerous port construction and expansion projects around the Gulf. Not all of them make sense.
With forecasts predicting only a marginally better global economic performance in 2010 than in 2009, it is unlikely that demand for port services will increase sufficiently any time soon to absorb the excess capacity.
The shipping industry is struggling and shipping lines have cut their services on routes between the Far East and Europe by 20 per cent since 2008, causing a drop in Middle East container traffic. In 2009, the industry saw the first ever decline in global container traffic and industry experts say that overcapacity is likely to remain a feature of the industry until 2014.
But Abu Dhabi, in particular, appears undeterred. The UAE capital is already building its largest port as part of the $10bn Khalifa Port & Industrial Zone project, and it has now announced plans to build a second industrial port at Mussafah. Abu Dhabi Ports Company already has nine other port development or expansion projects.
The first phase of Khalifa Port is scheduled to open in 2012 and it will be fully operational by 2030, when it will have a container capacity of 15 million 20-foot equivalent units and 35 million tonnes of general cargo.
With such ambitious plans, the danger of overcapacity at Khalifa Port is a real one, particularly given the presence of Jebel Ali port, just up the coast in Dubai.
Proponents of the scheme will argue that, once the market picks up, Abu Dhabi will find itself in an enviably competitive position, with little congestion and abundant capacity. But it could probably be in just as strong a position with fewer, rather than more, ports.
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