Sharjah expands logistics operations

02 December 2009

The emirate is investing in port infrastructure and building a series of inland ‘logistics cities’ to help it achieve its aim of becoming the distribution hub for the northern emirates

Already a hub for ship-to-ship transfers of containers, the northern emirate of Sharjah is upgrading its land-side operations to support its port activities with ‘logistics cities’ – bases providing storage and transport facilities and, in later phases, sophisticated supply chain services.

Local port management company Gulftainer operates container terminals on behalf of Sharjah Ports Authority at Khorfakkan Container Terminal (KCT) on the east coast and Sharjah Container Terminal (SCT) at Mina Khalid on the west coast. It also manages container movements for Sharjah’s Hamriyah Free Trade Zone.

Key fact

  • UAE company Gulftainer plans to invest $217m in logistics cities in Sharjah over the next two years

One year ago, Gulftainer grouped together its logistics activities into one business unit – branded Momentum Logistics – made up of freight and transport divisions. Momentum offers Gulftainer clients an integrated logistics service that includes warehousing, freight forwarding, container repair and maintenance and transportation.

Gulftainer plans to invest AED800m ($217.8m) in building logistics cities over the next two years. It is currently building two on the outskirts of urban Sharjah. One is under construction at Sharjah Inland Container Depot, 120km inland from Khorfakkan. The depot opened in 2004 and is now expanding to serve as a hub for Momentum Logistics, which bases its transport division’s fleet of 122 trucks and 240 trailers at the depot.

Capacity increase

Gulftainer is also expanding the container depot’s storage capacity. Phase two of its expansion was completed this year, adding 12, 800-square-metre warehouses and bringing the total number of bonded warehouses to 23. Under phase three, a further 12, 800-square-metre warehouses will open in 2010.

Despite the economic downturn, which has forced logistics companies worldwide to adjust to lower volumes, Gulftainer says it has found tenants for up to 80 per cent of the new storage space at the depot.

The company plans to build its second logistics city on a 700,000-square-metre site at Al-Sajaa, 110km inland from Khorfakkan. The ground has been levelled and work has started on building the perimeter roads. Gulftainer will be the landlord and manage some of the warehouses planned for the site.

“Gulftainer will own and manage the logistics city at Al-Sajaa,” says Keith Nuttall, the company’s group commercial manager. “We are already talking to several potential customers who want to set up their own facilities, and to others who are interested in using our warehouses and other developments.”

The customer base at the Sharjah depot ranges from electronics firms to shipping agencies and other service providers. It does not include manufacturing or assembly, as such activities are concentrated at Sharjah’s Hamriyah Free Zone.

Nuttall says there is scope for more sophisticated distribution and service operations at Al-Sajaa to meet future growth in local demand for comprehensive logistics support.

With Jebel Ali in Dubai the established hub for logistics and distribution in the UAE, the logistics cities at Sharjah and Al-Sajaa will serve the needs of Sharjah and the neighbouring northern emirates of Ajman, Umm al-Quwain and Ras al-Khaimah. Gulftainer does not see them as rivals to Jebel Ali.

“Our current and future logistics hubs are not necessarily in direct competition with other regional centres,” says Nuttall. “The UAE is a sizeable place and our facilities can serve customers based in the north and east of Dubai, and in the northern emirates. Customers will go where price, logistics convenience and quality are to be found.”

Consolidating its logistics activities has already borne fruit for Gulftainer. In October, it announced that Momentum had landed a contract to provide logistics services to United Arab Shipping Services Company (UASC), the region’s largest container carrier. Momentum Logistics will provide dedicated warehouse space at the inland container depot for UASC, and other transport and logistics services.

Momentum is looking at the possibility of expanding its activities beyond Sharjah. One option is to set up marketing offices in Abu Dhabi and Dubai, as well as key cities around the GCC.

“We could not afford to delay expansion. The industry is already bringing in ships more than 300 metres long”

Keith Nuttall, commercial manager, Gulftainer

In the longer term, the company may also set up warehouses and local logistics services in key regional markets.

The company is waiting to see what developments the proposed UAE rail network will bring before drawing up rail transport plans of its own. Consultants working for the federal government have visited Sharjah to look at the options for rail, but details of the project are unclear.

Neither the federal government nor the government of Sharjah have decided where the rail terminus should be built.

In the meantime, Gulftainer has invested AED600m in upgrading its ocean terminals in Sharjah. Work is under way to add a fourth berth and install an additional 30,000 square metres of storage and stacking space at Sharjah Container Terminal. The terminal is also being dredged from its current depth of 11.5 metres to 12.5 metres to handle larger ships. The expansion is due to finish in November 2010.

Built in 1976, the terminal handles a significant proportion of Sharjah’s domestic container traffic, serving the emirate’s industrial area, which is home to 45 per cent of the UAE’s non-oil manufacturing activity.

Two of Sharjah’s most important industries are food processing and servicing of cars, trucks and machinery. Nuttall says that imports of foodstuffs and car parts and spares through the terminal have held up well this year – the latter perhaps in reaction to the downturn in sales and shipments of new cars. 

Phased expansion

On the east coast, expansion at Khorfakkan Container Terminal is in two phases and is due to be completed in January. Phase one added two new gantry cranes, while phase two will add a 400-metre-long stretch of berth and four ‘super post-Panamax’ gantry cranes – the largest available container-handling cranes. Two of these arrived in October and the remaining two are due to be delivered in mid December.

Khorfakkan is a hub for ship-to-ship transfers of containers onto smaller feeder vessels offering onward connections to and from ports in the Arabian peninsula, Iraq, Iran, India, Pakistan, East Africa and Asia.

On completion, the terminal will have a new, 800-metre breakwater and 20 cranes loading and unloading containers over 1,900 metres of quay. The port’s 16.5-metre draft will make it possible for it to handle the largest modern container ships, each carrying up to 13,000 20-foot equivalent units (TEUs).

While other ports, such as Jebel Ali and Salalah in Oman, are rethinking their deadlines for expansion, Gulftainer has maintained its growth plans for Khorfakkan, arguing that, with shipping lines taking delivery of larger, new-generation container vessels, it is critical that it expands to handle larger tonnage.

“We could not afford to delay expansion at Khorfakkan Container Terminal for a few more years,” says Nuttall. “The industry is already bringing in ships that are more than 300 metres long. We had to address issues such the quay length and number of super post-Panamax cranes we would need to be able to deal with the requirements of existing customers, as well as to accommodate the future prospects.”

The largest of the new generation of vessels are too long to fit traditional 300-metre container berths. Khorfakkan customers deploying the larger tonnage include UASC, whose current fleet of 7,000-TEU vessels will be joined by an order for 13,000-TEU vessels, which come into service next year.

UASC’s partner shipping lines are already deploying large-tonnage vessels through Khorfakkan. Marseilles-headquartered shipping line CMA-CGM has vessels in service of 8,500-11,000 TEUs, while Shanghai-based operator China Shipping is deploying vessels of 8,500 TEUs.

The global economic crisis has led shipping lines around the world to remove chartered tonnage from service, scrap older vessels and, in some cases, lay up other surplus tonnage at anchor. But regional markets such as Saudi Arabia, Qatar and Abu Dhabi have remained relatively buoyant, and over the past year there has been an influx of larger vessels into the Middle East.

“Larger vessels have come on stream in the past two or three years and we had to expand to cope with this,” says Nuttall. “This was the right decision, both for the long term and for this year. Bigger ships are serving the surrounding region, which has been less affected by the recession than Dubai.”

Despite a downturn in global trans-shipment, Khorfakkan’s trans-shipment volumes have proven resilient. In 2008, Gulftainer’s Sharjah ports handled just over 2.5 million TEUs between them, representing growth of 15 per cent compared with 2007. The company does not break the figures down by terminal or ratio of trans-shipment to local cargo, although trans-shipment, says Nuttall, “accounts for more than two-thirds of KCT’s throughput”.

As MEED went to press, with barely four weeks of 2009 remaining, Gulftainer expected 2009 volumes to remain at the 2008 level.

“We expect to see some growth in this part of the world in 2010, with the situation improving slowly over the course of the year,” says Nuttall. “It may take a little longer before we see the Dubai economy recover, but the shipping market has generally proved to be resilient.”

CAPTION - Upgrade: Work is under way to install additional storage capacity at Sharjah Container Terminal

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