Trends: Riyadh transforms port sector

21 December 2007
The kingdom’s sea ports will receive a $50bn boost as it bids to reposition itself as a trans-shipment hub.

Saudi Arabia’s commercial ports increased the amount of cargo handled by 4.6 per cent to 67.3 million tonnes in the first half of 2007. However, they remain under-developed in proportion to the size of the economy. But that is changing as record oil prices generate revenues for state investment in infrastructure.

The kingdom is well located as a trans-shipment hub for container traffic destined for the markets of the Middle East, Red Sea and Indian Ocean. In the past, the kingdom’s ports have been dogged by congestion, delays at customs and bureaucracy.

However, there are signs of positive change. Saudi Arabia will invest up to $50bn in transport over the period 2005-15, according to diplomatic sources.

Moves are afoot to upgrade ports along both Saudi coastlines, while a raft of 10-year port management concessions ended this year, with Saudi Seaports Authority (Seapa) poised to announce the winning bids.

Seapa says the growth in cargo in the first half of the year was driven by a surge in imports of more than 10 per cent. Container traffic through Saudi ports increased by 6.17 per cent over the same period, to 1.976 million 20-foot equivalent units (TEUs).

Long-term prospects

Jeddah Islamic Port (JIP) is the country’s main port, with the most sophisticated container terminal. The south container terminal is operated by a joint venture of Emirati ports giant DP World and local company Siyanco. In 2006, Siyanco DPA handled 2.9 million TEUs.

Rashid Zaman, terminal operations manager at Siyanco DPA, says container operations at Jeddah will have grown by up to 10 per cent by the end of 2007, with growth in trans-shipment cargo of up to 13 per cent. The company is upgrading its equipment and carrying out studies of long-term container prospects at the port.

The market for handling containerised cargo is also growing. In total, Saudi ports handled 3.8 million TEUs in 2006. With a capacity of 3.5 million TEUs, JIP was responsible for the majority of this capacity. It plans to increase its container capacity to 6 million TEUs by mid-2009. Seapa signed a build-operate-transfer agreement with Saudi Commercial & Export Development Company (Tusdeer) in May 2006 to build a third container terminal, a project valued at SR1.6bn ($427m).

Tusdeer will build and manage the container terminal on a 400,000-square metre site at the re-export zone north of JIP. The terminal has initial capacity of 1.5 million TEUs a year and is able to handle the new generation of 12,000-TEU container ships. The site will include a logistics support centre.

To the north of Jeddah, King Fahd Industrial Port (KFIP) at Yanbu on the Red Sea increased cargo by 4.8 per cent to 15 million tonnes in the first half of 2007. However, the amount of cargo handled at Yanbu Commercial Port (YCP) dropped by 5 per cent to 688,473 tonnes in the same period.

Yanbu’s operators are optimistic about the future of the commercial port as there are plans to build the Red Sea’s largest shipbuilding yard and dry docks at YCP. Yanbu Floating Dock Company for Shipbuilding & Maintenance will open in 2008 on a 300,000 sq m site.

Seapa also plans to expand commercial shipping through Jizan, the smallest Saudi port, where, at just 175,682 tonnes of cargo, throughput fell by 23 per cent in the first half of 2007. Seapa has now cut port charges at Jizan and offered a five-year incentives and concession package to shipping lines.

There are also plans to build a container terminal at Dhiba on the northern Red Sea coast. Seapa is reviewing the project studies and aims to offer it on a build-operate-transfer basis. The port handled 178,091 tonnes of cargo in the first half of 2007, representing an increase of 13 per cent on the first half of the previous year.

To the east on the Gulf coast, Dammam’s King Abdulaziz Port (KAP) is one of Saudi Arabia’s fastest-growing ports. In the first half of 2007, it increased its container traffic to 505,615 TEUs from 450,071 TEUs in the first half of 2006. Now, investment will double its container capacity to 2 million TEUs a year.

Boosting capacity

International Ports Services (IPS), a joint venture of Hong Kong port management giant Hutchison Port Holdings and Riyadh-based Maritime Company for Navigation, manages the container terminal at KAP. It is close to completing a SR300m investment programme at the port. The upgrade will increase the port’s container capacity from 800,000 to 2 million TEUs.

KAP introduced SaudiEDI, a national Saudi customs portal, this year, joining Jeddah, the first port to implement the system, in late 2005. Electronic Data Interchange (EDI) speeds up cargo flows via the electronic exchange of cargo documents between agents, customs brokers, the customs department, Seapa and IPS. It is also being extended to cover exports. Rolling EDI out across all the kingdom’s ports is a priority for Seapa, which appointed Khaled Bubshait as president in May.

Much of the cargo entering regional ports is transferred from Jeddah. As growth at the port increases, all ports are set to benefit. One of the most ambitious port projects in the world is the megaport at King Abdullah Economic City (KAEC) north of Jeddah, where the Saudi Arabia General Investment Authority (Sagia) is overseeing plans to build a 20 million-TEU container and general cargo port, phase one of which will start operations in 2009.

Sagia says Dubai’s DP World and PSA of Singapore have been shortlisted to manage container operations at the Millennium Seaport, and will work with KAIC developer Emaar, The Economic City. The site covers 2.6 million sq m.

“About 30 million TEUs is shipped through the Red Sea every year,” says Abdulaziz al-Babutain, director general for transportation at Sagia.

“Saudi Arabia could potentially attract 12 million TEUs of that business, but its share is just 3 million TEUs because Jeddah has reached capacity.

“Plans to build a railway carrying cargo across Saudi Arabia mean that we need to integrate our port, air and rail business. We are looking at container growth of at least 20 per cent a year for the next five years. When the Saudi Landbridge opens, we expect huge growth in our Red Sea business, at a time when Saudi Arabia is expanding its own downstream industries.”

The proposed Saudi Landbridge rail project will help Jeddah become a real contender for international trans-shipment cargo for Gulf states, taking traffic from Dubai’s Jebel Ali port in the process.

Shipping lines serving destinations as far afield as Kuwait, Qatar and the UAE could load and unload at Jeddah, transporting boxes across the kingdom by rail to and from the Gulf coast. Sailing through the Strait of Hormuz to Dubai adds up to five days to the major east-west global shipping schedules. Saudi Railway Organisation’s plans include rail links between Yanbu and Jeddah, passenger rail services up the Red Sea coast to Mecca and Medina, bulk railfreight shipments between Riyadh and the mineral-rich northern region, and railfreight links between Dammam and Jubail on the Gulf coast.

Falling behind

Several 10-year, non-container port management contracts came up for renewal this year, including the contracts for the general cargo, bulk and roll-on, roll-off contracts offered as enlarged concessions at Jeddah’s north and south terminals, at King Abdulaziz Port in Dammam, and for Yanbu Industrial Port, Jubail and Jizan.

Industry sources say decisions on tenders have fallen behind schedule, although MEED understands that Globe Marine has been awarded the Jubail bulk and general cargo concession, and Al-Bakri the concession for Yanbu.

The deadline for bids for both Jeddah concessions passed in November, but the winning bidder has not yet been announced. All bidders are expected to commit to significant investment in upgrading the ports’ ageing equipment and infrastructure.

“The authorities want bidders to show experience and financial resources,” says Saleh al-Fadhli, general manager of AJWA Port Services, whose company is bidding to manage Jeddah’s south and north terminals, and the bulk operations at Dammam.

“In Jeddah, [the future prospects] depend on what happens with the megaport at King Abdullah Industrial City, but we see this more as an opportunity than as a threat, particularly when the Saudi Landbridge project comes on stream,” he says.

The prospects for Saudi port growth are immense. Saudi ports benefit directly from population growth, continued high oil prices and the construction of new retail, office and leisure projects. All these factors are driving increased demand for cargo, from heavy machinery to consumer goods and cars. Port capacity now needs to keep pace with this growth, and the signs are that it will.

TABLE: Saudi imports

ConstructionFood & foodstuffsVehiclesConsumer goodsOther cargo discharged

TABLE: Containers (TEU)


Other ports negligible or no container cargo.

Source: Saudi Seaports Authority

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