The rapid increase in container throughput – from 15m teu to 24m teu in just four years – has already triggered $38.2bn worth of port expansion projects, and an additional $38.6bn is earmarked for capacity projects in Dubai, Oman, Qatar and Saudi Arabia over the next ten years. However, industry pundits predict that contracting traffic and container throughput across the region is likely to put pay to this. Project delays are anticipated, perhaps, even cancellations.

DP World’s Jebel Ali, the Arabian Gulf’s main transhipment hub, whose T2 opened at the end of February to up overall capacity to 14m teu, has already taken a hit with a 10% drop in container volumes, and the second half of 2009 and onwards is expected to be just as unpredictable, according to the group’s chief executive Mohammed Sharaf.  

The UAE as a whole has reported a 7% decline in throughput volumes, compared with 2008 figures. But unlike the UAE, whose non-oil-based economic development has focused primarily on the strengthening of just two state-owned conglomerates – Dubai World and Dubai Holding – the Kingdom of Saudi Arabia has adopted a more Western, even Keynesian-like approach to its economy which may just prove to be more resilient during the downturn. 

For instance, like a number of hitherto public sectors that have been deregulated to spur competition, innovation, productivity and creativity, the Saudi ports’ business is now entirely managed by a private sector whose wide-reaching ambitions intend to place the Kingdom as a major intermodal transhipment hub – an endeavour that has potential to take a major chunk out of Jebel Ali and other Arabian Gulf ports.

Significant increases in container capacity are planned within the Islamic Port of Jeddah and the King Abdul Aziz Port complexes, while a 10m teu capacity port is under construction as part of the $27bn King Abdullah Economic City (KAEC) project, north of Jeddah, along the Red Sea coast.

These and other initiatives, along with the expansion of the petrochemicals sector, have the potential to shift the Kingdom from being a net importer to a net exporter of boxes. The petrochemicals sector alone is set to annually shift 1m teu of plastics by 2012.

A lot depends on whether the Saudi Land-Bridge concept becomes a reality. This ground-breaking project, to which many have pinned their hopes, proposes to cut a swath across the Kingdom, from west to east, linking Jeddah and the Riyadh dry port with the ports at Jubail and Dammam, from where containers and other cargoes could be feeder fed to Kuwait, Iraq, Northern Iran and Bahrain. If it all goes to plan, it could mean that some vessels will no longer need to navigate the ever-risky Strait of Hormuz to the Gulf terminals – saving significant amounts in fuel costs in the process.  

This is certainly how Naeem Ibrahim Al Naeem, King Abdul Aziz Port’s director general, sees it. He says that plans to increase capacity at the Damman port are heavily linked to the developments taking place elsewhere and that these massive national projects will further boost the importance of the port as a strategic hub. A lot depends on the Land-Bridge rail network and if funding can be sought, then, he admits, there is strong chance that the structure of the marketplace will change allowing companies to significantly reduce shipment transit times.

Another important project expected to start next year is the mining line which will pass through Al-Jouf, Hail and Al-Qassim, terminating in Riyadh but with extensions to Hazm Al-Jalamid to haul phosphate, to Al-Zubayrah to haul bauxite, and to Ras Al-Zour on the Gulf where a major export port is being developed. These and other rail links, such as the Harmain High Speed Rail project, which will link the holy cities, are acting as catalysts for all sorts of port and capacity expansion projects.

For instance, in 2007, International Ports Services (IPS), the division of Hutchison Port Holdings that operates the Dammam Container Terminal (DCT) within King Abdul Aziz Port, completed phase one of a 2m teu capacity expansion plan, but chief executive Jason French says if further financing can be sourced then another 750m of bulk berths and a new 2m teu container terminal will be constructed. This will be funded on a build-operate-transfer basis and, it is hoped, will be completed by 2012. Dredging firms have already been contracted to deepen the port’s basin by 2m to 16m and the approach channel to 16.5 in order to accommodate vessels of up to 14,500 teu.

The increase in both containerised and bulk cargoes at the Jeddah Islamic Port, on Saudi Arabia’s Red Sea coast has also augmented significant infrastructure development and expansion projects, not least of which is the $500m investment in the 400,000m² Red Sea Gateway Terminal (RSGT). To be operational from November, RSGT has the capacity to push the Port of Jeddah’s overall capability to 6.5m teu within just six months; it all depends on the market conditions.

Capacity expansion has also been a feature of the DP World-operated South Terminal, the oldest part of the Jeddah Port. The operator has invested $80m in new equipment to permit the stacking of containers seven-high, as opposed to four, which is currently the case, in order to increase capacity from 1.7m teu to 2.4m teu.

However, while Saudi Arabia’s total teu throughput has reduced by about 30% in recent months, Jeddah Port’s South Terminal has noticed a 20% drop since October 2008 and this is having an impact, according to DP World Jeddah general manager Adnan Abdulllah. “When we planned this expansion the market was growing but now it drops. We will still take delivery of the equipment as we ordered it in 2007, but our projections of 2.4m teu may have to be revised,” he says.

While the impact of the recession on the Middle East cannot be underplayed, many believe that the investment in Saudi port development is a sound one since it is not adding capacity that is not there.

RSGT chief executive Aamer A Alireza believes that having capacity at Jeddah along with the capability to handle second generation vessels will always make sense. Shipowners are now scrapping their smaller vessels in favour of larger tonnage but where are these ships going to go? Only a handful of ports around the world can handle them, he says.