High risk, high reward?

26 Mar 2016

North Africa offers huge port development potential despite political tensions. Felicity Landon reports.

Difficult, uncertain, complicated – commentators use many of the words you might expect when asked about the ports sector in North Africa. But at the same time, there’s intense interest in the region, and no doubt that some major port investment projects are much needed.

From Morocco’s ambitious ports vision in the west to Egypt’s continued investment in the Suez Canal, there are substantial investment plans to be found, including brand new greenfield port facilities and some significant expansion projects. It seems that Tanger-Med and several other Mediterranean transhipment hubs could be facing a lot more competition on the horizon.

“North Africa is a very dynamic situation at the moment,” says Gavin Griffin, Inchcape Shipping Services’ executive vice president for Europe and North Africa. “In Algeria, there is a complicated economy based on oil and gas revenues, so there is a spike in unemployment and obviously a difficult situation. They are not importing the volumes of cars they were three years ago, when the numbers were phenomenal. A lot of things have slowed down but as far as the ports are concerned, perhaps that is not necessarily a bad thing, as it is allowing them to do infrastructure improvements.”

To the west, he describes Morocco as ‘continuing to motor ahead’. “The cruise sector is growing and vehicle importation continues to be good. Tanger-Med continues to do well. Morocco is not so dependent on oil & gas revenue, so it’s a different model.”

Changing focus

Little over three years ago, when ISS opened its North Africa operations desk, the focus was on two countries in particular: Algeria and Libya. Both, at that point, were key energy suppliers to Europe and both had seen consumer wealth increase by double digit figures for several years, with consumer spending booming in all sectors.

Today Mr Griffin says of Libya: “Everyone is watching from the outside. It’s a let’s see what happens approach, see how things evolve.” 

Port Overview Africa’s second half 2015 report simply states: “Unfortunately, the situation in Libya has deteriorated further in the last eight months, with a number of ports being attacked by various militia forces and switching hands between various military factions. Portoverview.com has ceased to report on ports in the region for a couple of years now, as it focuses on the ability for shippers and forwarders to serve customers in non-conflict zones.”

Tanger-Med remains the top performing African port. Last year volumes grew by 20.4% to exceed 3m teu for the first time. “The port continued to make the most of its ideal location for carriers on the east-west trades that can call without deviating far from their traditional routes,” says Dean Davison, principal consultant at Ocean Shipping Consultants.

The two well-established terminals are operated by APMT and Eurogate and there’s more to come. The Tanger-Med 2 expansion provides for two more terminals, TC3 and TC4, total annual additional capacity 5.5m teu. Work started in 2009 but stalled because of the recession.

Now, says Mr Davison, construction is proceeding on TC4 in advance of TC3; the latter was to have been a dedicated facility for Maersk with 1.6 km of quay, but APMT pulled out when global trade volumes fell and it will now be built subject to demand. The 30-year concession for T4 was awarded to a consortium led by PSA; this terminal will have 1.2 km of quay and 2m teu capacity.

Beyond transhipment

At the same time, it is notable that Tanger-Med is looking beyond its transhipment business and pushing to increase its domestic volumes. A rail yard was built behind the existing terminals, with a direct link to the national Moroccan network. “Currently there is a direct train running to/from Casablanca offering 66 teu per train,” says Mr Davison. “Despite non-transhipment traffic reaching just 10% of the total in 2014, this acknowledges the potential of the port to seek more import-export container traffic.”

This may be needed; he believes that deeper berths in West Africa could have an impact on Tanger-Med and other transhipment hubs as far afield as Valencia and Barcelona. “The markets these hubs are serving are often West Africa,” he says. “If they are going to develop facilities down the west coast more and have direct call facilities, what does that mean for the hub ports that have served them?”

North Africa, he says, has huge potential. “Perhaps it has slipped under the radar because of all the attention on West Africa. Yes, this is a part of the world where there has been political instability, but there is still a large population to be served, demand will grow for import/export, and all this is being done through lower quality facilities at the moment.

“If the cargo demand is there, there are companies willing to invest and find a way to make it work. There are fewer opportunities for investment in more developed parts of the world, and higher risks can mean higher rewards.”

Investments afoot

Earlier this year, China signed an MoU with Algeria to construct the new Cherchell port, with Shanghai International Port Group to be given priority to operate the facility. Located west of Algiers, Cherchell is expected to cost $3.3bn of investment over the seven-year construction period. It will become the country’s largest port, with 23 berths and the capacity to handle 6.5m teu and 25.7m tonnes of bulks, and has been described as a major transhipment harbour to serve North Africa and Europe.

By the end of this year, plans for a $500 million expansion at Oran container terminal should be finalised. Meanwhile, DP World is committed to expanding its facilities in Algiers and Djen Djen.

In Egypt, Singapore’s PSA has signed an MoU to help develop, manage and operate the country’s ports – the main focus being Alexandria and Damietta.

Further investment is going ahead in the Suez Canal, too. A new five-mile, 16 metre draft channel to Port Said, costing $36m, is due to be completed by the end of this year. This channel will give improved access to the Suez Canal Container Terminal (SCCT), where a phase 2 expansion will increase capacity 5.4m teu.



MOROCCO A HOTBED OF PORT ACTIVITY

The European Bank for Reconstruction and Development (EBRD) will fund the Nador West Med port development in eastern Morocco, investing €200m to finance the basic infrastructur, including the construction of a breakwater, quays, dredging and related works, for a major new port and free zone. The development is in the Bay of Betoya, which is within 250 miles of the Strait of Gibraltar.

Nador West is one of at least five new ports under construction as part of Morocco’s National Port Strategy 2030.

“Morocco has had a long-term strategy of developing ports since 2013; for both transhipment and domestic traffic,” says Jalal Benhayoun, general manager of the port community system and Moroccan national single window, Portnet. “The vision is not only to build ports but to develop specialist port clusters for energy, industry and logistics.”

Portnet, which became operational in 2011, is a key part of this. As a national single window, it has been carefully developed to link not only to players in the maritime supply chain but also to extend to include importers/exporters, banks and many other stakeholders. It has more than 19,000 users. “Our objective as a national single window is to integrate the whole foreign trade supply chain from the buyer to the seller,” says Mr Benhayoun.

Morocco’s stability and rapidly rising standards of living are hugely important in its ongoing expansion, he adds. “The big investments in Morocco are due to its stability, long-term vision and status as the gateway to Africa.”

The 2030 vision identifies efficient ports as catalysts for the competitiveness of the national economy and drivers of regional territorial development; the strategy is that they will position Morocco as a strong logistics platform in the Mediterranean, capture a healthy market share of international seaborne trade and cruise traffic, and as a ports system be integrated within the regional transportation network.

Importantly, the port developments are spread evenly along Morocco’s 3,600 km Atlantic and Mediterranean coastline. As well as Nador West, the major new ports are at Kenitra, Safi, Jorf Lasfar (a new LNG port which will also serve the hydrocarbon import/export needs of a prospective new refinery) and Dakhla, while major extensions are planned at Mohammedia, Casablanca, the existing port of Jorf Lasfar, Agadir and Tarfaya.

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