Middle East ports, shippers face long recovery

Middle East container port traffic will decline by 7 per cent this year and grow by just 2.5 per cent next year, according to a new forecast. Drewry Shipping Consultants, based in London, said in its quarterly Container Forecaster report that last year's container levels would not return until 2011 as the industry faced a prolonged downturn caused by the fall in global trade.

The news could mean continued challenges for the Gulf's largest maritime firms, including the container company United Arab Shipping Company (UASC) and the port operators DP World and Gulftainer. "The bad news for the container shippers is that there is no good news," Neil Dekker, the editor of Container Forecaster, said in the report. "Our analysis shows that the container sector is looking at a US$20 billion (Dh73.46bn) black hole. So we can expect more casualties."

The drought in seaborne trade could also cause profound changes in the industry, such as hampering investments in global ports, and mergers and bankruptcies among shippers, Drewry said. "All container operators are having a tough time," said Jorn Hinge, the chief executive of UASC. Mr Hinge said the container trade was facing pressure from new ships, which were ordered in the boom years, being delivered into the global fleet at a time of falling demand due to dampened consumer confidence.

"Capacity is increasing while cargo is decreasing, for the time being," he said. Drewry's forecast paints a bleaker picture in the Middle East, with a 10.3 per cent decline expected this year, followed by a 1 per cent gain next year. It said cargo ships would carry 27 million fewer containers by the year's end than they did in 2007, with several major trade routes seeing the gains of the past three years erased by the downturn.

"This in itself is also bad news for the port investment sector," the consultancy said. Gulftainer, the port operator based in Sharjah, was holding off on further international expansion and would wait until the economy showed signs of recovery, said Keith Nuttall, the commercial manager. "We've always felt problems do not disappear immediately and that is definitely true," said Mr Nuttall, whose company manages ports in Sharjah, is expanding into ports in the Al Gharbia region of Abu Dhabi, and has joint ventures in Pakistan, Turkey and the Comoros Islands.

DP World has also put on hold billions of dollars of port projects in Dubai and around the world as it awaits a return of container traffic demand. "Taking into account our existing pipeline of committed capacity, the company has decided to defer much of our planned new capacity until such time as higher utilisation rates return," the company said in March. A company spokesman yesterday declined to comment.

Fred Doll, a shipping consultant based in Dubai, said port operators should have long-term investment plans that include the prospect of cyclical downturns. "People should not be building ports on yesterday's news and what tomorrow's news should be. It's a multiyear issue," Mr Doll said. For shippers, the downturn would present opportunities for smaller carriers, while larger companies would have to resign themselves to losing market share instead of lowering freight rates to unsustainable levels, Drewry said.

igale@thenational.ae