New hub developments in the region have led to increased competition for UAE portsMIDDLE EAST container terminals must seek long-term contracts with major shipping lines and establish their own national carriers, if they are to survive the demise of the trans-shipment business in the region, Uniglory Marine president David Young has warned.
He voiced concern at the growing competition for trans-shipment business around the Arabian Peninsula, sparked by the recent emergence of two new major terminals - Mina Raysut at the southern Omani city of Salalah and Aden Container Terminal in Yemen.
"The massive new hub developments in the region could run well ahead of demand growth in the next few years," Young cautioned.
He said Red Sea ports, in particular, would soon suffer from the development of terminals seeking to attract the same trans-shipment business, and forecast a fall in their capacity utilisation from 69 per cent in 1998 to just 51 per cent in 2001.
He also predicted that it would only be a matter of time before the impact was felt by the existing market leaders in the UAE.
"The growth of business is not so strong, or as much, to match fully the capacity the ports have installed," he said. "It needs to be seen if UAE and neighbouring ports would continue to achieve the same rate of growth which they have enjoyed in the last few years," Young said.
His words reflected the loss of more than 600,000 TEUs of trans-shipment business suffered by the Dubai Ports Authority (DPA) after the now- merged Maersk and SeaLand shipping lines shifted to Mina Raysut, in which they hold a combined 30 per cent stake.
Similarly, the UAE's east coast Port of Fujairah, which lost significant volumes between 1996 and 1998, is likely to suffer further with the departure of American Presidential Lines to Aden in 1999.
Young urged the UAE ports to follow Singapore's lead and enter into long-term contracts with their major line clients in order to protect their market share.
He also pointed to the PSA Corporation's strategy of developing an international terminal network to attract the main lines to use its home base as their operational headquarters, rather than just as a trans-shipment hub.
This policy has already found currency with the DPA, which has over the last year won operational and management leases from Jeddah Islamic Port's southern terminal and a container terminal currently under construction at Beirut port.
It has also signed a preliminary agreement for the southern Iraqi port of Basra, to come into effect when UN sanctions against Baghdad are lifted.
Young further warned that the lack of national container carriers in the Gulf could result in loss of business to private container port developments in the Indian subcontinent.
United Arab Shipping Corporation, the Gulf's sole container line, is jointly owned by Bahrain, Iraq, Kuwait, Oman, Qatar and the UAE. The region's other line, National Shipping Company of Saudi Arabia, is primarily a bulk cargo carrier.
However, Young did voice support for the on-going expansion of capacity at UAE ports.
He said container volumes would rise by between 90 per cent to 125 per cent over the next decade, against a "most positive demand scenario" increase in capacity from 190 million TEUs to 491 million TEUs.
He said it was crucial that UAE ports expand if they were to retain their three per cent share and boost total business from 4.46 million TEUs in 1998 to 15 million TEUs in 2010.
"They have to create more berths, additional equipment and upgrade their infrastructure to handle the increased volume," he said.