Are Middle Eastern ports struggling to cope with a boom in cargo volume?
Port congestion has been a growing challenge for the shipping industry. Found in all corners of the globe, it is particularly prevalent where the speedy growth of a country's trade has outpaced that of its infrastructure development.
It is no wonder, therefore, that some of the region's ports have been falling victim to the booming trade of the Middle East. Most recently, the well-respected ports of Jebel Ali in Dubai and Jeddah Islamic Port in Saudi Arabia have come under fire over increasing port congestion, leading to a clog-up in their terminals and costly delays in cargo movement.
The root cause of the congestion is the unprecedented growth in volumes in the Middle East region which is causing vessel delays. - Mohammed Al Muallem.
As one of the most profitable hubs in the region, Jebel Ali port has been paying this price for the success of Dubai's thriving shipping industry. "The root cause of the congestion is the unprecedented growth in volumes in the Middle East region, which is causing vessel delays," says Mohammed Al Muallem, senior vice president and managing director of the UAE region for DP World, the port's operator.
"Judging from our half-yearly results in 2008, our business has continued to report growth over the comparable period last year, with this trend of outperforming the industry set to continue throughout the year."
Whilst this growth has been good news for the company, it has had an inevitable knock-on effect in terms of port operations. "As an example, in our flagship terminal at Jebel Ali, 80% of all ships arrive out of their windows and containers are being left on the terminal for much longer than normal," Al Muallem explains. "These then stack up and take time to clear."
Not surprisingly, DP World has leapt to tackle the issue of port congestion head-on by investing heavily in its infrastructure. As part of this, the operator has ordered new equipment, doubling the number of tandem lift cranes and taking the number of RMGs at the terminal up to 38. Further equipment is due to be added to the terminal in coming months.
"We expect this to be fully operational in the first quarter of 2009. The second phase of Container Terminal 2 will deploy 29 tandem lift cranes and 60 RMGs," Al Muallem continues.
"The tandem lift cranes are capable of lifting four 20-foot containers (TEU) or two 40-foot containers simultaneously - a total capacity of 80 tonnes, which is twice that of traditional cranes." With the total capacity of Jebel Ali port predicted to grow to 14-15 million TEUs by the second quarter of 2009, Al Muallem strongly believes that the company will not be experiencing any congestion problems in any of its terminals in the future.
"We are working with our customers, both the shipping lines and local traders, to try to move the boxes off the terminal more quickly, and along with the new equipment we expect congestion problems to be sorted out fairly quickly," he says, optimistically.
Whilst capacity undoubtedly plays an essential role in tackling port congestion, many in the industry would argue that size is by no means the only solution. Delve deeper into the issue, and the real answer surely lies in adopting a better management process, with an emphasis on forecasting to allow ports to be better prepared to cope with fluctuating levels of traffic.
"The best way to avoid port congestion is to anticipate future trends and avoid getting congested in the first place," agrees Keith Nuttall, commercial manager for Sharjah-based terminal operator, Gulftainer Company.
"This is achieved by monitoring port capacity and operational capability compared with the number and size of ships that lines wish to call. Clearly if the volumes of business and the number of ships exceed capacity, congestion and delays will result."
Gulftainer itself, together with Sharjah Port Authority, has worked hard to prepare for extra capacity ahead of future demands. With its reputation as one of the fastest container terminals in the world, the terminal operator is pleased that its Khorfakkan Container Terminal (KCT) has not experienced problems with port congestion, despite its increased throughput.
"Congestion is already a problem at several ports in the Middle East and Red Sea region and is likely to become more so," says Nuttall. "The main causes are much larger container ships, carrying much greater volumes to be handled at regional ports. Port and hinterland infrastructure is therefore under greater pressure and in some cases cannot cope."KCT's own volumes have been much higher in the first half of the year, which the company partly attributes to lines increasingly choosing to route cargo through its gateway to the UAE due to the congestion and slow working conditions affecting other ports in the region.
It is evident that some ports in the region need to rise up to the challenge of congestion and ensure that the most up-to-date facilities and infrastructure are in place to prevent the loss of business in their respective regions.
"Certainly tackling or avoiding congestion very much depends on matching port and inland infrastructure with the volume and ship size demands made on them," points out Nuttall.
The shipping lines and the ports need to be able to forecast volumes for the foreseeable future. - Steen Davidsen.
Indeed, not all countries within the Middle East have experienced the same levels of port congestion. APM Terminals Bahrain, for example, has found itself relatively unscathed by the problem.
"There have been congestion challenges in very few ports around the upper Gulf, but we are certainly not faced with congestion in Bahrain," asserts Steen Davidsen, CEO at the terminal. Like Nuttall, Davidsen agrees that congestion tends to take place when a terminal or port accepts a volume which it may not be geared up to handle, whether due to equipment or staff shortages. "It is all about planning," he emphasises.
"The shipping lines and the ports need to be able to forecast volumes for the foreseeable future. Otherwise time constraints will make the port miss the investment windows needed to get the equipment operational on time for the volume increases."
With its strategic geographical location, Bahrain promises to be the major shipping hub for the northern Gulf, particularly with the opening of its new Khalifa bin Salman port, otherwise known as the Bahrain Gateway.
Due to be completed by the end of 2008 or early 2009, the new port is set to give the country's maritime industry a major boost, with container throughput predicted to more than treble within five years. Davidsen also believes that the new Bahrain gateway will help ease port congestion for the upper Gulf region. "Ports need to have the equipment and their facilities ready to meet the demand of our customers," he says.
"In the case of Bahrain, we have invested in state-of-the-art cranes and the new port will be operated as an RTG terminal equipped with brand new RTGs."
Although congestion is clearly a huge problem for the ports themselves, shipping lines also bear a major cost as a result. "If vessels are at port longer than planned, shipping lines might miss their window at the next port," Davidsen points out.
"They may also have to spend more on additional bunker costs to get to the next point in time. Missing port calls add to the complexity of all this with containers missing their connection."
In this way, port congestion can present a major challenge in ensuring a smooth and delay-free shipping schedule. "In the Middle East, congestion is severe owing to demand outstripping supply," complains Robert Uggla, managing director of Maersk UAE. "Congestion results in reduced service delivery and higher cost - a cost that ultimately has to be passed on to the shippers."
Where port congestion and other infrastructure problems have meant long delays for the shipping lines, they have had to resort to action such as introducing a congestion surcharge to counteract the effects.
"Berthing on arrival is always a problem which disrupts carefully planned schedules," he explains further. "Productivity whilst working in the port also suffers, resulting in longer port stay and hence further delays in the schedule. There are also a possibility of not completing operations and having to roll cargo - leading to higher costs."
For a busy shipping line such as Maersk Line, such a scenario is clearly not good for business. However, it is not just the ports that need to take action to avoid this.
Uggla's own recommendations for involving other interested parties in the solution include improving coordination between customs and port authorities, for example, when it comes to auctioning off abandoned containers in the terminals.
"It is critical that we work closely with the port to constantly address the small issues before they become a major concern which will affect both parties," he states."Shipping lines also need to adhere to berthing windows agreed with the port, sail vessels as per schedule and also partner with the port to optimise EDI and other systems."
In terms of the future, Uggla is hopeful that the situation with port congestion will improve as the Middle Eastern countries place increasing importance on the matter.
"However, congestion is never a general issue but related to a specific port or country. In a few Gulf countries, we still see a lack of proactive approach, which will hamper their future growth," he predicts.
The shipping liThe best way to avoid port congestion is to anticipate future trends and avoid getting congested in the first place. - Keith Nuttall.nes and the ports need to be able to forecast volumes for the foreseeable future. - Steen Davidsen.
"In some countries, other infrastructure projects, such as airports and major real estate projects, have been prioritised over sea ports, despite the latter being critical for a country's growth." Of course, as APM's Davidsen points out, any port may experience a period of a sudden and unexpected spike in volume, leaving the operator with little or no chance to plan for it and to secure additional handling equipment.
If this is the case, then it implies that port congestion should really be a temporary issue, with efficiency reinstated once the operator has had time to introduce the necessary measures, whether it is through more equipment or staff.
In light of the vast improvements in port efficiency being demonstrated across the Middle East over the past 10 years, the region clearly needs to step up its game to cope with the phenomenal success it has been experiencing.
It is evident that the answer to congestion lies as much with how efficiently a port is managed to cope with increases in throughput as it does with physical capacity. Without the increased investment to cope with the predicted continuing rising volumes of cargo coming in and out of the region, the whole of the shipping industry will be affected.
"You are not seen as efficient as you should be, and more man hours have to be spent in order to handle the same amount of revenue-generating volume," points out Davidsen. Nuttall agrees.
"Unless regional ports gear up to cope then the situation will become worse than it is now," he warns. "The clock is already ticking, and in this part of the world as in others, there is not sufficient appreciation of the improvements that need to be made to infrastructure in order to cope effectively."
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