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Fri 1 Jun 2007 12:00 AM

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KSA booming

Saudi Arabia's sea freight sector has enjoyed a period of unmatched success in recent years. With liquidity remaining high, investment in infrastructure projects looks set to keep the ports and freight operators working at full capacity.

The previous 18 months has been a record-breaking period of success across all key freight sectors for the Saudi Seaports Authority. Huge infrastructure projects ranging from power plant production to heavy industry development, coupled with a consumer goods boom has produced an unprecedented demand on the principal container and industrial ports. The facilities have produced throughput efficiency figures to rival any in the world, and with the enhancement of the Kingdom's major port facilities already underway, KSA ports will be the ones to watch in the Gulf for years to come.

The combined tonnage handled in all Saudi Ports during the first quarter of 2007 reached around 32.5 million tonnes, a 6% increase over the same period of the previous year, and a record quarterly performance. Imports alone this year have jumped by an impressive 10.55%.

KSA has shown itself to be a leader in attracting investors to become part of their continued economic growth. - Jamad Kamal

Jubail Commercial Port, which lies on Arabian Gulf in the Eastern Province of the KSA made the biggest increase with 44%. Jubail has become a vital economic asset in the Kingdom because of its role in the export and import policy in eastern region. Located in close proximity to industrial production centres, the port has alleviated the burden on King Abdulaziz Port in Dammam, 80 kilometres to its north, for both import and export shipments.

The stellar growth of activity at Jubail has generated job creation in the eastern region, and the governing Seaports Authority is heavily promoting opportunities for Saudi Nationals.

The terminal benefits from a fleet of small and specialised craft enabling it to carry out manoeuvres for the latest generation of container vessels. In addition, a 200 tonnes capacity floating crane has been deployed to provide extra capacity.

King Abdulaziz Port in Dammam ranks second among the commercial ports in volume, with 5.1 million tonnes showing an impressive 16.53% annual growth rate. The operator of the container terminal in King Abdulaziz Port in Dammam, International Ports Services (IPS), has started a huge development project to improve and expand the scale of operations available at the port.

Enhancement projects are scheduled for completion by August 2007 and are expected to increase the terminal's capacity from 800,000 TEU to 2 million TEU. The scope of the project is far reaching, and includes the dredging of the basin and approach channel to 16 metres to accommodate the largest of modern container ships. Provision of an additional six super post panamax cranes, to handle 65 tonnes, with outreach of 55 metres, and 37.5 metres height of lift under the spreaders, and extensive investment in ground handling equipment and design to increase the terminal stack capacity to 1,500,000 TEUs are also planned. The project will add 300 refer points to enhance the cold chain container handling capacity.

The strong start to 2007 has been delivered on the back of a record breaking 2006. The total amount of cargo handled in all Saudi Ports last year topped 133 million tonnes. The principal seaport in KSA remains Jeddah Port, which led the commercial ports in volume, with 40.3 million tonnes of cargo, an increase of 2% from last year. A notable achievement of Jeddah is that the port complex was ranked at 52nd position of the world's biggest ports in 2002, and by the end of 2006 had risen to 27th in the league table.

Containerised cargo shipments increased in all Saudi Ports, with Jeddah port, handling 2.9 million TEU alone. Dammam Port reached the one million TEU mark for the first time in 2006.

Industry experts see the fortunes of the Saudi Arabian freight sector continuing skywards. "Saudi Arabia, and the Gulf region in general, is experiencing a unique situation that may be unparalleled in the history of the planet. No country in the world has had so much liquidity," explains Jawad Kamel, president and CEO of Advance International. "In Saudi Arabia, no industry sector is really dominating, but there is huge investment there."

Having seen the commercial boom transform the fortunes of smaller states in the Gulf, Saudi Arabia is currently embarking on a range of vast commercial development projects. The Saudi Arabian General Investment Authority (SAGIA), launched three integrated economic cities in 2006, one each in Hail, Madinah and Jazan. Plans are also in the pipeline to establish two more economic cities, one in Tabuk and one in the Kingdom's Eastern Region this year.

Added to this commercial development, the Kingdom is rapidly expanding the heavy industry sectors, with the vast majority of equipment being shipped from outside the Gulf region. The development of additional power generation systems is taking place on an enormous scale, but also the continuing surge in oil and gas exploration and production projects, and resulting movement of large equipment to overseas locations all requires the skills of the sea freight experts.

"With the price of crude oil looking set to remain high, producing countries are continuing to invest in new facilities for the production and processing of oil and gas. They are also using the revenues to make major investments in their infrastructure," explains Kamal.

Oil-driven projects are booming in KSA as the petro-dollars fly in. The result of this windfall is the creation of an array projects demanding the movement of industrial equipment and production plants into the Kingdom, almost exclusively handled by the sea freight sector.

"Saudi Arabia has shown itself to be one of the leaders in this area: attracting investors to become part of the country's continued economic growth."

At present Advance International is undertaking a major project freight management contract on behalf of Mitsubishi Heavy Industries (MHI) as part of the Saudi Methanol Company's new AR-Razi V plant being constructed by MHI at Al Jubail, Saudi Arabia.

Advance International is the principal freight forwarder contracted by MHI to ship thousands of items of equipment being used to construct the complex from all over the world. The plant comes online in 2008, and will be the world's largest single production site for methanol with millions of tonnes of annual production capacity.

The movement of so much heavy lift cargo, combined with the booming freight trade in KSA has meant that the ports in the Kingdom have had to remain ahead of the game, something Kamal suggests the authorities have been successful with. "The Port infrastructure in Saudi Arabia is very good and certainly on par with the best international standards."

All the indicators suggest a continued period of success beckons for the Saudi Seaports Authority, and the sea freight industry across KSA. With global operators in the freight forwarding sector increasingly moving into capitalise on the boom, it will be interesting to see which firms take full advatage of the massive opportunities offered by success in Saudi Arabia.

National Shipping Company of Saudi Arabia

National Shipping Company of Saudi Arabia offers liner services by operating four fully owned ro-ro, conventional and container vessels across crucial shipping routes. "NSCSA is the shipping company of Saudi Arabia in the true sense of the term. There are small players, but they are nowhere near NSCSA, which is decidedly the market leader," says Humod Al-Ajlan, NSCSA president.

Back in 2002 NSCSA created its own Global Freight Forwarding and NVOCC division. Through its Global Network, this division offers shipping, road transportation, documentation and warehousing/distribution services, and supply chain management services which are also offered to key customers.

NSCSA operates its own on-land facilities, incorporating a container storage and repair yard covering 120,000m², at the Jeddah Islamic Port. A specialised workshop in the yard takes up repair jobs and refurbishes containers.

Last year NSCSA confirmed that it has drawn up a five-year development strategy calling for massive expansion plans. "The expansion plan calls for aggressive growth in our main business sectors, including the transportation of crude oil, petrochemicals and general cargo," says Al-Ajlan.

NSCSA has ordered six VLCCs (very large crude carriers) to be delivered between 2008 and 2009 in addition to the 2 VLCCs, "We have also ordered 10 chemical carriers, five of which we have already received and the remaining five will be due for delivery between now and 2008 for National Chemical Carrier, a subsidiary of NSCSA," says Al-Ajlan.

As part of the fleet augmentation programme, orders have also been placed for six more chemical carriers for NCC, which will be delivered between 2009 and 2010. "This will make NSCSA well-entrenched as a leading shipping company not only at the regional level but also at the international level as well," he says.

Kuehne + Nagel Q&A

Sea Freight Middle East

meets Werner Kleymann, head of operations in the Middle East region for global logistics transportation and supply chain leaders, Kuehne + Nagel.

How big are the Kuehne + Nagel operations in Saudi?

Kuehne + Nagel entered the Saudi Arabian market in 1977 via a joint venture (50/50) with E.A. Juffali & Bros. This joint venture, Orient Transport Company, operates three offices located in the key logistics centres of Jeddah (HQ), Riyadh and Dammam and currently employs around 80 staff.

How significant is the Saudi market for Kuehne + Nagel?

Saudi Arabia is of the major countries for us in the Middle Eastern region. A lot of efforts will be made in order to increase our market share in the future.

Is business in Saudi Arabia growing?

Yes, absolutely. As far as sea freight is concerned we are experiencing particularly strong growth in the import business from the Far East.

Which sector of the business has seen the biggest growth in Saudi Arabia?

The sea freight sector, particularly container shipments have seen the biggest growth for our operations by far.

How efficient are the ports and connecting infrastructure in Saudi Arabia?

There is room for improvement; but the authorities understand the requirements and corrective actions are being initiated. A sufficiently developed rail network currently does not exist and this would have a significant impact on freight forwarding efficiencies.

What challenges to business do you come across in Saudi Arabia? Is there more red tape than in other regions?

One challenge for us is Saudisation. This government policy requires that a minimum 30% of staff have to be Saudi nationals. We are faced with the challenge of finding and training local staff to our standards. Much of the local work pool is not sufficiently trained in logistics. As regards red tape, no, I wouldn't say that there is more red tape in Saudi Arabia than in other countries in the region. Also, efforts are being made to further reduce bureaucratic requirements, which we greatly welcome.

How do you see the Kuehne + Nagel operations in Saudi Arabia in a few years time?

I envisage strong growth for our activities in KSA. Our position will be strengthened as a market leader, offering an integrated service (air/sea/contract logistics and overland) from a single source.

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