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Sat 17 Sep 2011 03:06 PM

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Syria’s ports feel the pinch

Shipping industry frets as unrest slashes business to vital trade ports

Syria’s ports feel the pinch
Shipping sources say volumes shrank an average 35 to 40% in the first eight months of 2011.(Image for illustrative purposes only)

From his window on the corniche of Syria's Mediterranean
port city of Tartous, an international shipper bemoans the change since a
popular uprising six months ago engulfed the country and dealt a heavy blow to
its economy.

"At night, ship lights made Tartous extend into a city
on the sea; now it's like a small village. The port's sealine was full of
vessels - now the berths are nearly empty," said the shipper, who opened
an agency in Tartous to cash in on a boom in traffic after the Iraq war wound
down.

Street protests demanding the removal of Syria's President
Bashar al-Assad, many of them bloodily suppressed, have shrunk traffic at the
country's ports and damaged its hopes of capitalising on its position as a
Middle East crossroads to grab a bigger share of transit business.

The exact extent to Syria's economy is being hurt by the
unrest and resulting international sanctions is not clear; official data is
scarce. But many analysts expect gross domestic product to decline this year,
perhaps by several percent or more. At the start of this year, the
International Monetary Fund predicted it would grow three percent.

Shippers and businessmen say exports have dropped as foreign
customers have cut orders, while Syrian importers have delayed orders because
of the uncertainty. Meanwhile, companies which used Syria as a conduit to
conduct trade with other countries in the region are seeking different routes.
Syria's principal port of Latakia, where the military deployed three months
ago, has been hit hard along with Tartous.

"Even the Mediterranean cruise liners that came to
Latakia and Tartous, and had hundreds of Italian and Spanish tourists, have not
come this year," said the international shipper, who did not want to be
named because of the sensitivity of the issue.

Shipping sources say traffic in general cargoes, dry and
liquid bulk cargoes, and containers at Latakia and Tartous has been slipping
since the uprising broke out in March. They estimate volumes shrank an average
35 to 40 percent from a year earlier in the first eight months of 2011.

"Importers and exporters are being very cautious, and
that has led to imports of raw materials falling sharply as production slows
down in many industries due to the troubles," a Syrian transportation
official, who requested anonymity, said from Damascus.

Shipping agents and industry experts said container volumes,
the vast majority of which are handled by Latakia, dropped in June alone by 36
percent from a year earlier to 33,527 twenty-foot equivalent units (TEU).

Official Latakia port figures for the April-June period show
a drop of 16 percent from a year earlier, but industry sources said this data
was misleading because it included many containers with empty space.

In Tartous, which handles most of Syria's bulk cargoes, or
nearly 9 million tonnes of annual traffic in normal times, shipping sources
said some European operators were avoiding the port after the European Union
announced sanctions on Syrian oil exports at the start of September.

They said they were also seeing less business from Iraqi and
other Arab traders who were deterred by the increasing checkpoints and
roadblocks in many parts of Syria.

"We had 25 to 30 vessels daily arriving. This has
dropped to between 10 to five daily," said a major shipping agent based in
Tartous, referring to vessels between 8,000 and 35,000 tonnes.

So far, major regular shipping lines such as Danish firm
Maersk, French-based CMA CGM, Geneva-based MSC, and Germany's Hamburg Sud have
largely maintained normal vessel calls to Syrian ports despite lower cargo
volumes, industry sources said.

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Shipping agents say the companies are reluctant to pull out
of a transit market that has served the whole region and still has great
long-term potential because of its location.

"No major regular shipping lines are quitting at the
moment. Once they withdraw from any service, it's very hard to restore,"
said Talal Halawani, a shipper whose Amman-based Liberty Shipping is an agent
of a leading Italian line.

"Although they are suffering because cargo is not like
before, they are still operating normally despite all the constraints. It's a
wait-and-see attitude."

But other regional companies with no regular services have
less ability to sustain losses, and they have omitted port calls or cancelled
visits to Syrian ports altogether.

"Liners that made container ship calls four times a
month are now calling three times a month. Some regional liners, including one
or two Turkish liners, have even dropped port calls altogether," said a
second Syrian transportation official.

Some shippers are seeking to offset the drop in their Syrian
trade by offering more competitive rates for container slots in nearby Beirut,
Mersin and Alexandria ports, which are in the same Europe-Mediterranean
service.

The turmoil has prompted many lines to suspend plans, some
drawn up only a few months ago, to add more container slots or introduce bigger
vessels on Syrian port calls in anticipation of demand related to the
reconstruction of Iraq.

Over the past five years, Syrian ports were able to boost
their transit trade with Iraq, Jordan and the Arabian peninsula as Syria's red
tape and state controls, a legacy of five decades of Soviet-style economic
management, were reduced.

Latakia and Tartous were also revitalised by the award of
contracts to manage their container terminals to foreign investors in
partnership with local investors linked to the Assad family.

The foreign investors -- CMA CGM in Latakia, and the
Philippines' International Container Terminal Services in Tartous -- upgraded
the facilities and helped to nearly double the ports' container traffic last
year to 620,000 TEU from around 365,000 TEU in 2004.

Nearly 40 percent of Latakia's total incoming cargo volume
has been Iraq-bound, shippers and Syrian transportation officials say, while
for Tartous the figure has been as high as 70 percent.

Syrian ports' flexibility and lower costs gave them a competitive
advantage in Iraq-related business against Turkish and Lebanese ports and and
Jordan's Aqaba. Lower land transport costs were also a plus, along with the
ability to bypass Suez Canal fees paid by importers using Jordanian and Saudi
ports on the Red Sea.

Now, Iraqi, Jordanian and Saudi Arabian importers, who have
used Syrian ports in recent years for bulk cargoes of wood, marble, steel and
grains from the Black Sea area and North and Central Europe, are looking for
alternatives.

"We are getting increasing inquiries from local and
Iraqi traders who want to bring their goods to Jordan by sea from Turkey or
other markets. This business traditionally would go to Syrian ports. Even goods
that would normally go by land via Syria are now being shipped," said
Captain Wahid Abu Ajamieh, general manager of CMA CGM Jordan.

"This is an indication that something odd is
happening."

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