Consultant raises concerns about falling utilization, plans for expansion.
While ports in the Middle East have grown rapidly and handle an outsized share of world trade, an article by Boston Consulting Group (BCG) says, “As is often the case following a period of strong growth, there are causes for concern.”
The report says that ports in the Middle East handle 20 percent of the world’s global seaborne trade even though the region only accounts for less than 3 percent of world trade.
The region has accomplished this because its ports are transshipment hubs connecting various trade routes, notably for ships moving cargo between Asia and Europe and regional destinations because it has large ports with well-developed infrastructure and operators “with the ability to compete against the world’s best.”
BCG, however points to “three looming threats” — overcapacity, exposure to transshipment and lagging port productivity — that it says “threaten to slow or even reverse the upward trajectory of the region’s ports.”
Container capacity grew at an annual rate of 7 percent while container throughput has grown just 4 percent from 2011 through 2016. That has led to utilization of container capacity to fall from 75 percent to 66 percent, putting downward pressure on handling rates.
“Unless growth accelerates significantly, it does not appear additional capacity will be required for the foreseeable future,” BCG says.
Despite this, BCG says ports have announced plans to double container capacity by adding the ability to handle an additional 57 million TEUs by 2030.
Transshipment accounts for 53 percent of Middle Eastern port throughput. While key to the region’s success in the port industry in the past, BCG says smaller destination ports are “improving infrastructure, hiring experienced port operators and encouraging shipping lines to make direct calls.”
If these smaller ports are successful, BCG says it could present a threat to hub ports in the future, reducing their utilization.
“Empirical evidence suggests that, except for the most successful and established players, productivity is lagging at a number of Middle Eastern ports,” says BCG. “Because these ports have been busy bringing new capacity online, commissioning larger cranes and installing new operating systems, they have not focused on improving productivity.”
BCG adds low labor costs “have made cost optimization less of a priority.”
BCG suggests Middle Eastern ports should be cautious about growing capacity and instead “seek to extend their port’s reach by investing in inland connections and facilities tailored to the customers they currently serve.”
It also says companies may want to diversify outside the region through mergers and acquisitions or investment.
Middle East ports cautioned
