Port of Salalah experiences rapid growth from container transshipment.
By Chris Dupin
With a population of about 3.1 million, Oman is not the sort of place you might expect to find a container port that handled nearly 3.5 million TEUs in 2009 ' annual volume that ranks the port somewhere between the number of containers handled in Savannah and New York City.
But the Port of Salalah's location on the southeast corner of the Arabian Peninsula puts it at a world trade crossroads.
'Our business model is transshipment ' 98 percent of it is transshipment cargo,' said Peter Ford, the port's chief executive officer. The cargo is 'being generated in all the same places that it is being generated for consumption in the United States, it just gets here sooner.'
APM Terminals manages the port and has a 30 percent stake. The government of Oman has a 20 percent interest, institutional investors 21 percent, and pension funds and the general public 29 percent.
|Salalah's container traffic is dominated with calls by four lines including MSC|
'We are on the east/west trade routes, so geographically, it is perfect for the Asia/Europe trade to drop stuff off and pick it up,' Ford said. Asia/Europe trade accounts for about 60 percent of the port's trade.
Services moving cargo to or from three other markets ' the Indian subcontinent, Persian Gulf, and East Coast of Africa ' each account for about one-third of the remaining volume, with the Indian Subcontinent being the fastest growing, he said. That's partly because it is difficult in Mumbai and even Pipavav to get windows to work very large containerships.
'On the West Coast of India, frequently the only way to get into some of these congested ports are with smaller feeder vessels making multiple, short calls. There is a strategy by some of our customers to feeder over from Salalah,' he explained.
The port's container traffic is dominated with calls by four carriers: Maersk, Mediterranean Shipping Co., CMA CGM and APL. MSC provides the port with about 40 percent of its traffic, Maersk with about 30 percent to 35 percent. It is visited by the largest containerships in the world, including the Emma Maersk, MSC Emanuela, and their sister ships, which ply the Asia/Europe trade.
'The only customer that we have that does not bring its extremely large containerships into our port is CMA CGM; they are still sending their ships into Khor-al-Fakkan. But the more fuel prices go up; maybe they will change their mind and deviate less.'
Ford also said the size of feeder ships calling Salalah have also been growing, often carrying 2,000 to 4,000 TEUs.
In addition to transshipments, many lines use the port to reposition empty containers to the Far East and closer markets, he said. This includes special equipment such as reefers, open-top containers and flat racks, which often carry cargo commanding premium rates.
There is relatively little manufacturing in the Middle East, but Ford said a 'strategic pillar' for the port's future is development of the neighboring Salalah Free Trade Zone.
Today the zone contains plants that manufacture bulk products such as methanol and PET plastic, as well as warehousing. The port and zone are joining an effort to make the FTZ into a distribution and assembly hub for products such as garments, home products and electronics.
'We need to switch our strategy from not only talking to container shipping lines that see transshipment as a necessary evil, but also to the cargo owners who can view Salalah as a value-add location,' Ford said. Talks with possible customers indicate the potential for making the port a center for distribution and light manufacturing is 'more reality than pipe dream.'
Heavy manufacturing is less likely, he conceded. 'There may be some activities that will be more manufacturing-based than others, but I don't think we see ourselves as a location where there will be a car factory.'
He pointed to other ports as a model for the approach Salalah is taking.
'It's similar to what Savannah has done, focusing on the overall product, what can a port/free zone offer to some of these cargo controlling entities, be they consignee or shipper, and what technology or systems integration can help them make their supply chain shorter or more efficient.'
He also said the goals are similar to what has been done at the Jebel Ali Free Trade Zone, which along with Khor-al-Fakkan he sees as Salalah's principal competitors.
While Dubai has a larger local market, Ford said, 'we feel our location is even better for the trades specifically to and from the subcontinent and Asia/Europe.'
That's because Dubai can result in three days diversion from the main Asia/Europe trade route in each direction, he said.
A plan by the Gulf Cooperation Council of six Arab countries bordering the Persian Gulf to build an ambitious rail system that some press reports say could extend all the way from the Kuwait-Iraq border to Salalah, could benefit the port sometime in the future. A completion date of 2017 has been discussed in some news articles.
Shorter term, Ford said the port will benefit this year from a rail connection to Eastern Yemen. Salalah is about 150 kilometers from Yemen, and Ford said the port has come to an agreement with customs officials in Oman that will allow cargo to be transported in bond between Salalah and the Al Mazyounah Free Zone on the border. That gives the port access to a market of 8 million people in East Yemen.
Ford, who has held several positions at APMT, took his current position in fall 2010, said another possible area of growth is sea-air cargo, which is now handled at places such as Jebel Ali and Sharjah International Airport. Salalah Airport, only a 20-minute drive from the port, is 'severely underutilized,' handling only about 100,000 tons of freight annually.
'I just started discussions with someone from a Gulf logistics company that is very big into sea-air and when I told them we were severely underutilized and closer to the shipping routes, he was quite interested,' he said.
The port has seven container berths and seven berths for handling general and bulk cargoes such as limestone, gypsum, cement, sugar, petrochemicals and resin. The port handled about 5 million tons of non-containerized cargo and recently closed a tender for construction of another 1,200 meters of cargo berth for ships carrying cargoes.
In the first nine months of 2010, Salalah handled 2 percent more containers than in the same 2009 period, and Ford is hopeful for containerized cargo growth of about 8 percent to 10 percent from existing customers in 2011. If he succeeds in attracting other lines, the increase could be 15 percent to 20 percent. The port has signed a memorandum of understanding with the government to build three additional berths that would boost capacity from 6 million to 9 million TEUs.
While not a likely candidate for a high-tech yard like that at the European Container Terminal in Rotterdam, Salalah is optimizing its container yard with a technology pioneered in APMT in Algeciras, Spain.
Because of the bigger ships calling the port, the new berths could even be a possible pioneer of technology like the FastNet concept that APMT unveiled last year. The system allows closer spacing of container cranes and might allow the terminal to put nine or 10 cranes against a ship and move 300 to 400 containers per hour.
Of course, the Arabian Sea and Gulf of Aden's location hard by one of the busiest trade lanes in the world has also made it attractive to pirates from Somalia. Salalah, however, is protected not only by the Omani Coast Guard, but also is used as a home base by navies of many nations ' including the United States and European Naval Force, China and Iran ' to deploy military forces to attack pirates.
The port operates the pilots and tugs that serve Salalah. They systematically gather and share intelligence from the masters of each vessel that calls the port, sharing information on attacks and where pirates have been seen or need to be avoided.
The success of ports like Salalah and Jebel Ali has not gone unnoticed. 'If you believe everything you read there are plans to add 25 million to 30 million TEUs of capacity in the next five years' at ports ranging from the Red Sea to the Persian Gulf, Ford said.
'So things could always change. I'm not sure why everybody wants to get in the transshipment business ' it's very fickle, it's not very high margin, and it's costly,' he added.