Port to port: Changing global trade patterns add importance to maritime shipping

There are only three possible entry points to Bahrain: by airport, by the King Fahd Causeway (which links the island to Saudi Arabia) and by port. With the bulk of Bahrain’s imports and a large proportion of its exports entering and leaving by sea, the strength of maritime transport is thus something of a barometer for the overall economic health of Bahrain. Overall, 2012 proved to be a good year for sea transport.

PORTS: There are two main ports in Bahrain, Mina Salman Port and Khalifa Bin Salman Port (KBSP), as well as a number of small fishing harbours. Originally built in the 1960s as a primarily import-oriented terminal, Mina Salman is the older of the two. For a long time the island’s only port, it is now used primarily as an entry point for certain bulk goods, such as flour, and houses a number of warehouses and naval facilities.

The General Organisation of Sea Ports (GOP), was established under the Ministry of Transport in 2006, but as part of the ministry’s reorganisation process it is due to be renamed the Ports and Maritime Affairs Directorate. The GOP regulates, develops and promotes the island’s maritime industries. Danish shipping and port management group, APM Terminals Bahrain took over administration of Mina Salman in 2006, and since 2008, has also operated Bahrain’s new port, KBSP, on the island of Hidd, off Bahrain’s north-east coast.

KBSP was designed to serve as an export-import terminal, and its construction came in tandem with the development of large industrial and logistics zones next door. Although throughput fell in 2011, the port bounced back in 2012, recording a 40% rise in business that was partly due to clearing the backlog of stock from the previous year and partly to the opening of several industrial plants in Bahrain.

There has been a rise in both imported material to build the plants and in exported goods. Over the long term, KBSP aims to become the trans-shipment hub for the Upper Gulf. In 2012 KBSP handled 525,000 twenty-foot equivalent units (TEUs) and some 443,000 tonnes of general cargo. This represented a 40% rise on 2011 figures of 375,000 TEUs and 216,000 tonnes, respectively. The main goods exported were metals, petrochemicals and textiles, and the principal export destinations were either fellow GCC countries, such as Saudi Arabia or Asian nations. The main imports were cars, crude oil and chemicals, and the biggest import partners by sea were Asian countries. The majority of food imports came via the King Fahd Causeway.

BIG NAMES: There are several shipping lines serving Bahrain. United Arab Shipping Company is owned by the Bahraini government in consortium with the governments of Qatar, Iraq, Saudi Arabia, the UAE and Kuwait, and has its headquarters in the last of these. The company expanded its network in 2012 to include Australia, West Africa and Pacific North America and added new direct connections between Bahrain and destinations such as Sohar, Oman, as well as Jubail and Jeddah in Saudi Arabia. Other major players include Maersk of Denmark, Switzerland’s MSC, France’s CMACGM, multinational APL and China’s Hanjin.

SHIFTING TRADE: The Gulf region is becoming more attractive to shipping lines due to changing patterns of trade. Until fairly recently, Gulf economies were dominated by just one commodity, oil, meaning that ships would arrive full and often leave empty.

However, with the advent of big industrial projects in areas such as aluminium, petrochemicals and steel, shipping lines are increasingly able to transport goods both ways, whereas trade on a number of other routes, like transatlantic and China-North America trade, has become much more imbalanced over the past decade, with boats travelling full in one direction and empty in the other.

Moreover, with the Gulf having weathered the global recession better than many other regions around the world and displaying solid economic growth, companies looking to develop are taking greater interest in the region. With these developments, the shipping industry is expanding, and with it, so are the opportunities for Bahrain to become a maritime transit hub.

COMPETITION: The biggest mainline port in the Gulf is Jebel Ali in Dubai, which acts as a trans-shipment and unloading centre, while Salalah in Oman, lying closer to the main Suez-East Asia shipping lanes outside of the Strait of Hormuz, deals mostly in trans-shipment. In 2011 Jebel Ali handled 13m TEUs, while Salalah handled 3.2m TEUs. In addition to these, the new Khalifa Port at Abu Dhabi opened in 2012, with an initial capacity of 2.5m TEUs a year. However, KBSP is not looking to compete head on with these giants, and therefore the authorities remain optimistic about the increase in capacity in the region. Once Khalifa Port is complete, there will be three major ports in the Lower Gulf, but KBSP remains the largest port in the Upper Gulf. The Saudi government plans to redevelop its main port on the Eastern Province, Dammam, but this is not expected to be ready until 2015. Kuwait is developing a new port on the island of Boubyan, which the Kuwaiti government hopes will help it to attract business going into Iraq. Although work started on the project in 2011, it is unlikely to be up and running until 2015 at the earliest. Iraq’s main port at Umm Qasr continues to run at well under capacity, and moreover, its draft is rather shallow, at around 12.5m.

These factors, and unease over the country’s stability, mean that a number of shipping lines have been reluctant to ship directly into Iraq. Yet, given that relations between Iraq and Kuwait are often strained, the Iraqi government may be reluctant to allow too much business to pass through Boubyan, and thus Bahrain stands a good chance of picking up cargo heading there. KBSP is capable of handling ships up to post-Panamax size (up to 110,000 tonnes), and moreover, Bahrain already has a number of industries clustered around the port, supplying both regional and international customers. As such, a network of feeder vessels linking Bahrain with Dammam, Saudi Arabia; Umm Qasr, Iraq; Jubail, Saudi Arabia; and Kuwait looks increasing viable, as lines reach critical mass in terms of volumes. The fast turnaround times at KBSP are an additional inducement. KBSP sees its role as complementary to, rather than competitive with, other ports in the region. Rising trade volumes ensure enough business for everyone.

KEY NEIGHBOUR: However, in shipping, as in many other fields in Bahrain, the main market is Saudi Arabia. As the main port on Saudi Arabia’s Gulf coast, Dammam, has suffered from significant congestion for a number of years. To alleviate this backlog, Bahrain has been acting as something of an entrepôt for its larger neighbour, and a number of cargos unload at Bahrain and transport across the causeway, rather than docking directly in larger Saudi Arabia. Marco Neelsen, the managing director of APM Terminals Bahrain, told OBG, “Jubail Port has the ability to increase throughput and thus become an additional gateway into the Eastern Province. Synergies with Bahrain on capacity and operational efficiencies mean cargo can be moved competitively, which is clearly a win-win for all stakeholders.”

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The Report: Bahrain 2013

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