Economic Update
The ever-increasing number of ships plying the Gulf – oil tankers to cargo and container ships to barges, dredgers, tugboats and a whole array of specialised craft – is providing many opportunities for the ship-repair and maintenance industry. And, while hardly a nascent market, it is expanding fast. “Everybody is rushing to the ship repair and maintenance business,” an industry insider told OBG. There is little wonder that this trade is thriving in the region. According to some sources, over 30,000 ships are already registered in the Middle East, some 85% of them utilitarian vessels. Additionally, tens of thousands of ships pass through the Strait of Hormuz every year, significantly adding to the demand for ship-repair services.

The Northern Emirates seem well poised to benefit from the development of the ship-repair and maintenance industry. Labour, land and other costs are significantly lower here than in Dubai and Abu Dhabi. More importantly, most Northern Emirates still have vast tracts of cheap, sea-facing real estate available for development.

Some established players already operate out of the Northern Emirates. Arab Heavy Industries (AHI) is one of them. One of Ajman’s largest companies, it was set up in 1975, and is managed by the Singapore-based multinational Keppel. In 2000, it commissioned a 175m by 32m dry dock that allows the company to handle ships of up to 30,000 deadweight tonnes. That includes medium-sized cargo vessels, tankers and dredgers as well as double-hulled tankers, anchor handlers, supply boats and crane barges. AHI, which was listed on the Dubai Financial Market in December 2006, has been profitable for the last 19 consecutive years. In 2006, it posted revenues of 143m AED ($39m) and a 24mAED ($6.5m) profit and it expects to do better in 2007, as it continues to expand its operations. It is currently building two extra berths to increase its afloat repair capacities.

Many other companies have based themselves in Sharjah, Ajman, Ras al-Khaimah or Fujairah, and in smaller ports such as Khor Fakkan. Dubai-based Nico International, a subsidiary of Topaz Energy and Marine, has also been operating in the Northern Emirates since it opened a facility in Fujairah in 1981. It significantly expanded its activities in 2004 by acquiring the industrial and marine engineering division of Fujairah Marine Services & Trading Co. The acquisition quadrupled the size of Nico’s operation in Fujairah, which now has about 200 employees. Last year it catered to 328 ships, mainly Very Large Crude Carriers (VLCC), as well as liquefied natural gas vessels, naval ships and dredgers.

The port of Fujairah is the world’s third largest bunkering port and 8,000 ships lay at anchor offshore Fujairah every year while the demand for ship repair services continues to grow. F A Fazelbhoy, general manager of Nico International UAE, told OBG, “Fujairah is where we see the greatest growth in our marine business. We are continuously expanding our facilities and hope to commence dry dock operations for boats during the first quarter of 2008.” The company said it is also looking to expand its repair and diving operations to Sharjah and Khor Fakkan.

There are also the newcomers, hoping to succeed big on the rapidly growing ship-repair market. Ras al-Khaimah’s Al Jazeera Port, although primarily a loading facility for the local rock and aggregates industry, is planning to make big inroads into repair. Captain Haytham S H Mukattash, general manager of Al Jazeera Port, told OBG, “There is a tremendous opportunity for us in the ship repair industry that can provide a major source of income for the emirate. Regional demand for ship repair services is double the amount that existing suppliers can provide.”

Al Jazeera Port plans to convert into a ship repair yard focusing on medium-sized ships of up to 60m, offering mechanical repairs and maintenance, re-steeling services and all other related maintenance work. It recently commissioned a pre-feasibility study towards that end that recommends the rehabilitation of the existing 55m ship lift dock, the construction of 12 dry berths and the erection of several workshops and sheds to serve the shipyard. Construction could start in October 2007 and be completed by the end of 2008. Al Jazeera Port expects a brisk business with all 12 berths being 100% filled most of the time although Mukattash said it would be “profitable even at 50% occupancy.”

The huge and still growing regional, as well as local, demand should provide enough business for both established companies and newcomers. The market is also divided into several sub-segments, as ships of different sizes and types require different facilities and handling. As a result, operators specialising in repair and maintenance of small- and medium-sized ships are not in direct competition with the much larger facilities of Dubai’s or Abu Dhabi’s dry docks, which dominate the market for large and very large ships.