Kuwait forges ahead with port expansion

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Government investments in the transport sector are set to expand capacity at Kuwait’s ports over the next several years. Progress is being made on the new Mubarak Al Kabeer (MAK) port, while other infrastructure projects – including a 36-km causeway that will link Shuwaikh Port with Boubyan Island – are moving ahead.

Transport activity has yet to recover from the global economic downturn, but the latest results show a modest pick-up in freight volumes for the first half of 2013. Tonnage throughput at Shuaiba Port, one of Kuwait’s two main ports, is expected to rise by 4% this year, increasing to an annual growth rate of 5.3% by 2017, with air freight tonnage forecast to increase by 1.8% in 2013, levelling out to 1.4% annual growth by 2017, according to consultancy firm Business Monitor International’s “Kuwait Freight Transport Report Q2 2013”.

Meanwhile, land reclamation has been completed and quay construction is ongoing at the MAK project on Boubyan Island. The original plans for the KD345m ($1.2bn) port included 60 berths, but following a dispute with Iraq over the port’s development, this was reduced to 24 berths, with an initial handling capacity of 2.5m twenty-foot equivalent units per year, although there is capacity for this to be increased at a later stage. Completion of the first phase of development is expected in 2014.

Global multinational technical and management support company AECOM recently announced that it was awarded a contract to design a new deep-water navigation channel at MAK. The project will include channel dredging, the disposal of dredging material and land reclamation, with local consultancy SQC International contracted to provide technical assistance and environmental data collection. The project is expected to take 11 months to complete, with work to commence in August.

Infrastructure developments are also expected to benefit Shuwaikh Port, with a new highway and causeway project set to improve connections between the port and oil fields in the northern part of the country. In August 2013 a subsidiary of China Communication Construction, CCCC Guangzhou Dredging Company, was awarded a $15m contract to develop a dredging channel as part of the Sabiya causeway. The project will involve dredging 5m cu metres of material to create a 7.7-km channel, and will likely reach completion in mid-2014.

The government’s efforts to create a transport hub for the northern Gulf are set to support the development of the local logistics industry. The largest player in the Kuwaiti market, Agility Logistics, announced several high-profile contracts earlier in 2013, including a $190m project to provide supplies to a UN mission in Darfur, and a $9.7m warehousing deal in Egypt. Agility’s financial results for the second quarter of this year were promising, with net profits rising by 50% year-on-year to KD11.5m ($40.25m).

Revenues increased by 2% to KD355.2m ($1.25bn), with the greatest growth in the real estate division, which leases industrial space. According to Agility’s senior vice-president, Ali Mikail, the company has turned its attentions away from traditional transport operations.

“In Kuwait, contract logistics is Agility’s most important revenue generator, which primarily serves the private sector. This has demonstrated a year-on-year growth, but remains a low-profit-margin activity, although there are evolving opportunities amongst Kuwait’s government departments for expansion,” Mikail told OBG.

The shift to contract logistics, onsite document management systems and warehousing has provided the sector with new revenue streams post-2008 and has taken prominence since 2010, as new firms have entered the market and customers have become more price-conscious.

As Kuwait moves forward with its transport infrastructure investments, logistics firms are likely to benefit, both in terms of supporting development projects and from the resulting uptick in activity that is expected post-completion. “Infrastructure developments and mega-projects are driving growth all sectors, which naturally creates opportunities for logistics companies,” Fares Barqawi, the CEO of Posta Plus, a Kuwait-based logistics company, told OBG. “The trick is to be well placed to take advantage of Kuwait’s strategic location between Iraq, Iran and Saudi Arabia.”

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