Qatar’s maritime transport sector bucks global slowdown

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Qatar’s maritime transport sector has taken advantage of the country’s infrastructure boom and economic diversification plans to weather a slowdown in global shipping.

Meanwhile, looking ahead, fleet composition and integrated supply chains will be key to the continued growth of Qatar’s shipping and logistics companies.

Changing market dynamics

Last year the global shipping industry, particularly the dry bulk segment, was adversely affected by declining Chinese imports of coal and other raw materials.

This contraction, combined with the supply of new vessels coming onto the market, saw the Baltic Dry Index reach an all-time low of 498 points in November.

For most of last year, the revenues of the majority of dry bulk vessels did not exceed their operating expenses, forcing many companies to pull ships from active service. This resulted in an increase in scrapping during the first half of 2015, according to international shipping association BIMCO.

The container segment also saw a decline on the back of slowing global economic growth and oversupply. Indeed, container supply in twenty-foot equivalent units (TEUs) rose by an estimated 8% in 2015 – a four-year high – while demand-side growth reached the lowest level in three years.

Conversely, although lower energy prices have adversely affected the offshore servicing segment, the oil tanker market has benefitted greatly from falling hydrocarbons prices. Strong refinery margins have kept demand for these vessels high, with countries around the world racing to fill their storage facilities while low prices prevail.

Tankers have also been pressed into service as floating storage platforms in places where onshore tank farms have reached capacity. As of November last year, some 100m barrels of crude oil and heavy fuels were being kept at sea.

Given these changing dynamics, the fortunes of shipping companies have become intimately tied to their fleet’s composition, to the benefit of Qatar’s shipping companies.

Fleet diversification as a key advantage

Diversification has been the key to success for Qatar-based maritime and logistics company, Milaha, which operates a fleet of 10 container vessels, five product and crude tankers, two liquefied natural gas carriers, two ammonia/liquefied petroleum gas carriers, almost 40 offshore service vessels, a Supramax bulk vessel and over 20 harbour craft.

Lower oil and gas prices have seen a decline in demand for offshore service vessels, though there has been an uptick in demand for crude carriers and product tankers, according to Abdulrahman Essa Al Mannai, president and CEO of Milaha.

“Commercial shipping is driven primarily by economic activity in non-energy sectors, which remains strong and is supported by government spending on infrastructure projects,” Al Mannai told OBG. “Qatar’s economic diversification away from oil and gas has acted as a natural hedge.”

Despite cutting back on new infrastructure spending in recent months, the government’s commitment to maintain existing projects by running a deficit provides a continued source of demand for imported materials.

As a result, Milaha’s maritime and logistics segment reported a 26% increase in operating revenues last year to QR1.17bn ($321.5m), while net profits rose by 133% to QR279.5m ($76.8m), demonstrating the benefits of a diversified fleet.

Rising demand for high-quality storage

With Qatar’s boom in infrastructure requiring highly integrated supply chains to handle the increased import volumes, companies have been investing in temperature-controlled, environmentally friendly warehousing to satisfy demand for more modern storage facilities.

Gulf Warehousing Company (GWC) is another major player in Qatar’s transport and logistics sector, with over 2m sq metres of warehousing, distribution centres, and open and container yards.

“Warehousing has become a major profit centre, and GWC continues to bid on and enter into new logistics projects, such as our Bu Sulba Warehousing Park, a self-contained facility on 517,376 sq metres, with 194 warehouses expected to be operational by the first quarter of 2017,” Sheikh Abdullah bin Fahad bin Jassem bin Jabor Al Thani, chairman of GWC, told OBG. “This is in addition to expanding our present assets, including the Ras Laffan Industrial City site and the Logistics Village Qatar Phase 5 expansion.”

Last year the company reported a 20% increase in operating revenues, which totalled QR787.9m ($216.5m), and a 32% jump in net profits to QR185.2m ($50.9m).

Companies that can provide an integrated supply chain – bringing a diversified maritime portfolio together with efficient and modern onshore facilities – are well placed to profit from the continued pace of construction in Qatar, helping to hedge against the negative impacts of lower energy prices in international shipping.

The year ahead will likely see this trend continue, as Qatar pushes forward with its current infrastructure and diversification projects, signifying busy times ahead for Doha Port and the soon-to-be fully operational Hamad Port.

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