Dubai's maritime sector remains a development priority

In recent years Dubai has risen through the ranks as a global maritime centre, taking its place among the top port cities worldwide. As global trade becomes more integrated, transnational companies continue to grow, and sea, land and air connections proliferate, the emirate looks set to continue climbing the rungs, helped on its way by significant amounts of new investment. Further progress could be hampered, however, by the challenges currently facing the global maritime industry, including an oversupply of vessels at a time of declining growth in cargoes.

Yet during its development, Dubai has demonstrated a flexibility and willingness to change that should stand it in good stead through any storms to come. “The recent oil price decline has brought to light what we’ve known all along – that we need to continually diversify our economy. This is a journey which Dubai embarked on many decades ago,” Sultan Ahmed bin Sulayem, Group chairman and CEO of DP World, and president of Dubai Maritime City Authority (DMCA), told OBG.

History

Dubai’s maritime sector has long been a key component of the economy – and its identity. “Long before oil and gas, Dubai used to make a living out of the maritime sector,” Amer Ali, executive director at DMCA, told OBG. “There’s been a successful marriage here between trade and the sea for generations.” Pearl fishing, based on a fleet harboured along Dubai Creek, was once the emirate’s principal source of income, along with trading across the Gulf and out into the northern Indian Ocean. Though oil and gas subsequently supplanted this, much of the revenue from hydrocarbons was invested back in the maritime sector. Dubai Creek was dredged to allow for larger boats in 1960, while Port Rashid was established in 1972.

These moves established Dubai as the go-to port for the Gulf, particularly at a time of conflict between Iran and Iraq in the 1980s. Dubai became a safe haven in a troubled region, able to leverage its good connections with all parties, while also capitalising on its historic mercantile connections with the growing Indian sub-continent. Building on these successes, the emirate pushed ahead with the construction of Port Jebel Ali. Opening in 1979, it has since been expanded repeatedly and is now the world’s largest artificial harbour, the busiest and largest port in the MENA region, and the premier trans-shipment destination for cargoes heading to other Gulf states and beyond.

Strategic Thinking

The key policy document for the sector is the Dubai Maritime Sector Strategy (MSS), whose end-goal is the creation of a Dubai maritime cluster. This would provide not only ports, brokers, marine equipment, supplies and yards but also the industry’s necessary software component. This means providing a home for maritime experts of all kinds. “Up to now, the sector has been mostly ‘hardware’-focused,” said Ali. “But a maritime centre consists of a whole range of components – the brokers, financiers, equipment suppliers and so on. So now we have the MSS, which looks at how the sector can sustain its lead through creative thinking.” At the same time, the MSS foresees a leisure role for Dubai, providing state-of-the-art maritime sports and cruise facilities.

The MSS will thus build on the existing sector and take it to the next level. Currently, the maritime industry contributes some 4.6% of GDP, at around Dh14.4bn ($3.9bn), which puts Dubai alongside other global port cities such as Hong Kong (4.5%), although still some way behind Singapore (7%). The sector is also responsible for around 3.3% of the emirate’s jobs, with some 75,200 people working in maritime-related industries.

As another measure of the sector’s importance, a recent global comparison of the top 15 ports of the world by analysts at Menon showed that Dubai comes in 13th place overall. This survey assessed maritime facilities, maritime law and finance, technology, attractiveness and competitiveness, and the port’s role as a shipping centre. Though Singapore came out on top globally, Dubai outranked both Mumbai and Rio de Janeiro and, with the exception of Mumbai, was the only top-15 port between Athens and Singapore. Indeed, while Dubai is located in an increasingly competitive neighbourhood, it nonetheless remains unmatched by other ports in the Gulf and MENA regions, while also being a significant trans-shipment hub for destinations all around the western Indian Ocean.

The Menon report also placed Dubai 6th in the world when it comes to port services and logistics – one place ahead of Hamburg and three above New York. The analysts specifically referenced the emirate’s strong logistics base and pro-business environment as major pluses. Indeed, in terms of competitiveness and attractiveness, the Menon survey’s experts ranked Dubai 6th in the world as a location to establish a maritime business. They also declared that Dubai and Shanghai would be the two cities whose importance as maritime centres would increase the most over the next five years.

Ports Of Call

The emirate’s flagship port is Jebel Ali, operated by DP World and the most important port in the GCC. This company is now a global giant, handling around 9% of the world’s total container traffic, according to its 2014 annual report. Currently operating at a total of 39 terminals, from Vancouver to Cape Town and Brisbane to Southampton, DP World’s facilities serve around 180 vessels a day worldwide. In the UAE, the company has a total of six terminals, and in the GCC it also operates a terminal in Jeddah, Saudi Arabia.

Jebel Ali weighs in as the world’s ninth-largest container port, and has over 90 weekly services to around 140 other ports worldwide. DP World has set a container capacity target for the port at 22.1m twenty-foot equivalent units (TEUs) by 2018. This was already in sight in 2014, when the opening of the new Terminal 3 boosted capacity to 19m TEUs. With 52 berths and a depth of 17 metres, the terminal covers a 307-ha area. A $1.6bn fourth terminal is also to be added, with capacity for 3.1m-TEUs, enabling the port to reach its 2018 target. Terminal 4, on an artificial island, can also be expanded to a capacity of 7.8m TEUs to accommodate even more future demand.

Capacity

Recent figures from the Dubai Statistics Centre show Jebel Ali handled a total of 15.24m TEUs in 2014, up from 13.63m in 2013 and 13.26m in 2012. The port has a container freight station of 135,000 sq metres, a cool store of 3900 sq metres and a cold store of 5765 sq metres. The tank terminal has 11 berths for petrochemical and petroleum products. Jebel Ali also has a general cargo terminal, with a total storage area of 1.4m sq metres – dividing into 928,499 sq metres of open and 71,501 sq metres of covered space – and 26 berths. Around 130 forklifts, five reach stackers and 15 tractors compliment these facilities.

Jebel Ali Port also abuts the Jebel Ali Free Zone (JAFZA), which allows 100% foreign ownership of companies based within it, and has zero import or re-export duties. JAFZA also has no restrictions on capital repatriation, foreign employment, or currency. The port’s industrial appeal is increased exponentially by Al Maktoum International Airport, which can be reached within 10 minutes, thanks to the dedicated Dubai Logistics Corridor which directly links the two locations. This combines a 200 sq km area into one multimodal super system, allowing sea-to-air cargo to flow from port to runway in an unrivalled time frame of four hours. Jebel Ali, JAFZA, Al Maktoum International Airport and Dubai South are the pillars of Dubai’s multimodal system, responsible for much of the trade and investment flowing through the emirate.

Advanced Facilities

Jebel Ali has also been a leading port in terms of technological innovation and adoption. Nowadays, for example, Terminal 3 is semi-automated, but its cranes are operated remotely, with many of the container movements made from a distant control room. With giant cargoes now capable of being loaded and unloaded from a computer terminal, there are now many more women working in the port – a sign of shifting patterns in a traditionally male-dominated sector.

Port Rashid, meanwhile, has facilities enabling it to handle cruise ships, break-bulk, bulk and roll-on roll-off (ro-ro) vessels, along with dhows ( traditional sailing vessels), which ply short-haul routes around the Gulf. Also operated by DP World, the port has general cargo and ro-ro quay length of 2350 metres, with a depth of 10.5 metres and 13 berths, while the coastal berth area has 900 metres of quay, a depth of five metres and five berths.

As a cruise liner destination, Port Rashid offers unrivalled access straight into the heart of the city. Its old cruise terminal covers some 2m sq metres and can handle seven mega-cruise ships simultaneously, as well as up to 25,000 passengers a day. A new terminal was also inaugurated in 2014, the Hamdan bin Mohammed Terminal, which is the world’s largest covered cruise facility. Capable of handling 14,000 passengers a day, it covers an area spanning 28,000 sq metres.

Port Rashid is also home to a ferry terminal, with links to ports around the Gulf. Current capacity is some 20,000 passengers per year, with ferries docked in the coastal berth area of the port. A further facility operated by DP World in the emirate is Port Al Hamriya, a cargo facility focusing on non-containerised traffic between Dubai and East Africa, Western India and other Gulf countries. Covering a total area of 318,267 sq metres, it has 14 berths, a maximum depth of eight metres, and 1407 metres of quay. The port also has quays dedicated to local fishing vessels, with 190 of these capable of mooring at any one time.

Well Connected

While – despite its relatively small geographic size – Dubai has major ports and dry docks, its maritime status cannot be considered without reference to nearby infrastructure. Nearby is Damen Shipyards Sharjah, a joint venture between Damen Shipyards Group and Albwardy Marine Engineering. Located in a free zone, it has first-class ship repair and maintenance facilities, including a 5200-tonne capacity lift.

Also near Jebel Ali is Dubai International Airport (DXB), which ranked sixth in the world by cargo volume in Airports Council International’s 2014 survey. Dubai is also currently expanding its second airport in Dubai South, Al Maktoum International, to eventually contain an 8-sq-km cargo facility – several orders of magnitude larger than DXB (see Transport chapter). In addition, Dubai is connected to a good road network, and will be hooked up to the proposed pan-GCC railway system, Etihad Railway. In short, the maritime sector in the emirate is already at the heart of a multimodal transport network. “Right on your doorstep here you have everything,” said Lars Seistrup, managing director of Damen Shipyards, “or you can bring it here – the logistics are so good.”

With around half the world’s vessels by value controlled by European owners, Dubai is still some way short of other top-15 maritime cities in terms of fleet ownership, ranking 14th in the Menon survey, and owning around 1% of the world’s total fleet by value. Yet when it comes to ship owners located in the city, and the size of fleet managed from each city, Dubai rises to 10th.

A Good Reputation

In a maritime universe increasingly characterised by transnational shipping companies, the emirate has been able to capitalise on its positive reputation to attract major international shipping companies. When industry leaders were asked which cities they considered the world’s top five shipping centres, Menon’s survey showed that Dubai ranked 12th among the top 15 maritime cities worldwide.

In a roll call of the world’s largest shipping companies, most have Dubai branches, from Maersk to CMA CGM and Mediterranean Shipping Company. Many other companies of note are also in the city, including MUR Shipping, Sharaf Group, Transworld Shipping and the United Arab Shipping Company. Dubai’s ports have also accommodated changes in the types of ships. A move towards larger vessels, such as the Capesize, at around 400,000 deadweight tonnes (DWT), the Mini Capes (around 100,000 DWT) and Panamax (65,000-100,000 DWT), has meant deeper draughts are now neces-sary if a port wishes to remain a hub, rather than become a feeder. Jebel Ali regularly receives Cape-size vessels, carrying aluminium products for the emirate’s aluminium smelters.

Smart Shipping

New technologies also mean that a “smart ship” future is already on its way, with single vessels carrying 18,000-20,000 containers and almost no crew calling at Jebel Ali with increasing frequency. Possessing the necessary technology and infrastructure to handle such ships is essential for future competitiveness.

DP World has been encouraging the pace of innovation through programmes such as Turn8, a seed accelerator for start-ups. DP World provides core funding and also mentors some of the projects within this, enabling ideas to be developed and then pitched to venture capital outfits. Such programmes recognise that, in the future, port and shipping developments are likely to be major IT fields, with fewer, but more highly trained and tech-savvy, staff. The ideas behind DMC also dovetail with this future, as the city provides a dedicated educational cluster (see analysis).

One company that is positioning itself to assist the development of smart technology for offshore activities is E-marine PJSC. Operating out of the UAE, the company’s primary business is the installation and maintenance of submarine cables for telecommunications and power transmission on an international scale. “The concept of oil and gas is changing. We are pushing the concept of networked facility operations to the oil and gas sector to monitor security, increase efficiency and reduce operational expenditure,” Omar Jassim Bin Kalban, managing director and CEO of E-marine, told OBG.

Innovation & Training

The Maritime Creativity Lab (MCL) is another sign of the increasingly high-tech nature of the sector. Launched in 2014 under the umbrella of the DMCA, MCL brings together leading sector thinkers and strategists with government officials and other stakeholders to develop and implement innovative ideas of benefit to the sector. One of its most recent initiatives is the Dubai Maritime Intelligence Platform, which collects, analyses and presents data and information collected locally via an interactive system. The information, made available in real time through a range of enabled smart devices, includes anchorage and bunkering operations, ship movements, data from and about brokerages, agents, docks and marine clubs, as well as trade statistics.

Another MCL initiative gathering pace is the Dubai Maritime Training Centre, which has been developed to offer cutting-edge training and educational programmes across a whole range of maritime sector activities. The project is in line with the DMCA’s overall strategy of making qualitative improvements to the emirate’s maritime infrastructure, through the offering of human resource development as well as the hard infrastructure of ports and warehousing. The planners hope that projects such as this will increase Dubai’s attractiveness to international companies, boosting the numbers of those choosing to establish a headquarters and base of operations in the emirate.

Building Connections

Capitalising on its position between Africa, Europe and Asia, Dubai has global outlook on intercontinental maritime trade, with infrastructure that makes it a natural hub for regional distribution. This was recently illustrated when IKEA chose the emirate as the location for its first distribution centre in the Middle East in May 2016. Consisting of 120,000 cu metres of racking, the centre will receive containers, break them down and then ship goods out as required.

On intercontinental trade, Dubai benefits from a diversified market, with fall-offs in traffic in one region partly compensated for by more robust markets elsewhere. While 2015 saw a slight decline in trade compared to 2014 – total non-oil trade fell by 2.3% to Dh1.3trn ($353.9bn) – some markets held steady. Figures from Dubai Customs show that non-oil trade with Asia, Dubai’s largest overseas partner, decreased only slightly from Dh823bn ($224bn) to Dh822.7bn ($223.9bn), while the US also saw a comparatively small drop, from Dh99bn ($26.9bn) to Dh96.53bn ($26.3bn). Other continents, however, saw larger falls. Trade with West Africa, for example, saw a drop-off as the region was hit by political and economic worries as well as the Ebola crisis. Trade with Africa stood at Dh118bn ($32.1bn) in 2014 but dropped to Dh110.4bn ($30.1bn) in 2015.

Maritime companies are also looking forward to a future in which trade with Iran plays a larger role. Once again, Dubai’s location – across the Gulf from what is potentially the largest emerging market in the region – and its well-developed infrastructure will provide it with an advantage over its regional competitors, enabling it to act as a channel for global commerce entering Iran. In May 2016 industry leaders at the Seatrade Maritime Middle East conference predicted that UAE and EU trade with Iran could hit $59bn by 2018, with the EU taking the lead in Western trade due to the trade bloc having already removed the majority of its sanctions. The UAE is already Iran’s leading non-oil and gas trading partner and largest source of imported goods. The full removal of sanctions against Iran would see some $30bn in frozen assets released, along with GDP growth in Iran jumping from zero to around 5%. There is a clear need for every kind of commodity in what would be a major refurbishment of the entire country, and Dubai stands to gain significantly from this, providing the logistics and transport hub for Iran’s economic revival.

Outlook 

With much uncertainty in global market conditions, 2016 promises to be a year of caution amongst ship owners, with some tough times for highly leveraged companies in particular. Volumes at ports may also be drifting down, as demand shifts away from Dubai. The GCC states, however, continue to see population and economic growth, with major construction rollouts likely to continue, in turn sustaining port traffic.

In the longer term, a number of new ports in the region are expected to increase their global profiles, making for a much more competitive environment. “Iran and Sudan are some of the more interesting markets for the region for the coming years in terms of growth potential,”  Christian Juul-Nyholm, managing director and head of Maersk Line for the UAE, Iran, Qatar and Oman, told OBG. In the Gulf, challenges to Jebel Ali’s top position may come from Port Hamad in Qatar, as well as Sohar and Duqm in Oman. Yet for many, Dubai remains the pre-eminent port in the region, with its logistical and manufacturing capabilities second to none. Through continuous investment in new technologies and the promotion of new routes and methods, the emirate’s maritime sector looks likely to keep that top spot for many years to come.

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The Report: Dubai 2016

Maritime Industry chapter from The Report: Dubai 2016

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