Landbridge To Boost Dammam
BMI forecasts that the Saudi port of Dammam will continue upon its solid growth trajectory in 2014. While this will not quite match the level seen in 2011 and 2012, we note that the base effects of the beginning of the Saudi government's stimulus package are waning, meaning that any further gains will be slightly more incremental. This played out in 2013, when we estimate that a number of Saudi ports actually saw a slight decline in their throughput figures. We estimate that Dammam managed to secure growth in its handling in 2013. This is predicated on monthly throughput data to the end of November 2013 - the latest available at the time of writing.
In 2014, we forecast that the port of Dammam will handle 30.05mn tonnes, which if realised would represent growth of 5.2% on the 28.57mn tonnes we estimate was handled in 2013 - which was growth of 4.4%. This estimate is predicated on January to November throughput of 26.27mn tonnes. In terms of containers, we believe that 2014 will see a slight acceleration in the growth rate, from an estimated 3.3% (based on January to November throughput of 1.53mn twenty-foot equivalent units (TEUs)) in 2013 to 4.6%. If realised this would see 1.75mn TEUs handled by year-end.
|Port of Dammam Throughput, Tonnes|
Dammam has struggled with congestion in recent years, unable to cope with the rapid growth in throughput, and the demands this has placed on its limited capacity and ageing infrastructure. Major container-shipping company Hapag-Lloyd announced in Q212 that it had stopped taking bookings on routes from Riyadh via Dammam as there were serious delays due to congestion at the port: 'Riyadh-bound containers are experiencing prolonged delays due to the ongoing terminal congestion in Dammam Port. We shall resume bookings once the situation improves.'
Furthermore, the company introduced an 'operational recovery charge' of US$85/TEU on all exports and imports through either Dammam or Jeddah from July 20. There were further instances of congestion at the facility in 2013. With new capacity yet to come online, shipping companies could shy away from calling at Dammam if congestion issues are not resolved in 2014; in 2012, the major beneficiary of this was the Bahraini port of Khalifa bin Salman, which took in vessels originally bound for Saudi Arabia.
Over our medium-term forecast period, from 2014 to 2018, we project that annual growth in container throughput at Dammam will average 7.0% a year, which, if realised, would take the 2018 handling figure to 2.35mn TEUs. This growth will be supported by the macroeconomic expansion we project for the kingdom. We forecast real GDP growth to grow by an average 3.2% over the period. Although this is far from spectacular, private consumption will become a bigger driver of growth over the coming years, rising from 31.0% to 34.5%, having averaged growth of 4.5%. This growth in private consumption will help drive volumes of containerised imports at Saudi ports.
|Healthy Box Growth|
|Port of Dammam TEU Throughput|
Our 2018 throughput forecast of 2.35mn TEUs is far greater than the facility's current nominal capacity of 1.5mn TEUs. However, the port is due to be expanded as part of Saudi Arabia's port investment programme. Saudi Arabia intends to invest more than SAR2.8bn (USD750mn) to expand the King Abdulaziz Port in Dammam, according to the port's general manager, Naeem Ibrahim al-Naeem. The port will expand its container terminal capacity by allocating SAR2bn (USD535.71mn), while it will allocate SAR800mn (USD213.28mn) for other facilities. The port's capacity is to be doubled, which we note would be sufficient to handle our projected throughput growth for the port. Also, there are further works in the pipeline.
The ground-breaking ceremony for the second container terminal at the port was held on October 6 2012. The new terminal is being developed by Singapore-based international ports operator PSA International, the second-largest container terminals operator in the world in terms of box throughput. The company was awarded the concession in July 2011 to develop, operate and manage the second container terminal at Dammam as part of the Saudi Ports Global joint venture (JV). The new terminal, which is expected to open in 2014, will provide upside risk to BMI's throughput forecast for the port and should ensure that the port is capable of handling its expected growth without further instances of congestion. Saudi Ports Global is a collaboration between PSA and the Public Investment Fund (PIF) of Saudi Arabia. Once the terminal is complete it will have a quay length of 12,000m, equipped with 12 quay cranes and all the latest equipment necessary for a modern container terminal. The facility will have an annual capacity of 1.8mn TEUs.
In addition to the potential upside risk from the port's expansion there is also - as with the Jeddah Islamic Port (JIP)'s forecasts - upside risk from the construction of the Saudi Landbridge, the railway line that will connect the Red Sea JIP to Dammam on the Persian Gulf. In 2015, the year the project is due to be completed, we forecast container throughput growth at King Abdulaziz Port in Dammam to spike at 7.6%.
In terms of total tonnage throughput, Dammam is only the fourth-largest Saudi Arabian port, with the industrial ports of Jubail and Yanbu, in addition to the JIP, standing above it. Over the medium term we project tonnage throughput growth at Dammam to average 4.7% per annum. Should this forecast be borne out, then the port will handle 35.86mn tonnes in 2018.