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Home > Business/Finance > Diversified Services > Shipping & Logistics
Saudi Arabia Freight Transportation Report Q2 2008
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Development of the Saudi ports and shipping sector is proceeding apace. Harbour Engineering Co of China said on January 15 that it had won a SAR2.2bn (US$587mn) contract to build port facilities at Rasal-Zour in Saudi Arabia. Company officials said the work would be completed by 2010. National Shipping Co of Saudi Arabia (NSCSA) said in December that it had secured US$250mn worth offinancing to fund the expansion of its fleet. The money would be used to buy six new chemical carriersfrom South Korea’s SLS Shipbuilding yards, for use by National Chemical Carriers (NCC), an 80%-owned subsidiary of NSCSA. MMC Corp, the Malaysian infrastructure and energy group, said in November that it had won the right to jointly develop and operate a terminal at Jeddah Port, worth around US$598.8mn. The plan was for MMC’s international subsidiary together with Saudi partners to buy acompany that owns a 30-year concession to jointly operate the terminal. MMC group chief executive Feizal Ali was quoted by Reuters news agency saying ‘we will leverage our experience in developing andmanaging our two ports in Malaysia and replicate out success in one of the most dynamic regions in theworld.’ Construction was expected to begin in early 2008 and be fully completed by 2010, MMC said.
Even though oil prices are set to ease over the next couple of years, BMI believes that Saudi Arabia’sstatus as OPEC’s swing producer, together with capacity increases, positions shipping for continuedgrowth. In our latest Saudi Freight Transport Report, BMI concludes that the country’s sea-freighttonnage is likely to grow by an annual average of 7.7% over the next five years.
Various factors underpin our prediction. We now think that Saudi GDP growth in 2008-2012 will reachan annual average of 3.9% (lower than the 5.2% achieved over the preceding five years). Oil and gasexports will be the drivers of foreign trade. Although the pace of trade growth will ease, tanker exportswill remain dynamic. Big infrastructure projects will also help expand maritime transport capacity andboost demand for cargo.
By transport mode, we expect the fastest growing area to be sea cargo, followed by rail at an annualaverage of 5.3%, airfreight at 4.6%, road haulage at 4.1%, and pipeline throughput at 2.7%. The slowergrowth of oil and gas pipeline throughput will reflect the cooling of the current price boom towards theend of the forecast period. Saudi Arabia scores in a moderate range in terms of its growth forecast forfreight transport across all modes through to 2012, with an annual average of 4.2%. However, with itspetrodollar revenues, the country has shown recent commitment to reform and improve its transportsector and the current policy agenda (including greater private sector involvement) will bring resultsfurther forward. Saudi Arabia’s overall freight rating at 53.9 out of 100 is a little below the average forthe Middle East and Africa (MEA) region. It scores well in terms of its economic outlook because of itsabundant natural resources, principally oil and gas. However, it does less well in terms of its freighttransportgrowth projections over the 2008-2012 period and its current regulatory environment.
For the 2008-2012 forecast period, we expect the transport and communications sector to continueoutpacing the economy as a whole in GDP growth terms. It will achieve average annual growth of 4.2%, versus 3.9% for overall GDP. The total value of transport and communications GDP will rise to US$23.9bn in nominal terms by 2012, representing 5.6% of Saudi Arabia’s GDP.
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