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Home > Business/Finance > Diversified Services > Shipping & Logistics
Saudi Arabia Freight Transport Q4 2008
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At the beginning of September the National Shipping Company of Saudi Arabia (NSCSA) took deliveryof Jana, the first of six very larger crude carriers (VLCCs) which had been ordered in 2006 at a cost ofSAR460mn (US$122.7mn) each. The second super tanker was due to be delivered in October, and theremaining four during the course of 2009. NSCSA director general Humud al-Ajalan said that in additionthe company’s 80% owned subsidiary, National Chemical Carriers Ltd Co. (NCC) had ordered a total of16 45,000-tonne chemical carriers from SLS Shipbuilding of South Korea, for delivery through 2009,2010, and 2011. When all ships currently on order were to be delivered, NSCSA would have a combinefleet of 52 ships with a tonnage of 6.8mn dwt, up from the current 32 ships and 4.5mn dwt, he said.
NSCSA is 29% owned by the Saudi government with the rest of the shares held by local investors. In thefirst half of 2008 NSCSA reported a 65% rise in net profits to SAR317.7mn (US$84.7mn). Even thoughoil prices are set to ease over the next couple of years, BMI believes that Saudi Arabia’s status as OPEC’sswing producer, together with capacity increases, positions shipping for continued growth. In our latestSaudi Freight Transport Report, BMI concludes that the country’s sea-freight tonnage is likely to growby an annual average of 6.8% 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 3.2% (lower than the 4.7% 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 4.4%, airfreight at 4.2%, road haulage at 3.6%, and pipeline throughput at 2.3%. 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 3.9%. 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 3.6%,versus 3.2% for overall GDP. The total value of transport and communications GDP will rise toUS$23.9bn in nominal terms by 2012, representing 5.6% of Saudi Arabia’s GDP.
SWOT Analysis.
The Landbridge Project.
Following years of neglect, a major programme of rail upgrades has been given approval by the SupremeCouncil. In particular, a network extension programme has been unveiled that will effectively link thewest and east coasts through the capital, Riyadh. This is to be achieved by building a new line betweenRiyadh and the port of Jeddah and upgrading the Riyadh to Dammam line. The overall programme iscalled the Landbridge Project.
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