Bahrain targets Gulf container handling

From the top of its control tower, the ambitious scale of Bahrain’s new Khalifa bin Salman Port becomes clear.

The site, on reclaimed land off the island of Muharraq, is 900,000 square metres. Its container handling capacity is almost 10 times the amount the Gulf state imports.

APM Terminals, the arm of Denmark’s AP Moller-Maersk that runs the terminal, hopes to fill the spare capacity by becoming a hub port, handling containers going to and from other ports in the upper Gulf.

Very little of the capacity at Khalifa bin Salman, which was formally opened last month, is currently used. On a typical day recently, only the Maersk Regensburg, a small container ship, a cement carrier and a US military supply vessel lay amid the vast expanse of quay.

But for other ports in the region – especially Dubai’s huge Jebel Ali, the world’s sixth-busiest – that barely matters. Shipping lines routinely threaten during price negotiations with the region’s more established ports to take some of their business to Bahrain.

The opening of Bahrain’s new port highlights the increasing competition in one of the few important container markets to have grown, albeit modestly, during last year’s industry-wide slump in trade volumes.

No one expects such competition to end the key role of Jebel Ali – by far the biggest port in the region, which generates 40 per cent of the profits of Dubai-based DP World, the world’s fourth-largest container terminal operator. However, it increases the competitive pressure facing DP World at the same time that government-owned Dubai World, its main shareholder, faces a difficult restructuring of $22bn of debt .

DP World itself faces additional scrutiny after it announced on Wednesday that it planned to seek a secondary share listing in London to improve the liquidity of trading in its shares.

Mohammed Sharaf, DP World’s chief executive, admits that the fees he can charge container lines to use Jebel Ali are under pressure.

He says of his customers: “They’re saying, ‘My revenues are down the drain; my costs are high and there’s an empty facility there [in Bahrain]. What are you going to do about that?’”

The Gulf is one of several regions – others include south-east Asia, the Mediterranean and the Caribbean – where there is strong competition to handle trans-shipped containers.

The Bahrain port changes the market, which has been dominated by Jebel Ali, because it is the region’s most modern and one of only a handful with water deep enough to handle the latest, long-distance ships.

Steen Davidsen, managing director of Khalifa bin Salman, argues that it has significant advantages for lines seeking to serve markets such as Qatar, Iran, Iraq and Kuwait because it is far closer to them than Dubai is.

“The upper Gulf location makes this a very attractive market for the carriers,” Mr Davidsen says. “We like to think that whoever comes in here first [to trans-ship containers] gets an advantage over the rest.”

DP World continues to benefit from other advantages. Mr Sharaf points out that half the traffic through Jebel Ali goes by land either to Dubai or other emirates and is unlikely to shift to other ports.

Mr Davidsen agrees that Jebel Ali is bound to continue to dominate the region. Ports in Dubai handled just less than 12m TEUs in 2008, while Khalifa bin Salman’s capacity is only 2.5m.

But in the current environment, he believes no operator will be happy to see even a little business shift elsewhere.

“Nobody wants to see any volume go,” he adds.