With global cargo volumes projected to surge this year coupled with an increasing global ship fleet, shipping companies foresee a problem of terminal congestion at the world’s ports. The problem stems from the fact only a few terminals have rolled out expansion plans to match the expected surge in cargo volumes.
In an interview with Emirates Business, Mohamed El Alfy, Emirates Shipping Line Senior Vice-President, Middle East, Africa and Mediterranean Region, said the industry was looking forward to great fortunes this year, but terminal congestion and high fuel prices would pose the biggest challenges.
How was the company’s performance last year compared to 2006 when you began operations?
Emirates Shipping Line is registered in Dubai Maritime City and is headquartered in Dubai and Hong Kong. The company’s operations have grown by 30 per cent since its inception in 2006. Last year, our success was attributed to eight new services we launched during the previous 12 months.
We are expecting 20 per cent growth this year and we are in the process of doubling our container capacity within the next two years to boost our agency network, which currently spans more than 40 countries. We currently have 13 vessels on charter, which are deployed on various services.
As an innovative company, we plan and expand our services in niche markets. Last month we joined the Mediterranean India Express (MIX) service operated by United Arab Shipping Company (UASC) linking major ports of the Indian Subcontinent and the West Mediterranean coast via the Middle East. We hope this will boost our operations further.
How would you describe last year’s performance of the containerised cargo shipping industry in the Middle East compared to 2006?
The Middle East has experienced sustainable high growth year after year, directly benefiting from the continuous fast economic developments in the region, as well as expanding trade lanes to and from the Middle East. The continuous rise in oil prices and the reinvestment of the increased oil revenues within the region have contributed to greater consumption and a higher affluence level.
The sustained growth is thereby driven by the incremental liquidity resulting in an affable business climate.
On the other hand, the focused implementation of infrastructure developments in several Gulf states, as well as the shift of imports from traditional Europe to the Far East and Indian Subcontinent have also accounted for the growth of shipping performance in the area.
A rapid boost in bilateral trade has been seen between the Middle East and the Far East, especially China. Last year the cargo shipments in the region alone grew by double digits and economic growth continues to be buoyant. Our outlook continues to be robust and optimistic in 2008 and beyond.
From your experience, which are some of the most lucrative sea routes?
The Far East-Indian Subcontinent-Middle East route facilitated impressive trade growth, fuelled by rising demand for Asian products in various high-growth regions, specifically the Middle East.
We see the trend continuing in 2008 and beyond, especially as China continues to post strong demand. For its part, Emirates Shipping Line will continue to strategically position its global services to China, the Indian Subcontinent, the Middle East and other key areas of the world.
The Asia to Europe trade was a big driver in 2007. This was primarily driven by a surge in exports from China to Europe, though several other countries in Asia also contributed to this upswing. The other key driver was the strong Euro currency, which encouraged imports as well as the fast developing economies of Russia and Eastern Europe.
How do you compare the demand and rates for dry cargo ships in 2007 to that in previous years? What will it be in 2008?
Despite all forecasts to the contrary, cargo movements have been very high during 2007. Cargo space demands have outpaced ship supply resulting in an increase in charter-hires of all class of container ships in 2007. We foresee a strong growth of cargo in 2008.
A large ship supply is expected to enter the market in 2008, yet we believe that cargo will grow more or less greater than the ship supply resulting in stable rates of ships.
What likely impact will the current slowdown in the US economy and sub-prime woes have on the shipping industry in the Middle East?
Under the concept of globalisation, all economies of the world are interconnected. The recent economic downturn in the US has impacted business sectors specifically those that have a direct impact with US inbound and outbound cargo. As cargo shipments to/from US have been reduced, it is reasonable to expect ship owners will shift some tonnage to non-US trades.
This may impact the supply situation of other trade lanes. However, the economic growth within the Intra-Asia countries continues to be strong, which could outweigh the effects of the US slowdown. China, India and other major economies continue to show increased independence with GDP forecasts still aggressive.
These economic forces are unlikely to create a downturn. World trade continues to be strong; the incredible demand from China in particular will continue.
What are some of the main factors you think will continue to hold the cargo shipping business in the Middle East this year?
The region continues to be driven by the phenomenal growth of consumption demands and trade lanes in Far East and the Indian Subcontinent. The key reasons for growth is a growing middle class in China and India, as well as growing affluence in the Middle East driven by development projects in the region and admirable economic policies that have fuelled consumption.
How much do you think the shipping industry contributes to national economy?
Transportation is a key component to any economy. Efficient transportation is today backing modern communications such as telephone and internet by offering a choice to the market and thus boosting trade not only in the country but also developing countries as regional trade hubs. Singapore, Hong Kong, and Dubai are all examples of wealth created through shipping hubs.
What are the major challenges currently facing the shipping business and how best do you think they can be overcome?
The industry is currently monitoring the effects of an increasingly volatile stock market, mainly driven by the possibility of a US recession. Additionally terminal congestion will be a big challenge for the shipping industry as infrastructural development fails to match the growing global demand and an increasing ship fleet.
Do you see a problem of port congestion occurring in Dubai?
Dubai has always been proactive in analysing trade growth and plans itself well ahead of time. It has an efficient system, which is professionally run and keeps service and productivity high on its list of priorities.
Who are your main competitors in the region and how have you managed to survive competition from other major players especially being new in the market?
Our competition is with container shipping lines. We believe the main competitive edge can be narrowed down to a few basic areas: people, who we consider as our software and are the backbone of our relationships in the market; reliability in what we do – be it schedules or customer and vendor interaction; a customer-interactive and reactive IT system; a fast decision-making process based on a lateral organisation in place.
Mohammed El Alfy
Senior Vice-President, Emirates Shipping Line
Mohamed El Alfy is a seasoned shipping professional with a career spanning more than 20 years. Since starting his career in the shipping business in 1987, he has worked for multinational shipping companies in Europe, Africa, the Middle East and the US. In February 2006, he joined Emirates Shipping Line as senior Vice-President for the Middle East, Africa and Mediterranean.
The company has a global outlook and aims to set up a new long-haul container shipping company, which will react to market conditions and is responsive to customers on an individual basis.
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