Executive Briefings

The Middle East - An Expanding Logistics Market

The Middle East suffered the economic slowdown less than most other parts of the world in 2008, but now this region is also feeling it. For example, international year-on-year air cargo volumes carried by Middle Eastern airlines dropped by 1.6% in November 2008. Furthermore, the oil price stands currently at approximately US$46 per barrel, compared with $147 per barrel in July, as the global economic crisis has reduced the demand for oil.

The historically buoyant air and sea freight volumes to and from Dubai, UAE, a major logistics hub both in the Middle East region and globally, is also under threat. China, whose economy has been slowing down recently, is a major market for Dubai's imports and exports, and this has fuelled the growing Middle East-Asia trade.

However, Dubai's sea freight container volumes grew by 17% in the first half of 2008, compared with the same period the previous year, up to 5.8m TEUs, continuing the double-digit growth that the port experienced in 2007. In that year, Dubai was the seventh largest port worldwide in terms of container volumes, and in early 2009 the annual capacity at Dubai's extensive Jebel Ali container terminal will be increased by 5m TEUs, up to 14m TEUs per year. Meanwhile Dubai Logistics City (DLC), an integrated logistics and multimodal transport platform, is under construction, which will include the Al Maktoum International Airport, due to open later this year.

A number of global and regional logistics providers with major operations in the Middle East, such as GAC Logistics (part of the diverse Gulf Agency Company (GAC) group), Aramex, Agility, TNT and others, see major opportunities, and have announced major expansion plans, both within the region and in other parts of the world, particularly Asia.

In 2008, Dubai, UAE based GAC Logistics is hoping to exceed the 25% growth it reported in 2007. GAC has reportedly invested approximately AED200m in acquisitions and expansion programs in Algeria and Australia for the provision of shipping services, and in Kazakhstan for oil logistics services.

The GAC Logistics Park in Jebel Ali, Dubai has undergone continuous expansion over the past 15 years, to meet growing demand, and it has been the key to the company's growth over that period. To augment operations at the park, GAC has reserved a 200,000 sq m plot at DLC.

Simon Rhodes, the Regional Logistics Manager at Middle East GAC Logistics, explained: "In 2007, GAC added new capacity with the acquisition of a 42,000 pallet warehouse in Jebel Ali, bringing the enlarged logistics park to over 150,000 sq m, and offering over 125,000 pallet positions. GAC Dubai is investing US$3.6m in an advanced hanging garment system to support future growth requirements, especially for our Marks & Spencer business."

TNT Express has announced the extension of its road network in the Middle East. Its destinations now include Lebanon, Jordan, Syria and Yemen. Further expansion of its services in India and China were also announced recently, as the company aims to capitalize on the growing trade between the Middle East and Asia. China is UAE's largest source of imports.

On TNT's recent expansion plans, Mark Woodcock, Sales & Commercial Director for TNT Express in the UAE, said: "Hundreds of tonnes of goods per year are transported from India and China by TNT. With the company's plans for further growth and improvement of its services in these regions, we look forward to offering our clients more robust services, especially when linking onto our Middle East road network. TNT's growth in emerging markets stands at over 18%, a figure to which delivery services in India, China and the Middle East markets have made a significant contribution."

The Kuwait headquartered 3PL Agility plans to extend its emerging markets acquisition drive. The company would also meet its 2008 revenue target of $7bn, despite slowing economies around the world, according to Tarek Sultan, the Agility Chairman. Agility, which wants to reduce reliance on troop supply contracts with the US Government, is eyeing markets in the Middle East, Asia and Africa, and hopes to increase income from Mexico and Brazil, according to Sultan. Agility and the Abu Dhabi based manufacturer Borouge have broken ground on a new logistics hub in Shanghai, that will receive more than 600,000 tonnes of polyolefin's (polypropylene and polyethylene) annually, shipped in bulk containers from Abu Dhabi.

Aramex plans to make several strategic acquisitions in China or Southeast Asia, as falling prices make takeovers increasingly appealing. According to Fadi Ghandour, the CEO of Aramex, the company has not been affected by the current economic crisis, and instead looks at the turmoil as the best opportunity to implement its acquisition plan into strategic markets.

Momentum Logistics, a subsidiary of Gulftainer, plans to invest over AED1bn in infrastructure development over the next seven years. The planned Sharjah International Logistics City will be the pioneer project for Momentum Logistics, and will complement similar projects across the Gulf, to cater for the growing demand for third party logistics services. The 700,000 sq m logistics city will be part of Sharjah's Al Sajaa industrial city, and will provide the necessary infrastructure for third party logistics when it opens in 2010. Momentum Logistics will offer a comprehensive range of transport and logistics services, which include freight forwarding, storage and container repair services, to clients looking to outsource their logistics requirements.

Danzas AEI Emirates, a joint venture between DHL and the UAE headquartered Al Tayer Group, plans to consolidate its Middle East operations, through the opening of its AED185m multi-purpose logistics facility in the Jebel Ali Free Zone, Dubai. DHL claims that the 80,000 sq m facility is the largest of its kind in the Middle East, and offers "the perfect platform for companies to profitably leverage their supply chains using the new hub as a global gateway."

With the major logistics infrastructure developments under way in the Middle East, particularly Dubai, further initiatives are expected to be announced over the next few years.
Transport Intelligence

The Middle East suffered the economic slowdown less than most other parts of the world in 2008, but now this region is also feeling it. For example, international year-on-year air cargo volumes carried by Middle Eastern airlines dropped by 1.6% in November 2008. Furthermore, the oil price stands currently at approximately US$46 per barrel, compared with $147 per barrel in July, as the global economic crisis has reduced the demand for oil.

The historically buoyant air and sea freight volumes to and from Dubai, UAE, a major logistics hub both in the Middle East region and globally, is also under threat. China, whose economy has been slowing down recently, is a major market for Dubai's imports and exports, and this has fuelled the growing Middle East-Asia trade.

However, Dubai's sea freight container volumes grew by 17% in the first half of 2008, compared with the same period the previous year, up to 5.8m TEUs, continuing the double-digit growth that the port experienced in 2007. In that year, Dubai was the seventh largest port worldwide in terms of container volumes, and in early 2009 the annual capacity at Dubai's extensive Jebel Ali container terminal will be increased by 5m TEUs, up to 14m TEUs per year. Meanwhile Dubai Logistics City (DLC), an integrated logistics and multimodal transport platform, is under construction, which will include the Al Maktoum International Airport, due to open later this year.

A number of global and regional logistics providers with major operations in the Middle East, such as GAC Logistics (part of the diverse Gulf Agency Company (GAC) group), Aramex, Agility, TNT and others, see major opportunities, and have announced major expansion plans, both within the region and in other parts of the world, particularly Asia.

In 2008, Dubai, UAE based GAC Logistics is hoping to exceed the 25% growth it reported in 2007. GAC has reportedly invested approximately AED200m in acquisitions and expansion programs in Algeria and Australia for the provision of shipping services, and in Kazakhstan for oil logistics services.

The GAC Logistics Park in Jebel Ali, Dubai has undergone continuous expansion over the past 15 years, to meet growing demand, and it has been the key to the company's growth over that period. To augment operations at the park, GAC has reserved a 200,000 sq m plot at DLC.

Simon Rhodes, the Regional Logistics Manager at Middle East GAC Logistics, explained: "In 2007, GAC added new capacity with the acquisition of a 42,000 pallet warehouse in Jebel Ali, bringing the enlarged logistics park to over 150,000 sq m, and offering over 125,000 pallet positions. GAC Dubai is investing US$3.6m in an advanced hanging garment system to support future growth requirements, especially for our Marks & Spencer business."

TNT Express has announced the extension of its road network in the Middle East. Its destinations now include Lebanon, Jordan, Syria and Yemen. Further expansion of its services in India and China were also announced recently, as the company aims to capitalize on the growing trade between the Middle East and Asia. China is UAE's largest source of imports.

On TNT's recent expansion plans, Mark Woodcock, Sales & Commercial Director for TNT Express in the UAE, said: "Hundreds of tonnes of goods per year are transported from India and China by TNT. With the company's plans for further growth and improvement of its services in these regions, we look forward to offering our clients more robust services, especially when linking onto our Middle East road network. TNT's growth in emerging markets stands at over 18%, a figure to which delivery services in India, China and the Middle East markets have made a significant contribution."

The Kuwait headquartered 3PL Agility plans to extend its emerging markets acquisition drive. The company would also meet its 2008 revenue target of $7bn, despite slowing economies around the world, according to Tarek Sultan, the Agility Chairman. Agility, which wants to reduce reliance on troop supply contracts with the US Government, is eyeing markets in the Middle East, Asia and Africa, and hopes to increase income from Mexico and Brazil, according to Sultan. Agility and the Abu Dhabi based manufacturer Borouge have broken ground on a new logistics hub in Shanghai, that will receive more than 600,000 tonnes of polyolefin's (polypropylene and polyethylene) annually, shipped in bulk containers from Abu Dhabi.

Aramex plans to make several strategic acquisitions in China or Southeast Asia, as falling prices make takeovers increasingly appealing. According to Fadi Ghandour, the CEO of Aramex, the company has not been affected by the current economic crisis, and instead looks at the turmoil as the best opportunity to implement its acquisition plan into strategic markets.

Momentum Logistics, a subsidiary of Gulftainer, plans to invest over AED1bn in infrastructure development over the next seven years. The planned Sharjah International Logistics City will be the pioneer project for Momentum Logistics, and will complement similar projects across the Gulf, to cater for the growing demand for third party logistics services. The 700,000 sq m logistics city will be part of Sharjah's Al Sajaa industrial city, and will provide the necessary infrastructure for third party logistics when it opens in 2010. Momentum Logistics will offer a comprehensive range of transport and logistics services, which include freight forwarding, storage and container repair services, to clients looking to outsource their logistics requirements.

Danzas AEI Emirates, a joint venture between DHL and the UAE headquartered Al Tayer Group, plans to consolidate its Middle East operations, through the opening of its AED185m multi-purpose logistics facility in the Jebel Ali Free Zone, Dubai. DHL claims that the 80,000 sq m facility is the largest of its kind in the Middle East, and offers "the perfect platform for companies to profitably leverage their supply chains using the new hub as a global gateway."

With the major logistics infrastructure developments under way in the Middle East, particularly Dubai, further initiatives are expected to be announced over the next few years.
Transport Intelligence