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Saudi Arabia, UAE lead container trade in region

Saudi Arabia, UAE lead container trade in region

JEDDAH: Despite global dips, the container shipping trade saw the strongest – but still contracting – growth in the Indian subcontinent and Middle East regions at 5.1%. However, the global climate with respect to container trade dictates that, notwithstanding strong growth in the region, container liners must adopt new strategies for enhancing their performance in a new normal characterized by slowing container demand, according to a recently released report titled Sailing in Strong Winds: The New Normal in Global Trade and Container Shipping, by The Boston Consulting Group (BCG). The growth rates witnessed in the region was led by Saudi Arabia and the UAE who contributed 28% and 22% respectively in a total year-on-year increase in imports, mainly driven by chemical products.

The announcement of Saudi Vision 2030 and the National Transformation Plan in the second quarter of 2016 aimed to reduce Saudi Arabia’s continued dependency of oil and combat expected slowdown in GDP to revamp the scope of public investments, raise the private sector’s share in the economy and rationalize government expenditure is expected to play a vital role in further sustaining the contracting, but positive growth raters of the Kingdom’s shipping trade.

While in the UAE, industry imports have benefitted from a consistent strategy based on an intense diversification of the economy and investments in sectors such as hospitality, manufacturing, real estate, construction and financial services. The same growth figures were not evident on the global scale. Demand for containers picked up during 2014, but by the end of 2015, average global growth in the container-shipping trade was a disappointing 1.9%. Still, in a bid to boost scale and reduce slot costs, liners continued to invest in new and large vessels. This worsened the overcapacity that was already afflicting the market and pulled freight rates down to a new low. Giovanni Moscatelli, a Principal and lead for the Transport and Logistics practice at BCG, Middle East noted that “the growth of demand for container, lagged behind global gross domestic product for the first time in 2015.” To identify potential culprits behind the disappointing news for 2015, the report analyzed the performance (including import and export volumes) of six major trade routes, or trades, that collectively represent more than 80% of the total world container trade.