DP World sees opportunities in inland ports
Dubai: DP World, the Nasdaq Dubai-listed ports operator, said it sees “great opportunities” in inland ports, logistics hubs, and industrial zones with added services as the company works on diversifying away from core business.
Sultan Bin Sulayem, DP World group chairman and chief executive officer, said the company in 2017 also plans to focus on growing its operations in emerging markets as well as positioning itself on the New Silk Road.
“We are diversifying to complement our core business of ports and terminals, developing logistics, industrial parks and zones, and marine services to complement what we do across the supply chain. Our positioning on the New Silk Way from our existing operations in China through Europe will also feature in our ongoing plans,” he said.
In an interview with Gulf News via email, Bin Sulayem said DP World will continue to play to its key area of maritime container ports, but that it sees opportunities in inland ports such as Kigali in Rwanda and in Kazakhstan.
“Inland transport, logistics hubs, and industrial zones with added complementary or related services will be very important for future growth in world trade,” he said.
Emerging markets
In 2017, the company expects to spend $1.2 billion, and invest into Jebel Ali (UAE), Prince Rupert (Canada), Berbera (Somaliland), Posorja (Ecuador), Dakar (Senegal), and London Gateway (UK).
DP World is also planning to focus on regions such as Latin America, Africa, and Russia where the company sees growing opportunities.
“Emerging markets, Africa, and Latin America will continue to be of particular focus but we will remain in developed markets across the world. Latin America remains an interesting proposition and opportunity for expansion, with a rising middle class demanding higher living standards and economic growth,” Bin Sulayem said.
He added, “Africa has some of the fastest growth rates in the world, low containerisation, and some wonderful opportunities. Russia, where we have our joint venture, is also a focus.”
The company in September signed a deal with the Russian Direct Investment Fund to look into investing in ports, special economic zones, and logistics facilities. The deal created a joint venture, DP World Russia, with the aim of identifying new terminal and port facilities in the country.
Investment in Middle East
In the UAE specifically, the company will continue to invest in Dubai’s Jebel Ali port, which operates at high levels of utilisation (82 per cent). Bin Sulayem said he expects to see stabilisation in Jebel Ali in 2017 after challenges last year.
“Jebel Ali was facing tough year-on-year comparables in the first nine months of 2016, but they became easier in the fourth quarter, and we have also seen improvement in global trade and the economy. However, it is too early to say that trade has fully recovered,” he said.
Also in the Middle East, the company sees future growth potential in Egypt. The chairman said the devaluation of the Egyptian pound and the shortage of dollars have “impacted almost all economic sectors in the country and, therefore, trade”. He pointed that DP World’s operations in Egypt bill in Egyptian pounds rather than US dollars.
‘Strong headwinds’
The company’s focus on emerging markets comes even as the chairman points out that those markets were negatively impacted in 2016 by currency volatility and lower commodity prices.
And Bin Sulayem said the overall industry is still facing “strong headwinds” this year including lower commodity prices, currency fluctuations, and political issues. In developed markets, one of the key challenges is lack of demand growth.
In 2016, volumes were subdued on the Asia-Europe trade route due to “lacklustre demand” in Europe, prompting port operators to scale back on capital expenditure.
“The liner shipping industry continued to be adversely affected by overcapacity, leading to sub-economic freight rates,” he said.
Another challenge facing trade in Europe is the UK’s decision to leave the European Union. Bin Sulayem said, however, DP World “has not seen any material changes to the UK trade since the Brexit vote in June 2016.”
He pointed out that the company’s UK ports have limited exposure to EU trade.
While such challenges are impacting trade growth, the chairman said he remained positive on the medium and long term growth outlook for the industry.
“As we look ahead into 2017, we expect our new developments in London Gateway [UK], Yarimca [Turkey], Rotterdam [Netherlands], Embraport [Brazil], and JNP Mumbai [India] to drive growth in our portfolio. Drewry [the maritime research firm] is forecasting global container growth of 2.4 per cent for 2017, and we expect to grow ahead of the market,” he said.
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