Saudi Arabia Shipping Report Q3 2012

The outlook for Saudi Arabia is currently a strong one.

The country benefited from elevated oil prices through 2011 and the government, influenced by the Arab Spring which has toppled regimes in other regional countries and destabilised others, is pumping some of the surplus from this into a massive stimulus package.

The infrastructure investment and higher disposable incomes this will cause will help growth continue at the country's maritime ports.

Specific investments in expanding these maritime facilities, and in projects such as the Saudi Landbridge, will further boost throughputs.

Headline Industry Data

2012 Jeddah Islamic Port (JIP) total tonnage throughput growth forecast 12.5%, and to average 3.9% per annum to 2016.

2012 Jeddah Islamic Port container throughput growth forecast 5.5%, and to average 4.0% per annum to 2016.

2012 total trade real growth forecast at 2.8%, and to average 2.7% over the medium term.

Key Industry Trends JIP Seeks Metals Hub Status BMI believes that if the Saudi Arabian Jeddah Islamic Port lists itself as a delivery point for the London Metal Exchange (LME), there could be serious upside risk to our forecasts for the facility.

Furthermore, Jeddah could turn into a key metals hub.

Riyadh Container Backlog To Be Addressed A container backlog at Riyadh dry port is expected to be resolved in the immediate future.

About 7,000 containers were delayed at the facility in May as new US contractor Bass International failed to cope with the port's custom clearance programme.

A senior Saudi official said that an independent Chinese company had been hired to provide the requisite handling equipment needed to reduce the backlog.

Official Opening Of Red Sea Gateway Terminal, Saudi Arabia The Saudi Transport Minister officially opened the new Red Sea Gateway Terminal at Jeddah.

Funded, built and operated by privately owned Saudi Industrial Services firm SISCO-Red Sea Gateway, it is the first of its kind in the kingdom.

Key Risks To Outlook A major risk to our outlook would come from a major downturn in the West.

We are already projecting an economic contraction of 0.5% in the eurozone in 2012.

If this intensified and the demand for oil was reduced, it would hit our macroeconomic forecasts for Saudi Arabia.

However, we currently expect high oil prices to continue in 2012, not least from sanctions against Iran which preclude the EU and US from importing Iranian crude, increasing demand for Saudi volumes.

Iran is the source of another threat to our outlook: if the pariah state were to go through with its threats to try and close the Strait of Hormuz it would impact Gulf ports such as the Port of Dammam.

Equally, were Israel to unilaterally strike against the Islamic Republic it could greatly increase regional instability which would affect volumes through Saudi ports.

Risks to the upside for our forecasts come from Saudi Arabia's significant infrastructure investment programme, the Landbridge in particular.

This offers upside to our forecasts for the Jeddah and Dammam ports.

Jeddah's application to be a metals hub for the London Metals Exchange also offers upside potential to the facility's tonnage throughput.