DP World to Delay Jebel Ali Port Expansion

Posted by Joseph Keefe August 18, 2016

Company blames softer market conditions; plan to add 1.5 mln TEU to Terminal 3 delayed into 2017.

DP World, one of the world's largest port operators, is delaying the expansion of Dubai's Jebel Ali port, its main facility, because of softer market conditions, the company said on Thursday.

A plan to add 1.5 million 20-foot equivalent units (TEU) of annual capacity to Terminal 3 at Jebel Ali will be delayed into 2017, while expansion of Terminal 4 will also be slowed, DP World said without giving details.

The company had announced in July 2015 that it would invest $1.6 billion in Terminal 4, which was to be completed by 2018. Jebel Ali handles shipments not only for the United Arab Emirates but for much of the region.

Since last year, however, growth in the oil-rich economies of the Gulf has slowed because of low oil prices. Saudi Arabia's imports, for example, shrank 20 percent from a year earlier in May, according to official data released this week.

"After the 2009 financial crisis, trade helped support Dubai in part thanks to government stimulus in the region," said Dima Jardaneh, head of regional economic research at Standard Chartered. "Now Dubai's trade is feeling the impact of a contractionary economic environment and the absence of stimulus."

DP World's decision also reflected a subdued outlook for global trade flows. Expansion in the volume of world trade is expected to remain sluggish at 2.8 percent in 2016, unchanged from 2015, the World Trade Organisation forecast in April.

"(The) global trade environment remains challenging including for Jebel Ali port," DP World said on Thursday, adding that the company handled 7.4 million TEUs of cargo in the UAE during the first half of 2016, down 6 percent from a year ago.

The company had previously disclosed that its consolidated throughput for the first half - volumes at ports which the company controls around the world - was 14.6 million TEUs, down 1.4 percent.

DP World's decision may be a negative omen for several other ports in the region, which launched multi-billion dollar expansion plans when oil prices were high several years ago in efforts to become trans-shipment hubs for the Gulf.

Abu Dhabi has said it aims to increase the capacity of its new Khalifa Port, only about 50 kilometres (30 miles) down the coast from Jebel Ali, to 15 million TEUs by 2030 from 2.5 million TEUs at present, depending on demand. Qatar and Oman are expanding their ports.

Also on Thursday, DP World reported a 50 percent jump in net profit attributable to shareholders during the first half to $608 million, helped by the acquisitions of Dubai's Jebel Ali Free Zone and Canada's Fairview Terminal.

DP World's revenue for the first half was $2.09 billion, up from $1.90 billion a year earlier.