Khalifa Port – Behind Its Container Volumes Surge

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Khalifa Port has seen its volumes jump on the back of concession agreements with COSCO Shipping Ports and Mediterranean Shipping Company.

This growth will continue and undoubtedly grow stronger when COSCO’s and MSC’s terminals open properly for business at the port. Growth in China’s Belt and Road strategy, along with Khalifa owner Abu Dhabi Ports’ (ADP) ambitious development of its trade free zone, will only add to the momentum. There are similarities between this model and neighboring port Jebel Ali’s hugely successful strategy in Dubai.

This is all part of a bigger picture, namely ADP’s five-year strategy to boost UAE’s trade flow and drive the diversification of the Emirati economy.

Khalifa Port saw its container volumes soar by an impressive 82.4 percent in the first half of 2019, hitting 1.14 million TEU. A major reason for this growth is the concession agreement signed between ADP and MSC in May 2018. That agreement kicked off the ocean carrier’s plans to gradually shift some of its container volumes in the region to Khalifa Port, a move that started in July 2018. This initiative includes a concession agreement for MSC to establish a new container terminal at the port. This is forecast to increase the port’s capacity from 2.5 million TEU in 2017 to 5.3 million in 2020 and 8.5 million by 2023.

Container growth is expected to be further fueled by the full opening of COSCO Shipping Ports Abu Dhabi Container Terminal, which started trial operations in Q2 this year and will become fully operational in Q1 2019. The deep-water terminal includes the largest container freight station in the Middle East and will start with a handling capacity of 1.5 million TEU, with a total design capacity of 2.5 million TEU.

Above, our figures drill down into the growth Khalifa has enjoyed. The monthly vessel TEU deployed has risen sharply from under 300,000 TEU in June 2018 to over 700,000 TEU in September 2019. This growth coincides with MSC’s decision to start its shift of volumes to the port. While Khalifa’s TEU activity is still a long way off that of Jebel Ali’s Container Terminal Megamax 1, our figures show that Khalifa overtook both Jebel Ali Terminal 1 Quay 3 and Jebel Ali Terminal 3 Quay 10 in this respect around April this year.

Our data also show how MSC and COSCO are choosing Khalifa over Jebel Ali. COSCO’s TEU deployment in Khalifa hit more than 2.5 million TEU. Its TEU activity at Khalifa is greater than in Jebel Ali’s Container Terminal Megamax 1 and Jebel Ali Terminal 3 Quay 10, which both register TEU activity of under 1 million TEU, and also at Jebel Ali Terminal 1 Quay 3, where TEU deployed is under 2 million TEU.

MSC’s TEU activity has reached just over 3 million TEU at Khalifa – dwarfing its TEU deployment in Jebel Ali’s Terminal 3 Quay 10 and Terminal 1 Quay 3.

Another factor driving the volumes at Khalifa Port is the greater number of ultra large container ships (ULCS) that its main operators are using to call at the port. Since around April, most of COSCO’s dominant vessel class used at the port is ULCS. Importantly, its new deep-water terminal at Khalifa has a water depth of 16.5 meters, allowing it to accommodate vessel carrying in excess of 20,000 TEU.

And while MSC predominantly uses post Panamax vessels to call at Khalifa, since July its use of the ULCS class has started to grow. Khalifa’s other major operator, Maersk, also recently introduced ULCS calls at the port in August.

COSCO clearly has an interest in growing its trade within the Middle East. Our data show that its share of the Asia-ISC and Middle East trade lane reached over 18 percent in October this year and is fast growing as its trade share was only around 11 percent in July 2017. Its share of this trade eclipses its shares of the other major trades in October 2019, which fall behind at around 9 percent for Asia-Med, 15 percent for Asia-North Europe, under 12 percent for Asia-USEC and around 8 percent for Asia-USWC.

This can only bode well for the carrier’s investment and its co-operation in Khalifa. This also ties in with the opening of its terminal here, which will likely escalate its share of the Asia-Middle East trade even further.

The interest in Khalifa Port exhibited by COSCO and MSC could easily be mirrored by other ocean carriers because of its Khalifa Industrial Zone Abu Dhabi is a free-trade zone, just like Jebel Ali. This will undoubtedly be a pull for other lines and shippers with its economic benefits and advantages to becoming an industrial and logistics hub in the region.

And like Jebel Ali, the port complex has a focus on efficiency and technological advancement. In 2017, it launched Maqta Gateway, a port community platform that allows all data and document flow to be fully integrated with all stakeholders. It is also investing in blockchain and automation.

Khalifa has huge potential going forward, especially as it is set to be a hub port in the China Belt and Road trade lane, with connections to all the major trade hubs along this interconnection.