Global Investment House – Kuwait - MENA Shipping Overview-Robust growth in international trade over the last decade and increasing freight rates are driving the gains in the shipping industry. Freight rates are driven by the interplay of demand for commodities and supply of carrier vessels.
Demand Dynamics
Increased demand for energy from the expansionary BRIC (Brazil, Russia, India and China) economies is expected to drive the demand for crude oil upwards despite deceleration in the western economies’ growth. The (International Energy Agency) IEA has estimated a 1.5% YoY increase of in world energy consumption in 2007 and further forecasted a YoY increase of 2.4% in 2008. Accordingly, the worldwide oil consumption is expected to increase from 85.9mn bbls per day in 2007 to 87.9mn bbls per day in 2008. The population projections for the period up to 2030 indicates the growth in population of the OECD countries at a 22 year (2008-2030) CAGR of 0.4%from the current 1.2bn to 1.3bn, whereas that of the non-OECD countries should increase at a 22 year (2008-2030) CAGR of 1.4% from 4.9bn to 6.6bn. Resultantly, the world demand is set to grow to 118mn bbls per day by 2030. This increase in demand necessitates the transport of oil and redistribution of shipping movements to cater to the ever increasing consumption.
Industry themes
• Continued demand for oil and dry bulk transportation from emerging and developing countries is linked to strong demand in raw commodities (such as oil, iron ore and coal).
• The short supply of capacities help increase the freight rates through 2010.
• Port and docking infrastructure remains a contributor to congestion, however although congestion is decreasing, freight rates rise.
Trends in trade in the MENA region
IMF expects that the Middle East and Central Asia Department (MCD) region is expected to remain comparatively resilient to global uncertainty. According to the IMF, the short-term outlook remains favorable and has changed little compared with its projections in the Oct’07 Regional Economic Outlook:
• In oil exporters, growth is expected to remain at about 6.3%, with a pickup in oil production compensating for a moderate slowdown in the non-oil sectors. Large investments made in previous years should support productivity gains and sustain high growth. In the GCC countries, given the comfortable foreign asset position, government-planned investment programs are likely to be maintained even if oil prices decline. But the global credit squeeze could affect the pace of project implementation.
• The short and medium-term growth prospects of emerging market economies are favorable, provided governments continue to pursue fiscal consolidation and structural reforms to boost business confidence and improve the investment climate.
The inflationary pressures in these regions that have accompanied the economic expansion of the past few years have shown no respite. In oil-producing countries that peg their currencies to the U.S. dollar, past and prospective monetary easing could increase inflationary pressures.
Crude oil shipments
The UNCTAD estimates Crude oil seaborne shipments to have grown in 2006 and reached 1.9bn tons. Major loading areas are mainly located in developing regions, with Western Asia continuing to be at the top of the list with 897.2mn tons, followed by West Africa (221mn tons), South America’s northern and eastern seaboards (133.9mn tons), North Africa (133.8mn tons), the Caribbean and Central America (120.9mn tons), and Central Africa (109.8mn tons). Major unloading areas are located in developed regions, with North American ports estimated to have received 532.9mn tons and European and Japanese ports unloading respectively 446.9mn tons and 201mn tons. Major unloading developing regions included South and East Asia with 439.4mn tons and South-East Asia with 126.3mn tons.
Petroleum product shipments
According to UNCTAD, world shipments of oil products continued to grow in 2006 and estimated it to have reached 683.0mn tons. Overall, shipments of oil products were affected by the global refinery capacity as well as by the milder weather conditions which impact on seasonal fuel consumption. Growth has been recorded in various parts of the world. Imports into North America remained strong in the first six months of 2006 owing to the continued impact of the 2005 hurricane season on United States refineries. However, during the last quarter of 2006, a drop in United States oil product imports was recorded. While imports into Europe also increased, China was the largest source of product tanker demand, with most of the supply being sourced from Latin America.
LNG shipments
LNG shipments increased by 6.1% in 2005 and grew at a faster rate of 11.8% in 2006 to reach 211.1 bcm. Accordingly, LNG shipments expressed as a proportion of world production have increased over the past two years. Japan continued to be one of the main destinations of LNG shipments, with its 2005 LNG imports marginally decreasing before expanding in 2006 by 7.2% to reach 81.9 bcm. Sizeable importers included the United States, Spain, France and India.
Players in MENA
Gulf Navigation Holding PJSC (GNH) is engaged in marine transportation of commodities, chartering vessels, ship agency and marine transport. GNH was converted into a corporation from the erstwhile Gulf Navigation group that started in Muscat, Sultanate of Oman in 2001 as Gulf Navigation & Brokerage LLC to serve existing trading interests of the partners and as a national partner for the Omani Government strategic investment in the tanker industry. GNH operates a fleet of 9 vessels and has in their order book further six new builds, of which, two are scheduled for delivery in 2008 and four to be delivered in 2009. In addition, it has two crew boats in service and two more crew boats will be added to the fleet within six months.
Qatar Shipping Company Q.S.C (QSHS QD – Qatar) is a Qatar-based shipping company engaged in hiring, selling, leasing and operation of ships and other means of marine transport and construction services. The company owns and operates 20 transportation vessels, such as clean petroleum product tankers, crude oil tankers, liquefied petroleum gas vessels and liquefied natural gas carriers and 33 offshore services vessels which include pilot boats, standby/safety vessels, anchor handling vessels, anchor handling thug and supply vessels and dynamic positioning diving services vessels.
MENA Carriers' fleet size ranking
(Source: Various Company reports & Global Research)
National Shipping Co. of Saudi Arabia (NSCSA AB – Saudi Arabia) is a joint stock company based in the Kingdom of Saudi Arabia and is involved in the purchase, chartering and operation of vessels for the transportation of passengers and different types of cargo. The Company owns and operates a number of VLCCs (very large crude carriers) which are operating in various strategic ports and operates chemical carriers and roll-on/roll-off container vessels operating in the liner trades between the Middle East, North Africa and the Indian Subcontinent. The Company's services include crude oil transportation, chemical transportation, general cargo transportation, liquefied petroleum gas transportation and ship management. NSCSA operates a fleet of 29 vessels.
Qatar Gas Transport Company (NAKILAT) (QGTS QD – Qatar) is a Qatar-based public shareholding company engaged in the business of gas transportation through direct acquisition of ocean vessels and investing in joint ventures with other parties. The Company operates and leases a fleet of liquefied natural gas (LNG) and gas derivative vessels with matching dry docking facilities. QGTS operates a fleet of 29 Q-Max and Q-Flex LNG/LPG carrier vessels.
ETA Ascon Group constitutes a UAE based joint venture between the Al Ghurair Group and Amana Investment Hong Kong, Ltd. Headquartered in the United Arab Emirates and incorporated in 1978 ETA Ascon encompasses 23 branches and associate office throughout the world. Annual turnover ranges from US$1bn to US$2bn with activities ranging from consumer products & retail, contracting & materials, manufacturing, maintenance & service, automotive, travel & leisure, civil & construction to general trading & shipping. The group has about 60 bulk carriers and tankers.
Gulf Energy Maritime (GEM) Company is a UAE based closely held company promoted by Emirates National Oil Co. (35% shareholding), International Petroleum Investment Corp. (30% shareholding), Oman Oil Co. (30% shareholding) and Thales Group (5% shareholding) engaged in the transport of oil and chemicals. It has a fleet of 21 vessels constituting of 10 Panamax, 2 Aframax, 6 Medium range vessels and 3 Handysize vessels.
United Arab Shipping Company (UASC) is a Kuwait based closely held company. UASC through its subsidiaries and joint ventures provides a range of shipping related services, which include shipping agencies, freight forwarding, land transportation, sea/air cargo, petrochemical transportation, chartering, container repairs and storage. UASC owns and operates a fleet of 44 ships in containership and tanker segments of seaborne carriage.
© 2008 Al Bawaba (www.albawaba.com)
