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Eastbound traffic on the trade climbed 11% month-on-month in October.
Despite some pain as they wean themselves away from oil dependency, Middle East Gulf Cooperation Council countries continue to support strong demand for containerised goods. Saudi Arabia has led from the front and turned to the debt market for a 17.5 billion dollar bond sale to maintain its economy, consumer confidence and consequently spending, shoring up container demand. Its debut sovereign bond sale in October was almost four times oversubscribed. This stoicism helped the Europe to Middle East and South Asia trade bounce back with vigour from a post-Ramadan slump, demonstrating the underlying strength of this trade.
Eastbound traffic on the trade climbed 11% month-on-month in October, with South Asia and the Middle East benefitting equally from the growth. Traffic on the fronthaul leg now stands at 331,000 teu, just shy of the high achieved in March 2016.
While not in double digits, westbound traffic still registered growth on the backhaul Middle East and South Asia to Europe leg, although Middle East loadings were wholly responsible for the increase. Middle East to Europe traffic increased by 8,000 teu m/m in October, while South Asia to Europe traffic dropped by 3,000 teu. Since the start of the year, Middle East loadings have remained relatively stable, whereas South Asia loadings have fluctuated much more - from a high of 160,000 teu in March to a low of 138,000 teu in October.
That said, both directions continue to show positive growth in the 12-month rolling average, which in October stood at 1.4% on the eastbound Europe to Middle East service; 8.7% on the eastbound South Asia to Europe service and also on the westbound Middle East to Europe service; and 6.4% on the South Asia to Europe service.
Keen to capitalise on the strength in this trade, ports in the Middle East are bringing additional capacity on line. In Iraq, the first phase of ICTSI’s new Basra Gate Terminal at Umm Qasr has been officially inaugurated, with a 200-metre quay served by two gantry cranes. On final build out the quay will stretch to 600 metres, offering 900,000 teu capacity. In Iran, Maersk Line has resumed its services to and from the country after a five-year absence.
Meanwhile, in Qatar, MSC’s Hamad Port Container Terminal 1 has marked its official opening with the completion of the first phase of the 7.8bn dolar port, with initial capacity of 2m teu. There is further capacity to come here too, with terminals 2 and 3 planned for 2020 completion, after which the port will have a handling capacity of 6m teu.
These port developments will cater for the anticipated increase in capacity on this trade, which has stabilised after the scaling back of services in August and September to offset the post-Ramadan drop in traffic. Eastbound Europe to Middle East capacity stood at 253,000 teu in November, up 9.1% y/y. While not yet back to the heady highs of 192,000 teu seen in July, capacity has been on an upward curve since September. Much the same picture can be seen on the Europe to South Asia service. Capacity is up 15.7% on this route.
Westbound services have followed the same trend, with a recovery in capacity to 179,000 teu for the South Asia to Europe route and to 123,000 teu on the Middle East to Europe route. However, this momentum could be stifled by pending service overhauls from alliance restructuring. Due to enter into force in April next year, both THE Alliance and the Ocean Alliance have announced their proposed networks, but vessel deployment details for each service loop have not been confirmed.
For now, though, the balanced rise in capacity and traffic proved positive for utilisation in October, which was 85% for the Europe to Middle East leg and 90% for Europe to South Asia services. Westbound utilisation also improved with Middle East to Europe sailings up to 56% utilisation in October, a record high for 2016.
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