The UAE ports company Gulftainer has branched out into Saudi Arabia with a deal that increases the size of its operations by half.
The Sharjah-based company yesterday announced the acquisition of a 51 per cent stake in Gulf Stevedoring Contracting Company (GSCCO), a move that will give Gulftainer operating control over three terminals in Saudi Arabia. Two of the ports serve the industrial hub of Jubail; the third is in Jeddah on the Red Sea.
Gulftainer already operates in the UAE, Iraq and Brazil, and the deal increases the port capacity it operates from 4 million to 6 million 20-foot equivalent units (TEU) per annum.
"Saudi Arabia is a natural area for growth for us. There is a huge potential for growth in the container terminal business," said Badr Jafar,the vice chairman of Gulftainer and the chief executive of Crescent Enterprises, the UAE conglomerate that owns the company. He declined to disclose the value of the deal.
Mr Jafar anticipates Gulftainer's operations to expand significantly, as the company aims to increase its capacity to 10 million TEU within five years. Half of this growth is expected to come from the new Saudi assets, he added.
Backed by high oil prices, the kingdom has embarked on a programme of industrialisation that has turned the country into a major producer of petrochemicals, while other industries such as base metals are also being fostered.
Jubail is one of the two massive hubs that are the backbone to Saudi's industrial drive. As the focus shifts from producing basic materials to developing downstream industries, both Jubail and its Red Sea counterpart, Yanbu, are poised for further growth, necessitating a larger ports infrastructure.
"The Saudi economy is one of the strongest economies in the world," said Prince Abdulaziz bin Ahmed bin Abdulaziz Al Saud, GSCCO's chairman. "These three ports will be expanding significantly."
Mr Jafar believes the company's experience in handling large vessels will help it to grow in a difficult period for the shipping industry. Freight companies are tending towards larger ships to improve their profitability at a time when overcapacity is keeping margins low. This could make Gulftainer an attractive partner in ports that need to adapt to this trend.
"The cake won't be expanding, but we want a bigger part of it," said Mr Jafar.
With ports under operation on the kingdom's Arabian Gulf and Red Sea coasts, one way the company is seeking growth is by establishing a logistics infrastructure to connect Jubail and Janbu.
Gulftainer is also pursuing growth through further acquisitions and eyeing purchases or the management of ports in East Africa, Lebanon, Russia and the East Coast of the United States.
New deals are unlikely before next year, said Mr Jafar.
In the UAE, Gulftainer operates the container terminals of Sharjah, Ruwais and Khorfakkan.