The Gulf Supply

Chain Landscape
[2005 - 2015]

www.gpca.org.ae

www.chemicalmanagement.co.uk

 2010 by Gulf Petrochemicals and Chemicals Association.

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This

report was prepared for the Gulf Petrochemicals and Chemicals Association (GPCA) by Chemical Management

Resources Limited. The information contained herein is prepared on the basis of information that is either publicly available
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Aforesaid information has not been independently verified or otherwise examined to determine its accuracy, completeness
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with respect to the use of or for damages resulting from the use of any information contained in this report. Neither GPCA
nor Chemical Management Resources Limited represent or warrant that any assumed conditions will come to pass.

ABOUT THE GULF PETROCHEMICALS AND CHEMI CALS ASSOCIATION

The Gulf Petrochemicals and Chemicals Association (GPCA) is a dedicated and non-profit making association serving all its members with a
variety of data, technical assistance and resources required by the petrochemicals and chemicals industry. GPCAs mission is singular and
specific in that it intends to support the growth and sustainable development of the petrochemical and chemical industries in the Gulf in
partnership with its members and stakeholders and be both a sounding board and a meeting point for debate and discussion. It is the first
such association to represent the interests of the industry in the Middle East and it has brought a major dimension to its task by creating
both a forum for discussion and a place where likeminded people can meet and share concepts and ideas. Since its inception in March 2006,
the GPCA has earned the enviable reputation for steering the regional industry towards a whole new level of co-operation and raising the
standard in terms of common ground interests.

Additional information is available at http://www.gpca.org.ae

CONTENTS

PAGE NO.

About The Gulf Petrochemicals and Chemicals Association

1. Executive summaries

1.1

Overall

1.2

Petrochemicals

1.3

LNG

10

1.4

Container shipping

11

1.5

Chemical tankers

14

1.6

LPG

15

1.7

Dry Bulk

17

1.8

Land transportation

18

1.9

Ports

20

1.10

Freight rates and bunker prices

27

The Gulf Supply Chain Landscape (2005- 2015)

1.

EXECUTIVE SUMMARIES

1.1

OVERALL

Executive summaries

The GCC and Iran will increase their capacity of the 16 commodity products
specified in this Study by 68% from 2009 2015. This will add 69.1 mt of annual
capacity.

The GCC will increase capacity by 70%, adding 51.6 mt to its annual capacity.

The region has been the least affected by the global economic crisis at a time
when global chemical production is currently the same as Q1 2007, chemical
production in the Middle East has grown by 21% over the same period. In contrast,
North Americas chemical production is 90% of its Q1 2007 level.

Despite being eroded by the need to move to heavier petrochemical feedstocks, the
fundamental cost competitiveness of the Middle East will continue. This will support
an export-led boom.

Exports from the GCC and Iran will increase by 56% from 2009 2015, bringing
export volumes to 70.4 mt in 2015. GCC exports will increase by 50%, from 38.2 mt
in 2009 to 57.2 mt in 2015.

Shipping capacity is forecast to be able meet the export boom (Table 1.1). However,
shortages of containers are forecast due to increased demand as trade volumes
recover. Supply has been restricted by slow steaming practices. Chinese container
manufacturers are responding to the demand but selling prices for containers are
being pushed up to 20-year highs of $2,750 from $2,000 at the end of 2009.

The two largest Chinese manufacturers have a theoretical capacity of 3.5 million
TEU but expect to produce only 1.35 million in TEU in 2010 as operations were
scaled back or shutdown during the recession.

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Table 1.1
Utilisation of fleets by petrochemical cargoes

Ship Type

Global
Fleet
(vessels)

Capacity

2010 Orderbook
(% of Existing
fleet)

Shipping
Market
2010-2015

Utilisation By
Petrochemicals

Cause for
Concern?

LNG

339

48.8 million m3

12.4%

Overcapacity

100%

No

LPG

1,102

19.1 million m3

11.5%

Overcapacity

100%

No

Dry Bulk

7,288

469 mt dwt

~15%

Overcapacity

< 3%

No

Cellular

4,652

12.7 million TEU

Overcapacity
except Containers

2-5%

No
Yes

39%

< 5%

Chemical

3,832

76.8 mt dwt

11.8%

Balanced

65%

No

The major transhipment ports of Jebel Ali, Jeddah and Salalah will retain their
dominance. However, the significant developments in the Saudi Arabian Gulf ports
will reduce their dependence on Jebel Ali as a transhipment hub for the Upper Gulf.
Larger vessels will be able to call at the Gulf Saudi Arabian ports.

Road transport will continue to be highly fragmented. Intermodal development is

embryonic but offers an increasing array of opportunities as the region-wide rail
network develops.

Managing volume is the key challenge for commodities; managing hazard is the key
challenge for derivatives. Each requires different skills, assets and management
expertise.

The Saudi Landbridge will, in time, offer a strategic alternative for container traffic
currently using the Straits of Hormuz. The extent to which it creates a new trade
route will be determined by its cost competitiveness and convenience compared
with the shipping alternative.

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

1.2

Executive summaries

PETROCHEMICALS

The shipping sector has responded to the 15.4 mt increase in annual export and
import demand from the GCC and Iran since 2005, albeit with intermittent tightness.
Exports are forecast to be 70.4 mt in 2015, an increase of 25.2 mt, reflecting the
major capacity increase in the regions export-oriented production.

Annual capacity in the GCC and Iran (for the 16 commodity products considered in
this Study) increased by 37.0 mt between 2005 and 2009 with exports increasing by
15.4 mt. Capacity will increase by 69.1 mt from 102.1 mt in 2009 to 171.2 mt in
2015.

Exports are forecast to increase significantly, from 45.2 mt in 2009 to 70.4 mt in

2015, representing a 25.2 mt annual increase.

Imports will remain at approximately 3-4 mtpa. Benzene imports into Saudi Arabia
have been the largest annual import flow since 2005.

For the GCC alone, annual capacity (for the 16 commodity products considered in
this Study) increased by 20.5 mt, from 53.5 mt in 2005 to 74.0 mt in 2009. GCC
capacity will increase by 51.6 mt from 74.0 mt in 2009 to 125.6 mt in 2015.

Exports increased by 10.6 mt, from 27.6 mt in 2005 to 38.2 in 2009 and are forecast
to increase significantly, from 38.2 mt in 2009 to 57.2 mt in 2015, representing a
19.0 mt increase.

Historically high oil prices reinforce the competitiveness of commodity chemical

production in the GCC and the region will have an enduring commitment to exports.

Reduced crude oil production rates following the 2008 economic crisis constrained
the availability of associated gas which affected operations at some petrochemical
plants. The competing demand for natural gas for power generation and fuel has
further restricted supply. Off-shore exploration and the development of nonassociated gas have therefore increased in terms of a strategic priority. The shift to
heavier feedstocks produces more co-products and is creating a broader portfolio of
lower volume, specialty derivatives requiring more specialist storage, distribution
and supply chain management.

These downstream derivatives, which are not considered in this Study, have much
more marginal economics than the commodities in this Study. The Middle East
feedstock advantage often disappears beyond the third conversion stage from the
cracker. Being smaller volume and hazardous liquids, they require different supply
chain management skills. Managing volume is the key challenge for commodities;
managing hazard is the key challenge for derivatives.

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

The greatest capacity uncertainty is the development of Irans petrochemical,

chemical and fertiliser industries.

Low gas prices, which are subsidised to stimulate economic development and
sustain international competitiveness, remain well below global benchmark levels.
Qatars gas price is $1.50-$2.25/mmBtu while Saudi Arabias gas price of
$0.75/mmBtu is the lowest in region. In June 2010, the global minimum price for
large quantities of natural gas outside the Middle East is below $5/mmBtu (North
America). Saudi Arabias gas price is expected to increase in 2012. A two-tier
pricing structure, based on a higher benchmark, is possible.

Propane and butane, drawn from natural gas and refinery sources, are increasingly
important feedstock streams and are expected to also have their prices reset. Saudi
Arabian propane is subsidised to attract propylene derivative investments. Saudi
producers receive a 30% discount to prevailing Japanese naphtha prices.

Gas limitations in the Middle East, and the desire in some member states for greater
downstream diversification, are focusing attention on heavier gas and liquid mixedfeeds such as ethane/propane, ethane/butane, LPG, condensates and naphtha.
Though one of the least cost-advantaged choices of feedstock in the Middle East,
naphtha yields a broader product slate than ethane. Consequently, it provides a
better basis for specialty chemical manufacturing, which being more labour intensive
than petrochemicals, creates more jobs. The proportion of ethane in the Saudi
Arabian feedstock mix is expected to shrink by 8-10% over the next six years.

The ethane-based crackers of Petro-Rabigh, Borouge II and Ras Laffan Olefins

have all recently come on-stream. Other new crackers (Sharq, Yansab, Saudi
Kayan, Saudi Polymers, etc) are based on ethane/propane or ethane/butane. The
Borouge III cracker, planned for start-up at the end of 2013, will be ethane-fed.

Several newer crackers and plants were delayed or have had problems stabilising
operations. Several are not fully operational owing to construction and equipment
problems, process control issues and timing differences between derivative and
cracker plants completion dates. This had led to lower operating rates and a delay to
the market impact of these significant, new incremental volumes.

In the GCC and Iran, 69.1 mt of annual capacity will be added between 2009 and
2015, bringing total annual capacity to 171.2 mt (Table 1.2).

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Table 1.2
GCC and Iran capacity summary 2005-2015 by product
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Ethylene
Propylene
Benzene
Paraxylene
Methanol
MEG
Styrene
LDPE
LLDPE
HDPE
PP
PS
PTA
PET
PVC
Ammonia
Urea
MTBE

10376 11118 12519 14669 16822 20197 25067 29062 29062 31252
2050 2320 2830 4550
5895
7030
8665
9200
9400 10120
1790 1865 2085 2440
2885
3350
3510
3585
4265
4520
885 1020 1395 1770
1970
3409
3409
3409
4109
5474
8016 8016 9586 11941 12366 14747 15247 15247 16047 17447
3530 4055 4580 5080
6500
7955
9260
9260
9590 10825
1145 1145 1145 1400
2270
2970
2970
2970
3130
3295
705
705
705
705
1710
2250
2837
2904
2952
3602
2735 2885 2885 3035
3860
5540
5730
6797
6887
7777
3245 3715 3805 3930
4885
7022
8317
8837
9105
9995
1800 1925 2510 3125
4995
6310
7150
7660
7810
9600
255
255
255
255
255
309
309
509
509
509
1120 1120 1120 1120
1420
1720
1900
3000
4200
4200
130
380
680
740
1290
2100
2325
3175
3595
3595
622
622
622
652
727
867
1037
1187
1187
1187
9763 12183 12248 13151 13401 13731 15531 16596 18196 18217
12168 13843 15838 15838 16071 18026 18276 19101 21621 22596
4825 4825 4825 4825
4825
4865
4865
4865
5515
5695
65160 71997 79633 89226 102147 122398 136405 147364 157180 169906
Source: Chemical Management Resources Limited, Nexant, producers, analysis of public data

2015 Increase
CAGR
Increase
2009-2015 2009-2015 2009-2015
32252
92%
11.5%
15430
10120
72%
9.4%
4225
4520
57%
7.8%
1635
5474
178%
18.6%
3504
17447
41%
5.9%
5081
10925
68%
9.0%
4425
3295
45%
6.4%
1025
3602
111%
13.2%
1892
7977
107%
12.9%
4117
9995
105%
12.7%
5110
9600
92%
11.5%
4605
509
100%
12.2%
254
4200
196%
19.8%
2780
3595
179%
18.6%
2305
1187
63%
8.5%
460
18217
36%
5.3%
4816
22596
41%
5.8%
6525
5695
18%
2.8%
870
171206
68%
9.0%
69059

In the GCC alone, 51.6 mt of annual capacity will be added between 2009 and 2015,
bringing total annual capacity to 125.6 mt (Table 1.3).

Table 1.3
GCC Capacity Summary 2005-2015 by Product
2005

2006

2007

2008

2009

2010

2011

2012

2013

Ethylene
Propylene
Benzene
Paraxylene
Methanol
MEG
Styrene
LDPE
LLDPE
HDPE
PP
PS
PTA
PET
PVC
Ammonia
Urea
MTBE

2014

2015

9360 9516 9784 10257 12015 15265 19515 21265 21265 23455 24455
1720 1820 2180 3585
4890
6025
7600
8070
8270
8990
8990
1320 1350 1355 1495
1940
2405
2565
2640
3170
3425
3425
385
385
385
385
585
2024
2024
2024
2724
4089
4089
6236 6236 6566 8511
8936
9667 10167 10167 10967 10967 10967
3420 3745 4070 4170
5590
6770
7300
7300
7300
8205
8305
1050 1050 1050 1305
1875
2275
2275
2275
2275
2275
2275
580
580
580
580
915
1075
1512
1579
1627
1977
1977
2410 2410 2410 2410
3085
4765
4955
5415
5505
6395
6595
2820 2840 2840 2955
3760
5297
6142
6662
6930
7820
7820
1470 1525 1880 2265
3985
5300
6140
6650
6650
8290
8290
175
175
175
175
175
175
175
375
375
375
375
420
420
420
420
420
420
600
1700
2900
2900
2900
100
100
400
460
830
1245
1470
2320
2740
2740
2740
387
387
387
387
387
387
387
387
387
387
387
7598 8663 8663 8576
8826
9156 10806 11341 12261 12282 12282
9748 10348 11268 11268 11501 12101 12101 12101 13551 14526 14526
4325 4325 4325 4325
4325
4365
4365
4365
5015
5195
5195
53524 55875 58738 63529 74040 88717 100099 106636 113912 124293 125593
Source: Chemical Management Resources Limited, Nexant, producers, analysis of public data

Gulf Petrochemicals and Chemicals Association

Increase
CAGR
kt Increase
2009-2015 2009-2015 2009-2015
104%
12.6%
12440
84%
10.7%
4100
77%
9.9%
1485
599%
38.3%
3504
23%
3.5%
2031
49%
6.8%
2715
21%
3.3%
400
116%
13.7%
1062
114%
13.5%
3510
108%
13.0%
4060
108%
13.0%
4305
114%
13.5%
200
590%
38.0%
2480
230%
22.0%
1910
0.0%
39%
5.7%
3456
26%
4.0%
3025
20%
3.1%
870
70%
9.2%
51553

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Exports from the GCC and Iran will increase by 25.2 mt from 2009-2015 with the 8.5
mt increase in polyethylene being the largest export gain (Table 1.4). Total exports
of polyethylene are forecast to be 16.0 mt in 2015.

Table 1.4
GCC and Iran exports by product 2005-2015
2005

2006

2015 Increase
CAGR
kt Increase
2009-2015 2009-2015 2009-2015
Ethylene
523
457
763
856
799
1146
1110
1310
1310
1310
1310
64%
8.6%
510
Propylene
259
265
242
223
249
267
291
303
326
336
336
35%
5.1%
86
Benzene
771
799
612
592
794
815
815
815
815
1070
1165
47%
6.6%
371
Paraxylene
417
300
133
317
674
1637
1837
1212
1212
2577
2577
282%
25.0%
1903
Methanol
4848 5170 7140 8493 10217 11615 12422 12386 12427 13205 13227
29%
4.4%
3010
MEG
3509 3771 4033 4521
5232
7370
8750
8750
8750
9655
9755
86%
10.9%
4523
Styrene
796
824
819
969
1578
1950
1950
1950
1950
1950
1950
24%
3.6%
372
PE
5701 5970 6850 5955
7484 10799 12302 13391 13749 15816 15996
114%
13.5%
8512
PP
968
882
882 1890
3037
3963
4201
4558
4558
6058
6058
100%
12.2%
3022
PS
71
33
65
65
65
65
65
120
120
120
120
85%
10.8%
55
PTA
208
164
179
20
20
20
20
400
500
500
500
2400%
71.0%
480
PET
49
300
290
564
565
990
990
990
1440
1440
1440
155%
16.9%
875
PVC
115
114
78
75
80
125
155
155
155
155
155
94%
11.7%
75
Ammonia
741 1095 1346 1496
1528
1635
1619
1613
1619
1612
1619
6%
1.0%
91
Urea
7036 8949 10150 7203
9688 10900 10810 10846 11310 11346 11310
17%
2.6%
1622
MTBE
3740 3723 3508 3247
3190
2885
2885
2885
2885
2885
2885
-10%
-1.7%
-305
29752 32816 37089 36485 45200 56181 60222 61684 63125 70034 70402
56%
7.7%
25202
Source: Chemical Management Resources Limited, UN Comtrade, UNSD, DESA, GTA, Port Authorities, Selected producers

2007

2008

2009

2010

2011

2012

2013

2014

Exports from the GCC alone will increase by 19.0 mt from 2009-2015 with the 7.3 mt
increase in polyethylene being the largest export gain (Table 1.5). Total exports of
polyethylene are forecast to be 13.4 mt in 2015.

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Table 1.5
GCC Exports by product 2005-2015
2005

2006

2015 Increase
CAGR
kt Increase
2009-2015 2009-2015 2009-2015
Ethylene
465
286
626
627
559
900
832
920
920
920
920
65%
8.7%
361
Propylene
255
260
235
213
239
257
281
292
314
324
324
36%
5.2%
85
Benzene
264
258
339
232
344
365
365
365
365
620
715
108%
13.0%
371
Paraxylene
49
11
7
364
1327
1527
902
902
2267
2267
523%
35.6%
1903
Methanol
4067 4251 5145 6157
7262
7215
7722
7686
7727
7705
7727
6%
1.0%
465
MEG
3507 3771 4018 4184
4632
6520
7250
7250
7250
8155
8255
78%
10.1%
3623
Styrene
796
824
819
969
1578
1950
1950
1950
1950
1950
1950
24%
3.6%
372
PE
5656 5829 6067 5093
6137
8961 10165 10950 11308 13225 13405
118%
13.9%
7269
PP
956
863
832 1840
2987
3663
3901
4258
4258
5758
5758
93%
11.6%
2772
PS
63
33
65
65
65
65
65
120
120
120
120
85%
10.8%
55
PTA
208
164
179
20
20
20
20
400
500
500
500
2400%
71.0%
480
PET
21
28
190
464
465
890
890
890
1340
1340
1340
188%
19.3%
875
PVC
100
88
53
50
50
75
75
75
75
75
75
50%
7.0%
25
Ammonia
505
732 1086 1046
1078
1135
1119
1113
1119
1112
1119
4%
0.6%
41
Urea
7029 8941 9650 6703
9188
9900
9810
9846
9810
9846
9810
7%
1.1%
622
MTBE
3740 3723 3508 3247
3190
2885
2885
2885
2885
2885
2885
-10%
-1.7%
-305
27632 30100 32823 30916 38157 46127 48857 49902 50843 56802 57170
50%
7.0%
19013
Source: Chemical Management Resources Limited, UN Comtrade, UNSD, DESA, GTA, Port Authorities, GPIC, Selected producers

2007

2008

2009

2010

2011

2012

2013

2014

Saudi Arabia is the dominant exporter in the region although 2.5 mtpa of polymers
are consumed within Saudi Arabia. This is consistent with Saudi Arabias capacity
dominance. In 2009, 52.4% of the Kingdoms capacity of 48.7 mt (for the specified
products in the Study) was exported, equivalent to 25.5 kt (Table 1.6).

Table 1.6
Exports by GCC Member State and Iran

2005

2006

CAGR
2009-2015
Iran
2120 2716 4266 5569
7043 10054 11366 11782 12282 13232 13232
11.1%
Kuwait
1000 2189 2070 2176
2520
4010
4210
4210
4510
4510
4510
10.2%
Qatar
4108 4495 5569 2487
4627
5197
5502
5502
5502
5502
5877
4.1%
KSA
20191 19957 21371 21234 25451 28692 30231 31690 31916 31916 31916
3.8%
Bahrain
1008 1112 1048 1128
1220
1210
1126
1134
1126
1133
1126
-1.3%
Oman
823 1860 2104 2894
3457
4936
5621
5199
5301
5301
5301
7.4%
UAE
502
487
661
997
882
2083
2166
2166
2489
8441
8441
45.7%
Total
29752 32816 37089 36485 45200 56181 60222 61684 63125 70034 70402
7.7%
Source: Chemical Management Resources Limited, UN Comtrade, UNSD, DESA, GTA, Port Authorities, GPIC, Selected producers

2007

2008

2009

2010

2011

2012

2013

2014

2015

On a global level, projected fleet capacities will be capable of handling the

significant increase in GGC and Iranian chemical, petrochemical and fertiliser

Gulf Petrochemicals and Chemicals Association

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

exports. Rates will reflect the guaranteed cargoes on which ship owners know they
can depend and many of these are enshrined in long-term COAs.

1.3

A note of caution - the supply chain is only as strong as its weakest link and
continuing shortages and market tensions resulting from the shortage of containers
are foreseen.

LNG

Since the 1970s, the share of natural gas in world energy consumption has
increased from 18% in 1970 to 24% in 2009. Due partly to its clean fuel credentials,
demand is forecast to grow faster than overall energy demand, leading to a further
increase in its share of the total energy mix.

Global LNG imports in 2009 were up 10% up on 2009. Asia has traditionally been
the key LNG importer but Europe has recently seen the most rapid import growth.
The UK increased imports ten-fold. LNG imports by China and India have also
increased significantly.

Planned LNG liquefaction plants will increase capacity by 82% by 2015. Qatar is the
largest production, with 61.8 mtpa of production capacity, followed by Indonesia with
36.5 mtpa.

For LNG carriers, most of the demand will come from China due to major increases
in its regasification capabilities. On the supply side, Australia has ambitious
liquefaction projects. These two countries may account for over 60% of the future
demand for LNG carriers.

Demand for LNG vessels is expected to grow by 6% p.a. from 2010-2015, from 43.9
million cbm in 2010 to 58.7 million cbm in 2015. This compares with 7.4% p.a. since
2000.

The LNG fleet has recently been expanding rapidly due to the massive expansion of
LNG projects in Qatar and new projects in Oman and Dubai. Total capacity
increased by 17% in 2009, following a 29% increase in 2008. Based on scheduled
deliveries from the current orderbook, and assuming that LNG carriers are scrapped
after 40 years, the LNG fleet will expand from 358 vessels in 2010 to 369 vessels by
2012. Thereafter, demolition reduces the fleet by a net 11 vessels.

Since the last Qatari orders in February 2007, the orderbook has shrunk rapidly. At
the time, 140 vessels were on order worldwide with a combined capacity of 24
million cbm, representing 88% of the capacity of the then existing fleet. The dearth
of new orders is attributed to the withdrawal of speculative ordering, LNG project
delays and finance constraints.

The future LNG fleet supply/demand balance indicates that no new vessels (apart
from those on order) are required until 2014. Assuming all liquefaction plants in the
GCC and Iran become operational by 2015, a total of 119 LNG vessels will be

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required. If NITCs order of 6 LNG vessels from China is confirmed, no further

vessels will be required for long-term contracts until 2015. There are at least 37
uncommitted LNG carriers in the existing fleet and orderbook.

The expansion of GCC LNG production has been crucial to the growth of LNG
shipping trade as much of the production from the region is destined for export over
long distances. Limited pipeline infrastructure in the region has created additional
opportunities for shipping. The GCC has recently needed to import LNG as fuel for
power generating. These new LNG import volumes may help absorb surplus
tonnage.

The purchasing power of GCC LNG producers over LNG shipowners is high due to
regions large-scale liquefaction production. The preferential rates agreed will put
GCC producers at a competitive advantage over smaller LNG producers with
weaker bargaining power. With the worlds largest LNG owner based in the Qatar,
the region could be influential in driving the lowest-cost operating rates in global
LNG shipping.

GCCs shipping capacity is dominated by Qatars two major LNG operators,

Qatargas and RasGas, through their shipping arm Nakilat. In September 2010,
Nakilat will have 25 wholly-owned carriers and 29 jointly-owned ones in service. It
will then replace MISC (part-owned by LNG producer, Petronas) as the largest LNG
ship owner in the world.

High capital costs and demanding operational standards set LNG carriers apart and
create high entry barriers. New orders are traditionally counter-matched against firm,
long-term contract commitments.

Key challenges for operators include crew availability and costs, which are
traditionally high due to specialist training required for the vessels. Other challenges
include increasing lay-ups and a highly volatile spot market.

The oversupply of the past two years has led to some owners exploring FPSO
(Floating Production Storage and Offloading) employment for surplus vessels.
Others have operated at below break-even rates.

Long-term charters for a 125-155,000 m3 LNG carriers have been fixed in the $5085,000/day range. Attempts by new entrants to secure long-term employment, and
the extension of vessel lives, are expected to put strong downward pressure on LNG
freight rates in the short-term. Long-term charter rates for these vessels are
expected to be $75,000/day.

1.4

CONTAINER SHIPPING
Despite the marked container traffic reduction worldwide in 2009, the Middle East
region has been less exposed with only a slight decline of 1%.

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Global container traffic is back in growth mode in 2010, with current forecasts of a
5% annual demand increase globally and a 4% increase in the Middle East region.
For the period 2011-15, global container traffic is expected to be 7% p.a.

There is currently a large order book for new ships in the container shipping sector,
representing 39% of the existing fleet. The global fleet is expected to return to a
higher growth of 8-9% p.a. in 2010 and 2011 before slowing down between 2012
and 2014.

The container shipping sector is characterised by cyclicality, intense competition and

lack of differentiation between shipping companies. High capital requirements set
high barriers for new entrants. Customers possess strong buying power

The acute imbalances between inbound and outbound volumes of loaded containers
on many trade routes create the following dynamics:

Freight rates in the dominant, heavy direction tend to cover the vast majority of the
two-way costs

Shipping companies must reposition millions of empty containers back from the
importing region

To the exporting region, and are prepared to subsidise freight rates for these backhaul cargoes

Any change in the structural imbalance between inbound and outbound volumes of
loaded

Containers has a profound impact on relative freight rates between inbound and
outbound

Volumes and on the level of subsidisation of one by the other.

The pricing behaviour of container shipping companies has changed following their
mounting losses in 2009. An ethos of expanding market share by discounting prices
is now one focuses on securing profit margins by the collaborative withdrawal of
shipping capacity and the demolition, or temporary lay-ups, of vessels.

A very large number of wayport container shipping services are offered on the
routes from the Middle East to the Far East and Europe. In April, growth in the
westbound Asia to Europe trade increased by 25 per cent year-on-year to reach 1.1
million TEU. This compared with a year-on-year increase of 21% in Q1 2010. For
the eastbound Asia-Europe trade, April volumes increased by 7% year-on-year, to
reach 0.47 million TEU. Year-on-year volumes in Q1 2010 rose 23%. Volumes still
lag behind pre-recession levels. UASC is the largest Middle East based company
offering container shipping services in the region.

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UAE and Saudi Arabia command the largest container traffic volumes in the region.
With the Salalah container transhipment hub, Oman also ranks among the largest
container markets. Iran has been one of the fastest-growing container shipping
markets.

The major containerised export commodities from the Middle East are polymers
(particularly polyethylene and polypropylene), converted plastics, aluminium,
iron/steel products, machinery and textiles.

The increase in exports of the 5 major dry cargo polymers (PE, PP, PS, PET and
PVC) will mean the equivalent of another 0.6 million TEU being shipped in
containers from the Middle East, on top of current demand of 0.7 million TEU.

Major issues in GCC container shipping are:

Smaller ports no longer served only by feeder vessels

Greater role of Bandar Abbas as a container shipping hub

More container shipping options in the GCC

Lesser port congestion

Container imbalance

Piracy in the Gulf of Aden and off Somalia

Impact on sea-borne shipping of the Saudi Landbridge

The Saudi Landbridge is unlikely to be completed by 2015 and therefore this

infrastructure change will not significantly affect GCC exporters and importers in the
next five years. Saudi exporters and importers may consider the Landbridge as an
alternative or contingency route to move containers to Europe and North America
post-2015 but the shipping route via the Gulf will continue to be more costcompetitive and more popular.

There is substantial container shipping capacity to and from the Middle East and
carriers are introducing more, and larger, container ships. The future supply and
demand situation in container shipping is likely to favour GCC container exporters
with enough capacity and competitive freight rates in the next few years.

Changes in the container imbalance using the Saudi Gulf ports (Jubail and
Dammam) may have a negative impact on shippers. If and when Saudi Arabia
moves away from its current container import-based imbalance to an export-based
imbalance, Saudi Arabian exporters will bear the extra cost of repositioning empty
containers back to the region, which will increase shipping rates.

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1.5

Executive summaries

CHEMICAL TANKERS

The substantial capacity build-up of chemical, petrochemical and fertiliser projects in

the GCC and Iran, combined with the regions feedstock advantage, is creating new
global patterns of trade. A decline in sea-borne chemical trade from the USA and
Europe into the Asia Pacific is expected. Conversely, the trade between the GCC
and Asia, as well as in the intra-Asia region will continue to expand, creating
additional demand for different types of ships tailored for both the long haul GCC-FE
(Far East) trade and short haul Intra-Asia trade.

After hitting the bottom of the trough in 2009, chemical tanker demand is expected
to recover in 2010. For the period 2010-2015, demand for vessels of over 30,000
dwt (deadweight) is expect to have the highest growth due to the anticipated trade
growth on the GCC-Asia route.

A record number of chemical tankers were delivered in 2008 and 2009. Despite the
current shrinking orderbook, the recently ordered vessels are expected to inflate the
chemical tanker fleet by 11.8% over the period of 2010-2015.

Chemical tanker fleet ownership is fragmented with the top five owners representing
13% of global capacity. Among the top 5 companies, 89% of the fleet are IMO II or
IMO I and 51% of their fleet has stainless steel ships.

Chemical vessels incur high maintenance costs, with charterers imposing stringent
inspection procedures on shipowners. As the supply of chemical vessels increases,
the choice offered to charterers will also increase, but manning shortages will
continue to be a concern.

The revised MARPOL Annex II regulation requires vegetable oils to be carried either
in IMO II chemical tankers or in certain IMO III tankers that meet the IMO II tanker
requirements. This heightened level of regulation for vegetable oils is symptomatic
of the greater inspection and safety requirements on all vessels and is accelerating
scrapping.

With increased exports from the GCC, the cargo imbalance on the GCC-Asia route
will be more acute. It will require more vessels to ballast into the GCC. Repositioning
from Singapore, for example, requires 12 days in ballast. Difficulties could be
experienced getting parcel tankers into the Gulf as backhaul cargoes from Asia
become fewer - the significant backhaul of phosphoric acid to India, for example,
has just finished. This implies higher freight rates for chemical tankers on the head
haul to Asia. Increased purchasing power will partly compensate for higher costs.
Larger vessels are expected to be deployed on the GCC-Asia route, now many of
the ports have been expanded.

The market downturn in 2009 resulted in the formation of more shipping pools.
Pools offer shipowners protection from poor spot markets as they give them

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collective bargaining power and improve vessel utilisation rate. The formation of
pools is likely to have a long-term impact on the contract markets as their collective
power allows previously small shipowners/operators to compete with large
operators. This competition should lead to more competitive COA rates.

The chemical tanker time charter market is relatively inactive, particularly in the
stainless IMO II/III range. These vessels are traditionally built by owners for their
core fleet requirements which are dedicated to liner-type trades. Rates showed an
upward trend from 2005 as market demand strengthened but declined steeply in
2009.

Availability of abundant tonnage was the major factor delaying recovery in the
chemical tanker sector. The market is expected to weaken marginally for the rest of
2010. The removal of single-hull vessels from the fleet will cause some tightness in
the market, but this effect will become apparent only towards the end of 2010. From
2011 onwards, chemical tanker freight rates are expected to pick up.

The GCC shipping market is primarily contract-driven, with COAs (Contract of

Affreightment) estimated to account for 85% of total volumes. Identified contractual
shipping volumes suggest that coated chemical tankers between 40,000 and 46,000
dwt are the primary vessel sizes being employed.

With the latest surge in GCC petrochemical capacity, the chemical tanker orderbook
responded strongly. Of particular note is the large number of orders for vessels of
40-50,000 dwt. The growth in the larger vessel sizes reflects a response to the
longer-haul demand from rising GCC petrochemical capacity, as well as increasing
voyage distances for the clean petroleum trade amid constrained refinery utilisation
in America and Europe.

The growth potential of Asia is expected to bring a continuing high level of demand
for GCC chemical supplies in the future. This will stimulate future shipping demand
from the region.

1.6

LPG

Global LPG production in 2008 was 241.1 mt up, 3.1% year-on-year due to a 12.1%
production increase in the GCC and production increases in West and Central
Europe. The top five global LPG producers were the US (46.8 mt), Saudi Arabia
(23.3 mt), China (18.6 mt), Russia (10.9 mt) and Canada (9.6 mt). These countries
accounted for 45.2% of global production. Saudi Arabias production increased by
10.8%; Qatar production was 5.7 mt, up 76.9%.

LPG availability is driven by gas production and oil refining rates. The GCC is the
largest global source of LPG with Saudi Arabia the leading producer and exporter.
Despite production levels rising, vertical integration in the Kingdom will consume
much of the increase. New projects for domestic gas use, and increases in oil
refining capacity, will increase the GCCs capacity. The North Field, off the coast of

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Qatar, is expected to bring up steady volumes of LPG output in the short-to-medium

term.

LPG is used for fuel and feedstock demand for both is increasing sharply in the
GCC. Of all its uses, petrochemical feedstock demand increased the most, by 7.1%
in 2008. Saudi Arabian LPG consumption increased by 20.5% in 2008. With
consumption of 11.1 mt, the Kingdom became one of the top five global LPG
consumers for the first time.

The GCC is the major exporter of LPG, with almost 50% of global LPG exports
coming from the GCC. The region exported more than 88% of its LPG to Asia
Pacific markets in 2009. However, exports declined by 11.8% to 26.5 mt in 2009.
Asia is already the world's largest regional consumer of LPG, accounting for more
than 30% of global demand.

Japan is the largest global importer of LPG and demand is expected to rise by 1.4%
p.a. to 2015, when it will reach 17.8 mt p.a. India and Indonesia are the new
emerging LPG markets for GCC suppliers but Japan, as Asias largest LPG
consumer, will continue to be the primary export market for the GCC and will
continue to be the largest global importer. This will be the main driver of LPG
shipping demand.

The seaborne trade in LPG includes LPG, ammonia and petrochemical gases. The
LPG fleet can be categorised into three segments:

Fully refrigerated (or FR) LPG carriers (Long Haul)

Semi refrigerated (or SR) LPG carriers (Long Haul and Short Haul)

Pressurised (or PR) LPG carriers (Short Haul)

In 2009, the FR fleet was 241 vessels, totalling 15 million cbm. The SR fleet at the
end of 2009 was 305 vessels, with 2.9 million cbm of capacity and the PR fleet was
554 vessels with 1.6 million cbm of capacity.

In April 2010, the global LPG fleet was 1,102 vessels with 19.1 million cbm of
capacity. All segments saw a decline in carrying capacity. The orderbook was 11.5%
of the current fleet - the fleet is projected to have 1,234 vessels, amounting to 21
million cbm capacity, in 2015. There is a growing imbalance between increasingly
limited LPG cargoes and tonnage availability, the latter resulting from the massive
influx of ships ordered between 2006 and 2008.

Over the next three years, 52 vessels, with 1.1 million cbm of capacity, are
scheduled for delivery. 91 vessels, with 1.5 million cbm of capacity, are scheduled
for delivery in 2010. This will create very significant surplus.

Tanker pools are a common phenomenon to achieve efficiency of scale in LPG

shipping operations. They offer protection from poor spot markets as they give
collective bargaining power to ship owners and improve vessel utilisation rates.

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Average construction time is 24 months. However, 11 of the 16 ships delivered in

Q1 2010 were ordered 36 months previously. Manning costs are relatively high as
specialised crew are needed. Retention of quality staff is the short term challenge;
sourcing skilled seamen is the medium term concern.

Seaborne trade of LPG decreased by 9.6% to 13.1 million cubic metres in 2009 on
account of the global economic slowdown. Asia accounted for 93% of seaborne
LPG trade from the GCC.

Charter rates peaked in 2006 when demand exceeded supply. Charter rates are
expected to rise gradually from 2010-15 but will not reach 2006 levels.

Despite LPG demand is forecast to increase at 7.1% p.a. from 2010-14, the huge
influx of vessels that are scheduled to enter the fleet over the next couple of years is
ensure a good availability of shipping to meet the increasing shipping demand of the
GCC.

1.7

DRY BULK

Seaborne dry bulk trade fell by 2% to 2.96 billion tonnes in 2009. Despite weakness
in iron ore trade, overall dry bulk seaborne recovered in Q1 2010, supported by
improved shipments of coal and grains. GCC dry bulk exports and imports are
relatively limited in global terms and do not drive the global dry bulk shipping market.
As a minor dry bulk trade route, there is a risk that vessels may be withdrawn to
meet strong demand on the major routes but view this risk as remote, given the
long-term and structural oversupply in the dry bulk market.

The world dry bulk fleet is divided into six major cargo-carrying defined categories:
Very Large Ore Carrier (VLOC), Capesize, Post-Panamax, Panamax, Handymax
and Handysize. It consists of 7,288 vessels with 469 million dwt of capacity. 55,000
dwt Supramaxs complete the fleet portfolio.

The dry bulk shipping sector is highly cyclical with freight rates and vessel prices
fluctuating widely. Speculative ship ownership is a feature of the dry bulk sector, as
entry barriers and operating costs are relatively low. There is no market premium for
more highly specified vessels. As vessel size declines, the number of opportunistic
trading opportunities increases, although smaller ships focus on regional rather than
global trade.

Time charter rates for Capesize vessels peaked at over $170,000/day in 2008.
Rates collapsed to near-record lows in 2008 but by early 2010 had recovered to
$40,000-50,000/day, which is the 2000-2010 average.

On rates, the outlook for Capesize looks poor a record 35 vessels were delivered
in Q1 2010 with 2 scrapped. Oversupply, and new quarterly pricing on iron ore
contracts, will reduce rates. The outlook is similarly weak for Panamax and

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Supramax. More positively, Handymax (40-59,999 dwt) rates have firmed is

response to good demand from commodity transport. Rates are expected to rise to
$17,000/day in 2010, above those of larger vessels. Overall, oversupply will cause
rates to reduce from 2010-2010. Capesize and VLOCs are highly exposed to
Chinese demand for high volume, base commodities such as iron ore.

1.8

In world scale terms, the GCC is neither a major resource supplier of dry bulk
goods, nor a major importer. As a result, the GCC has no major dry bulk ship
owners. Irans IRISL is one of the major operators, with a fleet of 115 vessels, 46 of
which are dry bulk carriers with 2.3 million dwt. A new shipping line to Brazil has
recently been agreed, which will start supplying Irans phosphate and urea
production to Brazils fertiliser industry.

In an attempt to control the overall value chain, a number of large scale, raw
material and commodity producers have diversified into dry bulk shipping. These
include Rio Tinto and BHP Billiton. Average shipping costs in the large iron ore
market have been $28/tonne. Vale believes this can be halved by leveraging their
economy of scale and operating their own fleets.

Port infrastructure improvements in the GCC and elsewhere have increased lot
sizes and enabled the use of larger vessels. In the iron ore sector, traditional 100150,000 dwt Capesize carriers are being replaced new generation VLOC with
200,000+ dwt and 45,000 dwt Handymax carriers are being replaced by 40-59,999
dwt Supramax carriers.

No significant dry bulk shipping constraints are forecast for the export or import of
GCC chemicals, petrochemicals and fertilisers for 2010-2015.

One important note the forecasted oversupply is based on all orders being
delivered on time. As with petrochemical projects, it is inevitable that there will be
some delivery delays and orderbook cancellations due to finance availability, weaker
than expected trade, competition, changed strategic priorities, etc. 10% of the
orderbook has historically been delayed although this has increased since 2007.

LAND TRANSPORTATION

The market for the transportation of liquid chemicals in road tankers is small
compared to the volumes of solid chemicals, which are mainly polymers. This is due
to the relatively limited production of specialty liquid chemicals, a less developed
distributor network and limited demand from local formulators.

The road transportation market can be split into two categories:

Direct deliveries to customers. These customers can be either located within the GCC
or in neighbouring countries such as Turkey, Egypt, Jordan, Syria or Lebanon.

Export transfers from production plants to the local port.

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The region has been cautious with its acceptance of outsourced 3PL providers. The
leading technical know-how that some of these providers have developed in other
regional markets remains under-exploited in the Middle East.

With the volumes of hazardous specialty chemicals increasing as a consequence of

heavier cracker feedstocks, a higher level of product management is being
developed. Managing volume is the key challenge for polymers; managing hazard is
the key challenge for specialty liquids.

The best-known road transportation operators include:

Agility, based in Kuwait

Tristar, a subsidiary of Agility

Crescent Transportation, part of the Rezayat Group and based in Dammam, Globe
Marine Services, based in Dammam, Saudi Arabia Kanoo Terminal Services KTS
(Kanoo/Maersk joint venture which is part of the Bahrain based Yusuf Bin Ahmed
Kanoo Group)

Al Majdouie

The major trade partners for road-delivered chemicals, petrochemical and fertilisers
outside the GCC are Turkey, Jordan, Syria and Lebanon.

For the products considered in this Study, GCC exports to Turkey in 2009 were 587
kt of polymer and 337 kt of liquids.

Saudi Arabia is by far the largest exporter by land. It is largest road transportation
market and home to the largest producer in the region. In 2008, this producer had
30 service providers engaged to deliver 200,000 TEUs to 208 discharge ports in 75
countries. 2-2.5 mtpa of chemicals and polymers are delivered using land
transportation.

For the period 2010-2015, truck and flatbed availability is not seen to be a
constraining factor. Containers may, as now, have relatively limited availability

Because there is no integrated railway system, intermodal utilisation in the region is

currently focused on straightforward ship-truck transfers. There are no genuinely
multimodal operations for bulk liquids and solids.

The advent of the Saudi Landbridge and the construction of a Gulf Railway rail
freight system will create new opportunities for multimodal bulk liquid and dry bulk
logistics.

For intermodal road-and-rail combinations, the conditions necessary for

competitiveness are:

Large volumes

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1.9

Executive summaries

Long haulage distances

Low value per tonne of product transported

Backhaul loads

Regular and predictable movements between a small number of fixed points

Limited alternative delivery options

Direct deliveries from or into a customers warehouse or manufacturing facilities. A

single road delivery from the rail discharge point or to the rail loading point can
usually be accommodated for cost competitiveness. Two road deliveries - one at
either end of the rail movement

Will usually make intermodal rail/road uncompetitive compared with the road-only
alternative.
Multimodal transport alternatives will be developed for dry and liquid bulk chemicals
leading European practitioners of multimodal chemicals logistics are working with
local partners to develop an infrastructure and service capability in the GCC.

PORTS

Driven by the need to export its hydrocarbon natural resources and import industrial
and consumer goods, the Gulf has invested more than $40 billion in ports and
related infrastructure in the past decade.

There are 72 ports of various descriptions in the GCC and Iran. The region is home
to DP World, which now ranks as the fourth largest global port and terminal operator
with nearly 49 operational terminals, 12 major new developments across 31
countries and a consolidated throughput of 25.6 million TEU in 2009.

Middle East ports saw volumes drop by 5-10% in 2009 Dubai saw handling
volumes down 6.1%, according to Gulf Business.

As trade levels dropped away in late 2008 and 2009, there was a crisis of
confidence, and of financing, over the viability of many multi-billion dollar port
investments in the GCC. Despite this, $46.5 billion of port investments were under
way or planned in the GCC, Iran and Iraq in 2009. A further $11.5 billion of projects
were delayed.

Nevertheless, major investment decisions are being taken where port investments
are crucial to creating or sustaining competitiveness or long-term development.
Qatar is the largest investor in ports with $12 billion of projects with Saudi Arabia
investing $9.5 billion

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The recent global recovery of demand and prices has combined with new exportoriented production volumes in the GCC and Iran to put pressure back on the supply
chain infrastructure. Container shortages are evident.

The region is home to DP World, the fourth largest port operator in the world. The
five largest port operators in the world control nearly a third of the worlds container
traffic. The major port operators in the Middle East include:

APM Terminals, Port of Salalah/Oman, Khalifa bin Salman/Bahrain DP World Jeddah

South Terminal and King Abdullah Economic City/Saudi Arabia and Fujairah, Jebel Ali
and Khalifa Port/UAE

Gulftainer Khor Fakkan and Sharjah Container Terminal/Sharjah, UAE

Hutchinson Port Holdings/ Oman International Container Terminal/Sohar, Oman and

International Port Services/Dammam, Saudi Arabia

International Port Management Jizan, Saudi Arabia

KGL Ports International Mina Saqr/Ras Al-Khaimah/UAE, Shuaiba Area Container

Terminal/Kuwait

There are wide scale port privatisation programmes underway.

Many port projects are focused on regional transhipment opportunities. The regions
unrivalled hub is Jebel Ali in Dubai (Table 1.7). The transhipment modal is
particularly suitable for Jeddah on Red Sea (and the future King Abdullah Economic
City Seaport near Rabigh), Jebel Ali in Dubai and Salalah in Oman. Other port
projects may be left isolated by the major increases in capacity and throughput
volumes at key petrochemical, chemical and fertiliser production locations such as
Dammam and Al Jubail in Saudi Arabia. These can increasingly support direct
shipments to Asian hubs.

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Table 1.7
Port Rankings GCC and Iran

Country

Port Profiled

Iran

Bandar Assaluyeh

Bandar Abbas/Shahid Rajaee

Global Ranking
by TEU 2008**

2008 TEU

Global Ranking
by TEU 2007

Regional
Ranking by TEU

59

2,000,000

65

Bandar Imam Khomeini

290*

Bushehr

Kuwait

Qatar

Shuaiba

281*

Shuwaikh

130*

Mesaieed

New Doha

Ras Laffan

Saudi Arabia

1 (LNG)

1 (LNG)

Jeddah Islamic Port

32

3,325,749

33

Dammam - King Abdulaziz Port

84

1,247,039

86

327

75,591

356

Jubail - Commercial Port

Jubail -King Fahad Industrial Port

Yanbu King Fahad Industrial Port

Yanbu Commercial Port

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Jizan

Bahrain

Sitra

Mina Salman

212

269.331

231

36

3,068,000

41

191

359,990

204

183***

390,087

196

11,827,299

Khalifa Bin Salman

Oman

Salalah

Sohar

Sultan Qaboos, Muscat

UAE

Sheikh Khalifa Port, Abu Dhabi

Jebel Ali, Dubai

Khor Fakkan

Port Khalid, Sharjah

58*

200*

Fujairah
* 2006 ratings** Ports with no ranking are not in the global top 365 ports
*** Mina Zayed rating

More than 75% of containers shipped to or from the upper Gulf use transhipment
ports in the UAE or Oman, connecting local feeder vessels with mother vessels.
35% of vessels arriving at Dammam from the Far East are mother vessels.

The key change to the pre-recessionary period in 2008 is that ports have adjusted
their ambitious expansion plans. Expansions will be phased, with each stage
responding to current and near-term market realities.

By the end of 2009, three new terminal or ports had been opened in the region.
These have the deep water access required by the larger vessels coming into
service in the region.

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A second terminal was opened at Jebel Ali by DP World, increasing capacity by 2.5
million TEU to 14 million TEU

Khalifa bin Salman port, operated by APM Terminals, had been opened in Bahrain
with a capacity of 1.1 million TEU. The old Mina Salman port in the centre of
Manama closed;

A third terminal, the $443 million Red Sea Gateway, was launched at Jeddah Islamic
Port in Saudi Arabia.1.5 million TEU of capacity was added, bringing total capacity to
6 million TEU.

In the GCC and Iran, there are very few independent bulk liquid storage facilities
Jebel Ali and Sohar are exceptions. The land necessary for terminals, within or
close to ports, is closely controlled and at a premium. Authorities are cautious about
large volumes of stored chemicals being in close proximity to port operations; large
exporters tend to build their own facilities. Most imports of specialty liquid chemicals
are still in ISO tanks, keeping costs high.

Product differentiation is a surprising feature of large volume, commodity products

such as methanol, benzene, MEG and styrene. Whether or not this reflects genuine
customer needs is questionable but more consolidation of commodity products
would release significant savings in storage costs.

Bandar Abbas in southern Iran handles 90% of Irans container throughput and
accounted for 41% of all transit operations in 2009. Bandar Abbas appears to be the
lowest cost port across a range of line items. However, certain costs increase
dramatically for non-Iranian flagged vessels so caution is needed when describing
Bandar Abbas as low cost it applies in very specific circumstances (Table 1.8).

Shuwaikh is Kuwaits most important commercial port. It handled over 800,000 TEU
in 2008, accounting for over 80% of combined container traffic through Shuwaikh
and Shuaiba. The port hopes to leverage its strategic position to service Iraqs
container traffic needs as reconstruction efforts build up.

Ras Laffan in Qatar is one of the worlds largest LNG export terminals. 1,000
cargoes have been lifted. Qatar became the worlds leading natural gas exporter in
2007, when 31 mt were exported. LNG exports of 77 mt are forecast in 2011.

Saudi Arabia is investing $9.5 billion in port developments and is the home to the
regions second biggest port at Jeddah.

Jeddah Islamic Port is the principal port in the Kingdom and handles 60% of Saudi
Arabias maritime cargo; it imported 6 million TEU in 2009, equivalent to 73% of
Saudi Arabias total container traffic of 8.2 million TEU. 90% of containers shipped to
or from the Red Sea have a direct call at Jeddah Islamic Port, making the port one of
the most strategically important in the region.

Gulf Petrochemicals and Chemicals Association

24

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Dammam is the principal Saudi Arabian port in the Gulf and is in the middle of a 2
million TEU p.a. capacity expansion for its container activities. It has a rail link to
Riyadh Dry Port and is the main gateway for the Eastern and Central Provinces.

Jubail Commercial Port is the main container port in Al Jubail and is being extended
and, on completion of the Saudi Landbridge railway line, will be connected to Riyadh,
and the other regions of the Kingdom.

Jubail King Fahd Industrial Port exports liquid petrochemicals, refined petroleum
products, fertilisers (e.g. urea), sulphur and iron ore.

Yanbu King Fahd Industrial Port is the largest Red Sea port for loading crude oil,
refined products and liquid petrochemicals.

Yanbu Commercial Port handles general cargo and project cargoes.

Saudi Arabias chemical and petrochemical exports of containerised products are

expected to be over 950,000 TEU in 2015, ona n equivalent basis. Non-palletised
loose bag shipments, as used for exported sea-borne TEUs, have a 16.5 tonne
payload/TEU. Pallets loads are 13 tonnes/TEU; full payloads for road transport are
23.75 tonnes/40 foot flatbed. TEU demand will be principally focused on Al Jubail,
where polymer production will be boosted to 10.6 mtpa (equivalent to approximately
660,000 TEU p.a.) and Yanbu/Rabigh, where polymer production will increase to 4.7
mtpa (equivalent to 295,000 TEU p.a.).

Bahrain is positioning itself as a logistics hub for the Gulf and a gateway to the
Northern Gulf with the opening in November 2009 of Khalifa bin Salman Port
(KBSP), which has an initial capacity of 1.1 million TEU.

In Oman, Salalah went against the regional decline in container volume in 2009.
Throughput was up 14% to 3.5 million TEU. Due to its strategic location, it now the
GCCs third largest transhipment port after Jebel Ali and Jeddah Islamic Port. Shipto-ship containers transfers are its largest business. The deep-water port at Sohar is
investing $14 billion in one of the world's largest port development projects.

In the UAE, Sheikh Khalifa Port in Abu Dhabi has replaced Mina Zayed. Although all
five phases of the project are not due for completion until 2028, the first phase ($2.5
billion) should be open at the end of 2012 with an initial capacity of 2 million TEU
and 8 mt of general cargo.

Jebel Alis man-made harbour is the largest in the world and the port is the primary
hub for the Gulf and the largest port in the region. The port dominates the regions
share of transhipment freight traffic in the Gulf, the transhipment traffic between the
Far East and the West, and the cargo routes around the Indian Ocean rim. In
February 2009, Dubais DP World opened a second terminal at Jebel Ali, adding 2.5
million TEU of capacity to bring the total capacity to 14 million TEU.

Gulf Petrochemicals and Chemicals Association

25

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Table 1.8
Comparative port tariffs ($) Leading GCC and Iranian ports
Country Iran*
Kuwait
Port B.Abbas Shuwaikh
$
$
Transhipment
Transhipment Charges/full TEU
Transhipment - Empty TEU
Transhipment charges/m3 or tonne
Containers
Stripping container-trailer /unit
Re-stuffing container-trailer/unit (palletised)
Loading/Discharge (Full TEU container from/onto cell ship)
Loading/Discharge (TEU from/onto non-cellular ship)
LCL containers/trailers repacking per TEU
Re-stowage containers on board/TEU
Re-stowage containers via quay/TEU
Unloading using own gear and port trailer/container
Shifting/move
Stevedoring/Handling
Stevedoring (Handling) per FCL TEU
Stevedoring (Handling) per empty container
Stevedoring by ships gear at anchorage/TEU
Handling Charges/m3
Handling Charges/bulk tonne (solids)
Berthing
Berthing or unberthing (10,000 GRT)
Berth dues/day
Marine charges (Vopak,SPM,>2000 GRT tank) berth/unberth
Berth Usage (liquid, >60,000 dwt)
Berth Usage (liquid, >60,000 dwt)
Shifting (12,001-25,000 tonnes)
Pilots
Pilot boat services/hour (<12,000 tonnes)
Pilotage/movement
Pilot Detention/hour
Pilotage (>18,000 tonnes) berthing
Pilotage (>18,000 tonnes) shifting
Main Channel Dues
Industrial Channel Dues
Vessel Traffic Management System/call
Port Charges
Port Arrival dues
Port Arrival dues/gross tonne (>16,000 gross tonnes in BAH)
Port Departure dues
Port Dues per gross tonne (incl pilots, tugs Jebel Ali)
Port Dues per gross tonne (hydrocarbons)
Port clearance fee
Port Services/tonne general cargo
Agency fees
Demurrage
Free days Exports
Demurrage/FCL (following 7-15 days)/day
Demurrage/FCL (thereafter)/day
Tugs
Tug charges (>750 HP)/hour (>186 metres)
Tug charges/gross registered tonne
All-in assistance (Including pilots)
Terminal Handling Charges (exports)
Terminal Handling Charges (imports)
Gantry Crane (per hour - size dependent)
Administration Charges
Ships Inspection
Certificate of Departure/Electronic release fee
Lashing/TEU or unit
Oil/non-oil tankers, petchem spec wharfs
Port Entry dues/gross tonne
Loading/Unload on wharf per tonne cargo
Loading/Unload on berth per tonne cargo
Garbage collection from wharf (>50000 GRT)
Garbage/waste collection dues/vessel/day (non-military)
Garbage/waste collection dues/call
Labour
Mooring labour/hour
Skilled/hour
Supervisor/Managerial per hour

40.00
35.00
1.60

64.00
121.00

Qatar
Mesaieed***
$

Qatar
Ras Laffan
$

75.46
75.46

KSA
Bahrain
Oman
Dammam KBSP**** Salalah
$
$
$
151.20

145.89
87.54

140.00
100.00

92.55
115.69

225.00
75.00
93.00

56.23

60.00

4.05

75.46
75.46
102.90

81.00

27.00
27.00
81.00

32.40
32.40
75.60
108.00
229.50

20.25

12.00

35.00

64.00
50.00

75.46

81.00
27.00
8.64
1.35

94.50
27.00

5.40
583.10
171.50

32.40

14.05
56.23

75.60

84.27

5.40
2.16

75.00
30.00

UAE
Jebel Ali
$

UAE
Khor Fakkan
$

89.10
48.60
1.49

147.15
99.90

133.65
89.10

81.00
81.00
138.51

81.00
81.00
147.15
99.90
81.00
37.80
64.80

67.50
67.50
113.40
135.00
54.00
32.40
45.90

32.40

33.75

137.70
67.50

113.40

22.82
64.80

138.51
60.75

3.51

67.50

UAE
Fujairah
$

1.49

4.32
4.05

125.55

114.75
0.42

24000.00
16000.00
840.00
65.00

486.00
85.75

65.00
1234.80
308.70

216.00
13.50
1944.00
729.00
1890.00
810.00

2430.00
491.40
500.00
4000.00
4000.00
7862.40

135.00
108.00
405.00
405.27

262.08

136.00
225.00

265.00
1060.00
1060.00

114.75
135.00
175.50
324.00
236.25
236.52

193.59
237.60

98.15
270.00
0.93
270.00

0.06
0.34

0.05
0.16
27.00

0.05
0.09

0.045

0.32
0.47

11
3.98
5.31

10
5.00
10.00

10
21.60
40.50

491.40

664.58

313.00

486.00

109.99

987.00
84.00

143.04

191.40
140.00

0.11
0.38
81.00

26.50
9.45

1620.00

2000.00

15
8.10
16.20
200.00
0.09
49.28
121.00
327.00

343.00

76.00

162.00

Doha 82.00
Doha 165.00
109.99

10
0
50

75.00

297.00

109.99
109.99

20.00

27.00

196.83

189.00
337.50

26.52
5.30

9.45

29.18

81.00
13.50

32.40
64.40

10.80
16.20

2.70
5.40
8.10

7.96

9.45
16.20

See Study for important Notes

Gulf Petrochemicals and Chemicals Association

20
4.05
5.40
324.00

79.50

1.10
0.10
0.22
0.11
700.00
20.00

10
20.25
37.80

26

10.80
21.60
21.60

The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

In general terms, Jebel Ali and Bandar Abbas offer the most competitive transhipment
rates with Jebel Ali being the most efficient transhipment port in the region.

The average loading/discharge cost for a full (TEU) container from, or onto, a
cellular ship is $94.37 with Dammam, Salalah and Shuwaikh being the lowest cost
ports in the GCC.

Terminal Handing Charges for exports average $119.65. UAE has the highest
charges.

1.10

FREIGHT RATES AND BUNKER PRICES

From 2000-2010, long-term charters for 125,000-155,000 cbm LNG carriers were
fixed at $50,000/day - $85,000/day with escalation clauses based on inflation and/or
increases in operating costs. Charter rates peaked at $150,000/day. As the number
of long-term LNG charter fixtures increases, charter rates will narrow. New entrants
are will sacrifice margin to secure long-term employment especially in the context of
increasing lay-ups.

Condition Assessment Programmes (CAP) and advanced repair-and-maintenance

technologies have allowed some LNG ships to extend their life beyond 40 years.
This has contributed to a doubling of the global LNG fleet in the past three and half
years, putting downward pressure on rates. The spot market accounted for only
18.2% of global LNG trade in 2009.

In the chemical tanker market, 50% of all chemical movements are covered by
COA, while the spot market covers 35% to 40%. One year time charter rates are
expected to increase from $27,000 in 2010 to $34,630 in 2015 for a 37,000 dwt IMO
II tanker.

Owing to subdued trading conditions in the LPG shipping market, charter rates fell
to their lowest mark in five years in 2009. Downward pressure on the rates in the
LGC (large gas carrier) sector is expected to come from weak demand and from
competition from VLGCs (very large gas carriers) or MGCs.

In 2009, average container freight rates declined by 30% from 2008. However, in
2010, average container freight rates on the major east/west trade routes recovered
strongly and returned to levels close to those of 2008. Container shipping
companies have stopped chasing market shares by discounting price. Instead, they
are demonstrating stronger price discipline, and capacity management and costreduction techniques such as slow-steaming.

In 2011-12, average freight rates on the major east/west routes are forecast to
decline slightly, despite the expectation of higher Bunker Adjustment Factors. They
are then forecast to increase again in 2013 and 2014 as shipping capacity tightens.

Gulf Petrochemicals and Chemicals Association

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The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Table 1.9
Shipping rate summary 2005, 2010, 2015
* all freight rates represent GCC-China route
2005
2010
$500/TEU
$350/TEU
An excellent year for the
container shipping sector - good Shipping sector recovers from
Containership market growth and profitability.
2008-2009 lows.
& freight rates
Utilisation of available capacity is Larger, more economical ships
high.
are used.
Middle East exports growing.
$12,000/day
$12,200/day
China's
demand
becomes
increasingly significant in global
Chemical tanker
New 'Marpol' regulations apply.
market & freight rates terms.
Growth in tonnage greater than
Significant increase in chemical growth in demand, leading to
tanker orderbook.
lower freight rates.
$31,600/day
$16,600/day
Recovery in GCC exports and
continued strong Atlantic basin
LPG carrier market & A period with low fleet growth demand supports VLGC (Very
and low demand growth.
Large Gas Carrier) rates.
freight rates
High natural gas prices boost
ammonia trade and help Lgcs
and Mgcs enjoy record rates
$59,500/day
$70,000/day

LNG carrier market &

freight rates

New short-haul routes (GCCIndia

and
Egypt-Europe)
increase demand but the short Old vessels being considered
voyage distances reduced 'tonne-for conversion to FSRU (Floating
miles' (distance multiplied by Storage
and
Regasification
tonnes LNG carried).
Units).
Low LNG shipping utilisation
rates with fewer ships ordered Unused vessel capacity at its
speculatively.
highest level since 2000.
New
shipowners
offered
discounted rates to win long-term
contracts.
Average vessel size increases.

2015
$620/TEU

Availability may become tigher.

Empty container surplus in Saudi
Arabia may reduce, raising costs
for exporters
$14,000/day
GCC countries strengthen their
pivotal
role
in
commodity
petrochemicals, chemicals ans
fertilsers.

$20,000/day
The utilisation of new capacity as
a result of new vessel deliveries
is expected to increase only
slowly.
Demand growth will exceed the
moderate
fleet
expansion,
causing a tighter market.
$75,000/day

China and India are expected to

see the strongest growth in LNG
imports.
An
increased
number
of
importing countries will lead to
more diversified routes.
More LNG production in Asia will
increase Asian demand for LNG
ships.

Source: Drewry

Gulf Petrochemicals and Chemicals Association

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The Gulf Supply Chain Landscape (2005- 2015)

Executive summaries

Bunker prices are forecast to increase as follows:

Table 1.10
Forecast bunker rates 2005-2015
Arabian Gulf

US Gulf

Singapore

MDO

IFO

MDO

IFO

MDO

2005

272

502

266

509

273

480

2006

323

616

314

558

321

574

2007

387

668

368

603

382

633

2008

539

1,020

540

923

526

903

2009

391

595

373

518

381

513

2010

515

806

496

728

503

715

2011

578

939

559

828

564

817

2012

602

978

582

862

587

851

639

1,038

617

915

623

903

2014

682

1,108

659

977

665

963

2015

706

1,148

682

1,012

689

998

2013

forecast

IFO

Source: Drewry

Gulf Petrochemicals and Chemicals Association

29

 2010 by Gulf Petrochemicals and Chemicals Association.

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