COVER STORY
“Imports and exports for the country are expected to increase by three and five percent year-on-year, respectively, in 2010.” Iran has the potential to cash-in on the back of increased global trade as the world economy clambers back to its feet, and a boost in Iranian trade could bring with it, over the midto long-term, an increase in business for the ports of Gulf Cooperation Council (GCC) countries – meaning that the likes of Bahrain’s Khalifa bin Salman Port may not be forced to suffer from over-capacity for as long as would otherwise be feared.
FUELLING THE FIRE
Any logistical industry is, by its very nature, highly susceptible to shocks in the price of crude oil. In summer 2008, as crude prices scraped the eye-watering US$148 (QR539) per barrel mark in the build-up to the financial crisis, the unprecedented price spike took its toll. Marine bunker fuel, the lifeblood of container ships, hit US$700 (QR2549) per tonne in 2008. This marked a 100 percent rise since the beginning of 2007. Latest figures had prices in the United Arab Emirates’ (UAE) port of Fujairah at US$474 (QR1724) per tonne. The fuel consumption of a large, modern container vessel with a maximum capacity of 7750 TEUs is around 217 tonnes per day, according to the World Shipping Council. Therefore, a typical 28-day round-trip voyage would come with a hefty fuel bill at February prices of a little under US$2.9 million (QR10.5 million). With oil being the main driver behind bunker fuel costs, it pays to look ahead. Last month investment bank Goldman
- The International Maritime Bureau is calling for the world’s navies to go after piracy mother ships. -
The United States (US), along with Britain, France and Germany, have been pushing for a fourth round of sanctions that would target Iranian shipping companies, including the country’s largest shipping firm, the Islamic Republic of Iran Shipping Lines (IRISL), on the grounds that such companies provide logistical support to Iran’s nuclear programme. The UK banned its giant financial services industry from doing business with IRISL last October. The US has been enforcing similar sanctions since 2008. The Iran Shipping Report Q1 2010, published by Business Monitor International in December, makes clear the potential growth for the sector, should it be allowed to function free of international sanctions: “We forecast an upturn in the country’s maritime sector, as trade volumes look set to begin to recover from the downturn of 2009,” the report said.
38
MARCH 2010
“We forecast an upturn in the country’s maritime sector, as trade volumes look set to begin to recover from the downturn of 2009.” - Iran Shipping Report 2010
Sachs predicted oil prices would reach US$85 to $95 (QR309 to 346) per barrel this year, driven by accelerating economic growth. This year to date, oil has been ranging between US$70 and $80 (QR255 and 291). The bullish Goldman Sachs prediction, should it ring true, will add further pressure to the shipping industry as it seeks to align itself to the state of the global economy. And next year, the situation could be set to exacerbate. “By 2011, the crude market is back to capacity constraints,” warns Goldman Sachs analyst Jeffrey Currie. “The financial crisis created a collapse in company returns, which has significantly interrupted the investment phase.”