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Micheal Wubbens

SAUDI ARABIA - Transport

Sea Change

Managing Director, Huta Marine

Bio

Michael Wuebbens has served as managing director and partner of Huta Group of Companies since 1981.

“Uncertainty is the flipside of any reform.“

How has Huta Marine performed on the KAP since we last spoke in 2014?

In 2014, we started commercial operations in King Abdullah Port (KAP), and over the past two years we developed the port further. Today the port handles about 1.5 million TEUs per year, and with the current arrangements, we expect that figure to be close to the order of 2 million TEUs in 2017, which would make KAP the second biggest container port in the Kingdom after Jeddah. We were the fastest growing port in the world in 2015. We have had double-digit growth in a declining trade environment worldwide and in the Gulf. The trade market was stagnant in 2016, and in the Gulf it was actually shrinking, for obvious reasons. But we were able to increase our volume in absolute terms from 2015 to 2016, and we also increased our market share. The reason for that performance is because we have a good product, first and foremost. The port is state of the art in terms of infrastructure, in terms of process, efficiency, and technology. The market appreciates that and sees the difference we offer, as do local importers and exporters. We reach the highest levels of international standards in terms of vessel unloading productivity as well as the clearance process. In terms of cost, we have to be competitive against other national and international ports for the same or comparable services.

What key trends in the global shipping industry are driving that growth?

In the global shipping industry, small shipping lines are going out of business, and there is a lot of consolidation going on. The remaining lines have forged four “alliances,” which are capacity-sharing agreements, similar to what airlines are doing. There are just four alliances remaining now, namely 2M, Ocean 3, G7, and CKYHE. The alliances are part of an effort to optimize the use of existing capacities. The use of large ships triggers an economy of scale. Big ports like ours that can accommodate this trend are going to be more and more important. In short cargo is being driven onto larger and larger ships, and only ports like ours which can accommodate such vessels will remain competitive internationally.

What is the state of your RO-RO terminal?

We will start operations around the middle of 2017. The terminal is operated by a JV with NYK, the largest RO-RO car carrier in the world. NYK has a terminal operating arm. Cars are capital goods, expensive ones, and that is the first item affected by any economic downturn or fluctuations. This is why the imports of cars to KSA has dropped in 2016. Normally these cycles lead to recovery, with downturn being followed by an upturn that is bigger than the downturn preceding it. The RO-RO port has a lifetime of 100 years, so I do not worry about what will happen over the next two years.

What is the status of the construction of the port and the expansion process?

We foresee an expansion of the port that will continue for the next couple of years. Today we have more than 3km of berths that are completed, and we plan to have about 15km in total by the end of the project. So we have a few years yet ahead of us. The ultimate development period depends on financing, the economy, demand, political issues, and more. But we see a continuous increase in demand, because of the superiority of KAP’s infrastructure, and also its superior efficiency and its strategic positioning. The port is in the proximity of Yanbu, and considering that Vision 2030 includes the expansion of the petrochemical industry, that is a good place to be because these exports all go to KAP. Yanbu does not have adequate port facilities for export of commercial cargo like containerized petrochemical products. Yanbu is an industrial port, not a commercial port. The commercial port of Yanbu is not designed as container port and does not have international connectivity. So it needs KAP. The basins of our port are 18m deep and can accommodate Ultra Large Container Vessels (ULCV), vessels carrying more than 20,000TEUs. The biggest container cranes worldwide operate in KAP. Yanbu, on the other hand, has just 12m water depth, so it cannot accommodate large vessels.

What about your plans for going public? What conditions would need to be there to go public with KAP?

We are determined to do this one day, because we believe an infrastructure facility of this size that is for public use should be publicly owned. However there is no fixed timeline set yet.

Are you encouraged by the developments and reforms that we have seen on the capital markets today? Would these developments speed the timeline for going public with KAP?

The opening of the KSA capital markets, which is geared more toward foreign investors, is a very important move, especially for a port like KAP, because this will attract individual as well as institutional investors, and those investors look for open secured capital markets as a prerequisite for their investments.

What are your plans and expectations for the coming 12 months?

Like many others, we are trying to wait and see the impact and effect of the reforms. The financial impact of the reforms is not fully known yet. It is difficult to plan before the details are known and the impact of reforms and policies can be estimated. This is the disadvantage of the current situation. Certain state-controlled enterprises are already planning and preparing for new investments in connection with Vision 2030. We know that SABIC and ARAMCO are very active in planning huge new projects. But this is a bit speculative for now. Uncertainty is the flipside of any reform, and in particular of reforms that have hardly taken effect yet.

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