The Kingdom's ports appear to be experiencing unprecedented pressure, with a backlog of containers onshore, halting the landing of newly arrived cargo. As a result of lengthening and costly delays for shipping companies, some international freight forwarders are refusing to take further consignments for Riyadh, via Damman.
One major shipper, Hapag-Lloyd has suspended all further Riyadh-bound consignments through Dammam Port until the situation improves. It is also imposing extra fees, which it calls “operational recovery charges” amounting to up to $ 125 on the largest containers. The firm is not the only one to be obliging its customers to pay more for goods being shipped to Saudi Arabia. Other shippers are also refusing to take now consignments until the backlog has been cleared. In May, it was reported that there were no less than 8,750 containers Riyadh-bound containers unmoved in the port. That is a lot of containers. Nor does the figure include those that were destined for elsewhere in Eastern Province or were due to be trucked further into the Kingdom. Dammam has a notional capacity of 1.5 million standard containers a year, (to double by 2014), which means it ought to be handling around 4,800 containers a day. But it is not.
The Saudi Ports Authority is already being accused of mismanagement and poor organization. However, this is not entirely fair. The problems of the timely movement of goods through our ports and on to their destinations are intricate and can be affected by bottlenecks or breakdowns in an extensive supply chain.
Most Saudi ports have some of the most modern infrastructure in the world. Major investments have been made in new handling cranes, automation, wharfage, container parks and storage, refrigeration plants and the information and communication technology, that ought to enable each port to function smoothly. The handling capacity at most of these facilities, was based upon careful projections for increased trade flows. On the face of it, there is no reason why any of the ports should have ever become congested, even for a day or so, let alone for weeks.
The investigation into the debacle that is currently being called for, will hopefully give a detailed explanation of what has been going wrong and equally, suggest solutions to stop the problems reoccurring.
However it is already clear that there have been serious breakdowns in the process of moving goods out of the ports. Some shippers report extremely long delays in Dammam, moving containers on to freight trains for the 450 kilometer trip to the Riyadh Dry Port. This is blamed on to some degree on Saudi Railways. There has also been a growing number of examples of road truckers simply not arriving as arranged to pick up loads. Hauliers have in their turn complained that the containers they have been scheduled to collect, were not available when their drivers arrived.
The problems appear to have been compounded by a failure to alert cargo vessels bound for the Kingdom to the delays. The result is that large cargo ships, loaded with thousands of containers, are forced to spend days waiting their chance to unload.
One views is that the introduction of commercial management to many of the cargo terminals since 1997 may no longer be working well. Most of the facilities continue to be owned by the Saudi Ports Authority, but the management and day to day operations are left to private companies that have bid successfully for the work. Since each privately-run facility tends to specialize in one type of cargo, there ought to be limited overlaps and minimal inefficiencies.
An analysis of the impact of the privatization process should be included in any enquiry that is mounted into what is going wrong. If for instance, vehicle movements in and out of docks are not coordinated between different terminals, jams are inevitable. Are these private firms working together properly for the overall efficiency of the facilities ?
But all of this is for the medium term. The pressing need is to work out how to clear the cargo backlog and get goods moving efficiently into the Kingdom again. This is costing everyone increasing sums of money and damaging the reputation of our ports, which in turn has to be causing foreign investors to think twice about committing to Saudi projects.