Red Sea Shipping Disruptions: Challenges and Opportunities for Arab Logistics
The Red Sea shipping disruptions caused by Yemen’s Houthi militants pose challenges but also unveil opportunities for the logistics sector in the Middle East.
According to the recently released Agility Emerging Markets Index 2024, there are multiple investment and infrastructure development opportunities for Middle Eastern countries in the logistics sector. The index notes that the UAE and Saudi Arabia, with their robust infrastructure, are poised to capitalize on shifting global dynamics. As India and China vie for dominance as world logistics and manufacturing hubs, Middle Eastern countries can position themselves as vital hub locations connecting Southeast Asia, India, Africa, and parts of Europe.
As for rankings on the Agility’s Emerging Markets Logistics Index for 2024, the UAE maintains its stronghold as the third-ranked country, following China and India. Saudi Arabia (ranked 6th) and Qatar (7th) also retain favorable positions, while Oman, Bahrain, and Kuwait face downward shifts in the rankings.
John Manners-Bell, CEO of Transport Intelligence (Ti), notes that if the disruptions in the Red Sea persist for years, it could impact Saudi Arabia’s investments in its Red Sea ports, including the ambitious NEOM project. Yet, regional stakeholders are optimistic about Arab resilience and existing mitigation strategies.
Projects like the Saudi Landbridge Project, which we spotlight below, and sea-air solutions could alleviate some of the challenges posed by the Red Sea militant disruptions.
The Saudi Landbridge Project
The Saudi Landbridge is a pioneering railway line currently in development by the Saudi Railway Company (SAR) that is set to transform transportation infrastructure in the region. Spanning 950 km (594 miles), the ‘Landbridge Line’ aims to establish a vital link between Jeddah on the Red Sea coast and Riyadh, the capital of Saudi Arabia. Primarily designed for freight transport, the railway will bolster trade and commerce by facilitating seamless movement of goods between Jeddah and Riyadh. Furthermore, upgrades are planned for the existing 450 km line between Riyadh and Dammam, with an additional 115 km of new line intended to connect Dammam with Jubail on the Persian Gulf coast.
A bid by an consortium comprising of Italy’s Italferr, Spain’s Sener, and Hill International has been officially selected by the SAR for a project management services contract related to the Saudi Landbridge project. Reports from local media indicate that work on the line will commence via the established public-private partnership (PPP) venture in early 2024.
The Saudi China Landbridge Consortium (SLCC) had inked a memorandum of understanding (MoU) to oversee the project’s implementation through a PPP arrangement back in October 2018. Comprising SAR, China Civil Engineering Construction Company (CCECC), and local partner Al-Ayuni, the PPP consortium includes Systra, Thales, WSP, Aldhabaan & Partners, the local affiliate of British law firm Eversheds & Sutherland, ALG Infrastructure, and Calx Consultancy.
The design of the Saudi Landbridge project was completed in 2017 and undertaken by Italferr in collaboration with local partner Arabian Consulting Engineering Centre (ACEC). Once operational, freight trains are anticipated to travel at speeds of up to 160km/h on the new line, while passenger trains could reach speeds of up to 250km/h.
The project is segmented into six sections:
- Upgrade of the Jubail Industrial City internal network, including 10km of new track construction.
- Upgrade of the Jubail – Dammam line, involving the addition of 35km of new track.
- Upgrade of the Dammam – Riyadh line, including 87km of new track construction.
- Construction of the Riyadh bypass, divided into two segments totaling 102km of track.
- Establishment of a new 950km link from Riyadh to Jeddah, extending 146km to King Abdullah Port, with intermediate stations at Jamuma, Moya, and Al-Doadmi.
- Construction of a new 172km line from King Abdullah Port to Yanbu Industrial City.
The project will cover the development of seven logistics centers strategically located at key points along the railway network: Jubail Industrial City Logistics Centre, Dammam Logistics Dry Port, relocated Riyadh Dry Port, King Khalid Airport Logistics Centre in Riyadh, Jeddah Logistics Dry Port, King Abdullah Port Logistics Centre, and Yanbu Industrial City Logistics Centre.
Red sea challenge necessitates logistics solutions, showcases region’s resilience
Since the onset of attacks in October 2023, the global shipping industry has faced significant hurdles. Most recently, two ships were attacked by suspected Yemen Houthi rebel drones in Middle East waters early February 6, marking the latest incidents in the rebel fighters’ campaign targeting vessels due to Israel’s conflict with Hamas in Gaza. The first attack occurred in the southern Red Sea near Yemen’s Hodeida port, causing minor damage to a Barbados-flagged, UK-owned cargo ship. The second attack took place off Yemen’s Aden port, involving a Marshall Islands-flagged, Greek-owned vessel heading from the US to India. Despite claims from Houthi rebels about targeting American and British ships, no evidence was provided.
As the Red Sea disruptions present immediate challenges, they also underscore the resilience and adaptability of Middle Eastern logistics. By leveraging their strategic locations and investing in infrastructure such as the Saudi Landbridge project, countries in the region can capitalize on emerging opportunities in the global logistics landscape.
For example, a land corridor project is being used for truck logistics and serving as an alternative to the Bab El-Mandeb-Red Sea shipping route. Following pilot runs in late 2023, the route is being used to transport cargo passing through the UAE, Saudi Arabia, and Jordan, and ending at the Israeli port of Haifa. Dubai’s PureTrans FZCO, Bahrain’s Cox Logistics, and WWCS in Egypt are currently assisting with logistics operations along the corridor.
Hapag-Lloyd AG, the world’s fifth-largest container carrier, is exploring plans to establish connections between Dubai’s Jebel Ali port and two eastern Saudi ports, along with a route to Jeddah on the west coast. Additionally, the company is considering another option to link Jebel Ali with Jordan.