An electronically powered straddle carrier crane on the dockside at London Gateway port, operated by DP World, in Stanford-le-Hope, U.K. (Chris Ratcliffe/Bloomberg)
Key Takeaways
- DP World is expanding trucking and overland routes after the Iran conflict, betting Strait of Hormuz shipping will not return to prewar conditions.
- The company says diversification reduces supply chain risk as Jebel Ali volumes fell nearly 60% and land transport costs three to four times more.
- DP World plans deein ports and trucking networks while pursuing a Europe-Iraq-UAE corridor and using recent bond funding for upgrades.
Overland expansion amid Hormuz uncertainty
Ports giant DP World is expanding its overland logistics network in a bet that shipping through the Strait of Hormuz — vital for its flagship container and industrial hub in the United Arab Emirates — won’t return to the status quo from before the U.S.-Iran war.
The Dubai-based firm plans to grow its truck fleet by about 40% and add new land routes to diversify supply chains linking Europe, the U.S. and Asia to the Persian Gulf, Chief Operating Officer for Freight Forwarding Europe Stephen Whittingham told Bloomberg in an interview.
“I think we’ll never get back to the original normal,” Whittingham said. “There’s always going to be a level of uncertainty that exists now around this geography, and so I think having options is really where DP World has said we’re going to be able to mitigate risk.”
The comments underline how the Iran war’s shock to global supply chains is likely to outlast the conflict itself, as countries and companies alike seek to reduce their dependence on the embattled waterway. The diversification drive also aligns with the UAE’s aim to cut its reliance on the strait to zero.
New land corridors and capacity targets
Within days of Iran closing the strait, DP World launched a road service from western Europe to the Gulf through Turkey that currently handles as many as 50 trucks , Whittingham said. Most of the cargo demand is for automotive parts and everyday consumer products, he added.
DP World also set up hybrid sea-and-road services for shipments from Asia and the U.S., also via Turkey.
The company now wants to grow its fleet of trucks to 1,000 from 700 currently that provide a “land bridge” within the region to ports outside the Persian Gulf like Fujairah in the UAE, Salalah in Oman and Jeddah in Saudi Arabia, he said.
DP World operates ports and terminals in 84 countries from China to South America, but had to briefly suspend operations at its Jebel Ali facility in the UAE due to debris from an intercepted Iranian attack.
Jebel Ali’s sharp volume decline
Before the conflict, Jebel Ali was the busiest container port outside of Asia, ranking in the top 10 globally and serving mostly as a transshipment hub integrated with one of the world’s largest industrial free zones.
But Jebel Ali reportedly saw a nearly 60% drop in volumes during the first half of the year from a year earlier, data, pushing it down to 32nd biggest by volumes in the world.
On new routes, the next target is to bring cargo over land from Europe to Iraq then load it onto ships to cross the Gulf to the UAE. Talks with authorities in Baghdad for a “permanent service” are ongoing, Whittingham said.
Premium service
All that diversification comes at a cost. Shipping goods from Europe to the Gulf via land is typically three to four times more expensive than sea, he said.
But he expects some customers to continue to use the service even once Hormuz reopens. “I don’t think it’s going to go away completely,” he said, adding that even now, customers often find pure truck services more reliable than multimodal ones amid disruptions to shipping from the Black Sea to the Middle East.
“If you needed a truck tomorrow, you could get a truck tomorrow.”
Port investments and financing
DP World is also investing in its ports network, most notably with plans announced in July to develop two new deepwater terminals on the UAE’s eastern coast — outside the strait.
It has also committed around $800 million to terminal upgrades at Jeddah in Saudi Arabia and Tartus on Syria’s Mediterranean coast, both of which would link to the trucking networks.
Funding for such projects received a boost last week when the company sold $1.6 billion in bonds.
“DP World’s strong liquidity provides a substantial buffer against prolonged Middle East disruption,” Bloomberg Intelligence Credit Analyst Sharon Chen wrote in a note on Sept. 10. The bond deal “demonstrates continued funding access, albeit at a sizable spread premium.”
DP World to build 2 UAE container terminals to skirt Hormuz
Source: Transport Topics
Compiled from international media by the SCI.AI editorial team.
