The outlook for Oman's shipping sector remains mixed and reflects its main ports' specialisation. The port of Salalah is expected to post another year of strong growth and historic highs in total tonnage helped by increased demand for the limestone and gypsum it handles, while box volumes at the country's top container facility will endure another year of decline in 2015, affected by decreasing transhipment.
The port of Sohar, however, will enjoy growth both in terms of total and container throughput, largely due to the transfer of operations from Sultan Qaboos, although continued investment into new dry bulk industries will also prompt growth.
Over the medium term we project further growth at the port of Sohar and total throughput growth at the port of Salalah, while container volumes at Salalah will continue declining. However, despite the at-times challenging outlook, Oman continues to invest in its maritime facilities.
Headline Industry Data
2015 port of Sohar tonnage throughput forecast to grow around 4%, over the medium term we project a 22% increase.
2015 port of Salalah container throughput forecast to contract by 4%, over the medium term we project a 5% decrease.
2015 total trade growth forecast at 3.9%.
Key Industry Trends
Salalah Pessimistic on Box Transhipment, Bullish on Total Throughput: A large amount of government-driven port developments in the region and the corresponding increase in port capacity 'are cause for concern', according to the Port of Salalah Annual Report, with shipping lines at the same time 'working to form alliances to reduce operating costs and this reduces transhipments'. Despite the port believing that its strategic location and service levels 'will remain an important factor in customer choice', it nevertheless expects the reduction in box throughput seen in recent years to accelerate. At the same time further growth in limestone and gypsum handling due to increased demand for these cargoes, is expected to drive total throughput at the port to average monthly levels exceeding 1mn tonnes, which, if achieved, would lead the port to surpass its historical high annual level.
New Deals to Increase Sohar's Volumes: The inclusion of two new facilities offers the potential for greater cargo volumes to pass through the port of Sohar. Sohar's most recently announced deals are a leased contract with Sohar Flour Mills signed on January 28 2015 and the official unveiling of a new ferrochrome smelter at the port's Freezone also in January. The contract with Sohar Flour Mills was signed ahead of the planned building of a new flour mill with a capacity of 500 metric tonnes per day. The smelter is the second of five planned for the port of Sohar. Production at the new 100,000 square metre, USD19mn facility will be conducted by Gulf Mining Group, who signed a 25 year lease in 2012.
Risks to Outlook
There are considerable risks to our outlook for Omani maritime ports. The continued development of their dry bulk capabilities leaves it hard to project by just how much total tonnage throughput will expand at the facilities of Sohar and Salalah in the coming years. Throughput growth of 139.4% at Sohar in 2011 is indicative of this. Equally, recent contractions in box volumes at Salalah in 2013 and 2014 demonstrate how the port's transhipment business is subject to the vagaries of the global macroeconomic climate and increasing regional competition. Nevertheless, container volumes at the country's ports will continue to be supported by private consumption, which will keep increasing in real terms in 2015, as the improvements in household incomes achieved over the past few years should provide a continued boost to consumer purchases, including imported products.