Latest News

NEOM, a Saudi company, offers a niche market for Gulf importers

Salam Studio & Stores, a distributor based in Qatar, had gone weeks without receiving its Red 'Bull shipments. This prompted it to try a 'little-used route.

In the fourth month of conflict, and despite the effective closure of 'the Strait of Hormuz', its products were scattered across India and Sri Lanka ports, and Gulf hubs that it usually relies on were hit by Iranian fire, and faced capacity constraints.

Salam, fearful of losing market shares, chose an untested option: shipping cargo via the Port of NEOM in Saudi Arabia, a Red Sea facility that is now promoting itself as a quicker alternative to traditional trade routes.

This demonstrates the extent to which some Gulf companies are willing to go in order to maintain the flow of goods, as the war disrupts regional supply chains. Shipping data suggests that such workarounds are niche and only offer speed for certain cargoes, not a solution for wider supply disruptions.

FASTER, BUT MUCH CHEAPER

Adam Mulla, the director of distribution at Salam, said that the company initially ordered a single truckload in order to test out the route from Europe to Gulf. This corridor spans both land and sea legs.

He said that it took us less time than usual, but the costs were much higher. The shipment arrived in 22 days - almost half the time it usually takes to get from Europe to the Gulf.

The company was so encouraged that it ordered 15 additional truckloads. It paid about $10,000 for each load compared to $2,500 per load before the war. Mulla explained that the extra costs were due to higher fuel and insurance prices, rather than port charges.

NEOM was the brainchild Saudi Crown Prince Mohammed Bin Salman. It was first unveiled as a futuristic city project a decade before it had to be scaled back due to cost overruns. The port has been repositioned to be part of a more efficient trading corridor.

NICHE SOLUTION

"Europe-Egypt-NEOM-GCC: your faster route," the port said in a post on its official LinkedIn page, describing a mix of sea crossings and trucking aimed at speeding goods into the six Gulf Cooperation Council (GCC) markets, ?and adding that importers from several European countries were already using it.

NEOM didn't provide any details or respond to a?request for comment.

However, shipping data shows that its role is still limited. According to Kpler, data firm, the majority of traffic in the port is made up by roll-on/roll off vessels. The port had no container activity until April. Over 95% of the shipping activity is concentrated on just two vessels.

"NEOM?remains an niche RoRo port with stable, but limited activity," Kpler added, adding that there had been no signs of a surge in rerouting since the Iran War began.

Since late February, Iran has prevented 'nearly all' shipping into and out of the Gulf. This has disrupted a fifth of global oil and gas flow and left hundreds of vessels unable transit the Strait of Hormuz.

Salam was attracted to NEOM by the congestion in Jeddah, Saudi Arabia's major Red Sea port.

Mulla stated that "they chose NEOM as it has no traffic."

(source: Reuters)