Red Sea crisis: UAE suppliers use Dammam as 'cost-effective' way to get goods to Saudi Arabia
As sea shipment costs from Dubai-Jeddah soar, shippers take an alternate route
Dubai: Demand for space on container trucks from Dubai to other Gulf destinations has shot up as the Red Sea crisis situation continues to flare and more shipping lines opt for the longer routes through the Cape of Good Hope.
This has become more so after sea freight from Jebel Ali port to Jeddah started soaring from $450-$500 a TEU to around $2,500, because of the Jeddah port’s proximity to the Red Sea channels.
So, now, UAE importers are sending goods meant for Saudi Arabia to Dammam using overland routes, which is where the heavy demand comes in for trucks bearing the goods 'cross-stuffed'. “Dammam has become the single most important option for shippers – not just to keep costs down, but ensure they can deliver the orders from Saudi Arabia on time,” said a trader in FMCG goods. “Because delays of even a couple of days could result in cancelations and all the attendant cost risks.”
From Dammam, the road distance to Jeddah is 1,200 kilometers.
Typically, the waiting times at Al Batha for clearance averages 4 days.
Saudi authorities lend a hand
According to shippers here, Saudi customs authorities are also making sure to keep the process going smoothly as far as possible. “At the Al Batha border, the Saudis are clearing the trucks with goods meant for delivery in the Kingdom within 2-3 days,” said Haris Shaikh, Managing Director of Dubai-based Gallop Shipping. “Typically, the waiting times at Al Batha for clearance averages 4 days.
“However, transit cargoes bound for Kuwait, Bahrain, Jordan, Qatar, etc., have to wait for more than a week at the UAE border to obtain 'Fasah' clearance from Saudi customs."
Can shipping costs go up further?
A lot’s been happening on the Red Sea and the Bab Al Mandab straits, with the US and allies hitting Houthi positions in Yemen through last week. Even then, stray missile attacks on commercial shipping still continues to emanate, and putting the global shipping industry on heightened alert. Container shipping costs through Red Sea from Europe to the Gulf have already shot up by $1,000 a TEU and over in recent weeks.
What shippers in the UAE and elsewhere are worried about most are whether all of this would push oil prices higher at some point. The Red Sea accounts for a significant position of the world’s energy-related shipments, and any delays will have its say on fuel prices at some point.
Oil futures are trading at just over $73 a barrel currently.
For now, UAE’s importers are focusing on the present – and making sure they can do their part at minimal price and time disruptions.
“Transportation costs from Jebel Ali to Dammam would average Dh5,000 currently,” said Sheikh. “This includes the Saudi border charges too, and taken together, these are still reasonable costs for the logistics sector to bear.
“More so, because shippers have greater clarity on when the goods can be delivered to the client.”
Trucking and fleet operators say there is ‘abundant’ capacity available on container trucks, even with the latest spike in demand.