Middle East shipping fleet expands to service China

Chinese demand for raw materials is driving Middle East ship owners to invest in new vessels.

Middle East shipowners are preparing to take delivery of new tankers and container ships to cater to the rise of China in the world economy.

This summer United Arab Shipping Company, which is jointly owned by several Gulf states, will take delivery of the first of nine container ships capable of handling 13,000 20-foot containers at one time. The 2007 order with Samsung Heavy Industries of South Korea is worth Dh5.5 billion (US$1.49bn) and is the largest ship order ever for a Middle East firm.

"Most of the trade coming to the Middle East is coming from Asia," said Ken Bloch Sorensen, a managing partner of Econships, a shipping advisory firm, during the Gulf Ship Finance Forum in Dubai yesterday. The UASC ship arrivals are "a major step to cover the demand growth," he said.

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Amid a wobbly economic recovery in the West, shipping analysts and owners say China will become the heart of new trade corridors for crude oil, commodities and consumer goods. The demand has already driven regional shipping firms to invest more than a billion dollars in new ships.

The developing world, led by China and the rest of Asia, accounted for two-thirds of the GDP growth last year, according to Shady Shaher, an economist with Standard Chartered Bank. At the same time, the West is busy deleveraging debt levels and suffering from deflation, he said. "It is a tale of two worlds."

Forecasts also show an undersupply of crude oil tankers serving the Middle East to Asia Pacific route, requiring more than $8bn worth of new very large crude carriers (VLCCs) according to Per Wistoft, the chief executive of Gulf Navigation Holding based in Dubai.

Chinese demand will require the number of ships travelling from the Gulf to rise from 256 today to 337 by 2013, Mr Wistoft said. The shipping firm plans to acquire three of the vessels, which are as long as three football fields and as tall as a seven story building and currently sell for roughly $100m.