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Gallo: “Trade with Italy down, shifting freight volumes”

Genoa - The Middle East, a tough market: there are no fixed reference points.

Genoa - Container shipments from Italy to the Middle East decreased by 6 percent from 2015 to 2016. 211,823 containers departed from Italy in the first eight months of the year, versus 224,315 in the same period in 2015. And if the main port in the area, Jebel Ali, saw an increase (from 51,000 to 58,000 TEU), it is perhaps due to the lines’ new strategy of concentrating traffic; the other ports, on the other hand, recorded heavy losses: Jeddah from 49,000 TEU in 2015 to 43,000 TEU in 2016, also in the period from January to August, in Amman from 20,000 to 18,800 TEU, and Abu Dhabi from 25,000 to 15,500 TEU. However, the dynamic in maritime freightage rates in the Middle East, although not positive, is different and has fewer critical situations than in another market that is experiencing a series crisis, the East Asian freight market.

“It is clear,” said Filippo Gallo, representative of the office of the president of Federagenti, “that the political geography of the Arab countries has changed and continues to change. Their importance, from Saudi Arabia to the United Arab Emirates and beyond, was linked to their influence due to the production of oil. The situation has changed since gas won a significant market share compared to 10-15 years ago, when oil ruled the roost. This conditioned the relationships of dependency and the role that Arab countries played in the world and therefore in the Mediterranean. Russia and the former Soviet countries that produce gas won a substantial share of the global market.”

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International political dynamics directly affect the flows of traffic that are distributed across the various routes and therefore also affect the corresponding levels of freight rates for ships, which are the major drivers of revenue for that category of shipping agent. Gallo has profound experience in the Middle Eastern market which he gained as an agent in Italy for UASC, the container carrier company of the Persian Gulf States, with Qatar as a majority shareholder.

“Qatar is a gas producer,” he explained. “It is a small country, but influential, with bank and investment fund headquarters. Besides its presence in football, it has acquired major brands and is successful worldwide.” Besides considering changes under way in the Emirates, one must add other important countries like Iran and Iraq on one hand, and Libya and Egypt on the other.

“Egypt and Libya,” reminded Gallo, “played an important role in our trade. Today we hardly export to Libya, nor import oil from Libya.” In short, the most important points of reference are constantly changing, a principle which also applies to the two large countries, Iran and Iraq. “Iran is very solid. The embargo is almost over, but many restrictions remain in place. It is difficult to sell Italian products and to transport them there. But there is ferment, and we expect that the situation will ripen and bear fruit from March, 2017.” The situation in Iraq is worse, where in fact “everything has stopped,” and for the moment there are no prospects for change. “And yet this country has significant potential. We mustn’t forget that they have a high population density.”

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The trade numbers, as we have seen, have dropped, which has never happened in the past. “From the always positive numbers that we were accustomed to seeing before, with significant market growth, we have had a couple of years in which trading has slowed. The purchasing power of these countries has decreased with the decreasing price of oil.” Gallo explained that this situation has also made itself felt in terms of freight rates, for which, however, the trend is different than in other areas of the world. “Certainly the drop in the price of oil and the difficulties of countries in the Middle East are affecting maritime freight rates, which have stabilised since last year. The trend is different than in East Asia, where decreases in traffic have been recorded. The Middle East is a distinct market, in which all the major players have a presence. The Port of Jeddah is the exception, precisely because it was influenced by traffic to the Far East: here freight rates have risen and fallen, but there is greater downward pressure.”

In terms of episodes of piracy and terrorism, there are few concerns about the proper functioning of the maritime supply networks. “Piracy and terrorism have no influence either on the container market nor on tankers on routes to the Gulf. There are higher costs, but they are no cause for concern. The conflict has had an enormous effect on Libya and partly on Egypt. Here one perceives a lack of confidence that is limiting the level of acquisitions.”

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