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Logistics News

2017: The year ahead

2016 was a year characterised by the surreal and unbelievable. On the global stage we saw the election of Republican presidential candidate Donald Trump, likely triggering a sustained period of unpredictable and unprecedented foreign policy and trade deals. In Europe the UK’s vote to leave the EU shook markets and stirred caution as who is in and how is out of the  single market, continues to be a point of disagreement in Brussels. In Turkey a failed military coup gripped the world and has since led to the arrest of thousands of citizens, with small scale violence and bombings continuing and a marked increase in instability over recent weeks, including the New Years Eve attack on a nightclub.

Zika Virus broke out in the host country of the 2016 Olympics; Iran cut ties with its Arab allies and recalled its ambassadors; and North Korea claimed a successful nuclear test. Russis is also flexing its muscles – how and why remain to be fully understood. Terrorist attacks continue to sweep major cities across the world and a string of natural disasters have touched every continent.

In the industry it was a particularly difficult year for shipping which suffered catastrophic consequences from a combination of major events. Overcapacity, consolidation of carriers, stagnant global demand for goods and downbound oil cut freighter bunker fuel prices removing the cost advantage of larger ships.

The climate created then triggered the collapse of Hanjin Shipping Co Ltd over the summer. Speculation on how and why the massive company failed covered everything from the actions of senior executives to overspending during bullish periods.

The silver lining is that in the four months since Hanjin’s bankruptcy filing freight rates have improved significantly for the industry’s remaining container lines.

The low oil price continued to put pressure on every industry, even more so once sanctions on Iran stepped closer to being lifted and it looked likely the nation could flood markets with supply. There will likely be huge changes on the horizon due to the political events of 2016 and there will also, no doubt, be some tricky times over the coming 12 months, with Iran, Iraq and Egypt all tipped for changes – both positive and disruptive.

2016 didn’t disappoint, but 2017 will be the year we feel the very real consequences of some very strange events.

 

 

Ruth WaughRuth Waugh

International business development director, Twintec Middle East Regional Office

How did business perform in 2016?
Twintec established a permanent office in the UAE this year and following the hard efforts during 2015 laid more metres squared of ‘jointless’ SFRC floor slabs than any other year to date in the Middle East region.  Logistics operations represented a large proportion of this volume. The greatest challenge we had to overcome was responding to the large increase in enquiries for Twintec’s unique design and build service. We believe this was  a result of clients having poor warehouse floor slabs previously due to poor design or execution during the construction phase, however moving forward this can be overcome by employing and training local staff.

What do you predict will be the key trends and events that will shape the regional logistics industry in 2017?
A higher occurrence of VNA racked or automated warehouses as the region embraces the latest logistics technology.  This will lead to a requirement for flatter floors to enable the VNA trucks to operate safely and effectively.

What will be Twintec’s big news in 2017?
Twintec will introduce a totally joint-free floor slab to the local market that eliminates all construction, expansion and saw-cut joints.

FeatureOpenerSultan Ahmed Bin Sulayem

Group chair and CEO DP WORLD

What do you predict will be the key trends and events that will shape the regional logistics industry in 2017?
While we don’t forecast, Drewry says 2017 global port throughput will be 2.4%. Drewry’s forecast for 2017 global fleet growth is 5.9%. Short term turmoil caused by Hanjin’s bankruptcy (i.e. $14 billion-worth of goods have been held up in the supply chain) is temporary. Drewry believes it signals the bottom of the market. Meanwhile, conditions for recovery in the medium term are improving, so long as carriers encourage them wisely. The industry is also consolidating with mergers, acquisitions and alliances. Global freight rates have been forecasted by Drewry to improve by 8% in 2017 after four years of decline, leading the industry to potentially make a small $2.5 billion profit in 2017. For DP World, we expect Expo 2020 and the opening up of new markets to drive medium term growth. Our confidence in the region was boosted further when our recently raised $1.2bn for a seven-year sukuk to be listed on NASDAQ Dubai received such strong investor interest that it was two times oversubscribed, receiving more than $2bn in bids. This is a clear sign of support for the economic fundamentals of Dubai and the UAE.

 

Dan Farley

Chief investment officer, State Street Global Advisors, Investment Solutions Group

“Proposed global trading agreements are losing support across all markets and the incoming US presidential administration opposes the 12-nation Trans Pacific Partnership (TPP). Moreover, the number of protectionist trade measures imposed globally in 2016 is five times as many as through the same period last year. A broad reversal in global trade is almost certainly a negative for global growth and is consistent with our modest return forecasts for global equities. Within certain local industries, however, protection will be beneficial as firms become more competitive domestically, just as it will be a drag on companies with substantial global exposure.”

Stefano Pollotti, MD, GEFCO Middle EastStefano Pollotti

Managing director, Gefco Middle East

“It’s not going to come as a shock to anyone that the past year has been something of a challenge. And I think ‘challenge’ is the right term for it. 2016 has not been a disastrous year, it has been a time for potential client building, re-establishing relationships and making the most of the time to foster new partnerships. For many organisations, whether in logistics, manufacturing, heavy industry or services, this should have been a time to consolidate and keep heads above water but it should not have been a deal-breaker, as long as you channelled your business in the right directions. For us, we placed a much heavier emphasis on our far East operations, where we actually beat our sales targets by 40%. It was a record-breaking year for that market despite the difficulties elsewhere.

“Probably the greatest challenge for us this year could have been the low oil prices, which led to a drop in trade volumes. As I said, we adapted a good strategy in turning our focus in the right directions. GEFCO also has a very flexible cost structure, once again the key word is adaptability and we have the resources and experience to put the theory into practice.

“As for the new year, GEFCO has just been awarded an €8bn contract to optimise PSA Group’s global supply chain. This means designing and implementing the global logistics and transport solutions for the three PSA Group brands, Peugeot, Citroën and DS. There can be no better start to the year than that.

“There will be some massive changes ahead in terms of political implications on trade but we can only speculate at the moment what those will be. Iraq and Iran are obviously huge factors in how the logistics industry in the Middle East will fare over the next twelve months and beyond. Egypt is another decisive market which is constantly growing and is still, to some extent, an untapped opportunity. It is going to be a defining year in so many ways for so many industries, and logistics is going to play a significant role in all outcomes.

“For GEFCO in the Middle East, we are fairly confident that the challenges of 2016 are behind us. Saudi Arabia looks as though it will open several new channels for us and Qatar will once again be back on track. We have a big focus on Qatar – GEFCO is a major player in bringing together the metros, stadia, and infrastructure.”

 

Eng Mahmood Al BastakiMahmood Al Bastaki

CEO, Dubai Trade

What was your greatest challenge in 2016 and how did you overcome it?
We anticipated the depressed global economic outlook and took measures to diversify our revenue streams through new customer acquisitions for our flagship products – Dubai Trade Portal Framework and Rosoom. We continued to look for innovative ways to address the needs of our customers and by adopting new technologies to improve our service offering.

What do you predict will be the key trends and events that will shape the regional logistics industry in 2017?
2017 will be another important year for global and regional logistics industries. Based on multiple expert opinions we are predicting continued macro-economic headwinds for the first half of 2017 with cautious optimism for the second half of 2017. We see this as an opportunity to be ready for another uplift in regional logistics services and are actively developing new platforms in transportation and warehousing for the benefit of our customers. We believe in working responsibly and sustainably to build a strong business for our customers, people and society. With this long-term approach, we also embrace technology in our everyday operations and the recent government announcement regarding BlockChain technology is a key focus area for us. BlockChain is a new and highly-secure way of online transactions. It works on the concept of a distributed ledger of database transactions with low-cost and low-latency. This makes BlockChain suitable for the recording of events such as container movements and other records management activities, customer identity management and proving provenance. We have already demonstrated a proof-of-concept for BlockChain in trade facilitation at the last GITEX event in October this year. We will continue to work with government leaders, technology providers and customers to pioneer the innovative use of BlockChain technology for cross-border trade and logistics operations.

What will be Dubai Trade’s big news next year?
2017 will be another important and crucial year for us as we launch our global operations. We have been invited to establish a similar electronic trade facilitation portal in many countries around the world and we will be making announcements regarding these developments in the first half. We’ve also set up a subsidiary company called DT World through which we will offer our expertise and products to other countries. This will have a positive impact on local trade too, as exports from one country could trigger the necessary import transactions here in Dubai and the UAE and vice-versa.

 

HansHans Christian Ettengruber

Managing director, Unitechnik

How did business perform in 2016?
Business for Unitechnik was constant on the services provided by Unitechnik. On the project side of our business we feel a slight slowdown because of reduced budgets or cancelled budgets for projects that have been planned.

What was your greatest challenge this year and how did you overcome it?
To identify the customers, that are willing to invest in spite of an economical downward trend. Those will be the winners, when the economy will pick up again. Then those customers have their supply chain well organised and their cost reduced to give them a competitive edge.

What do you predict will be the key trends and events that will shape the regional logistics industry in 2017?
Customers are more likely to go for automation in projects as they now see the benefit of it; the utilisation and analysing of in house data will become more common; warehouse management systems will be the tools to use more comprehensively.

What will be Unitechnik’s big news in 2017?
We are planning to increase our service part of the business, so customers can achieve higher availabilities with the systems we have provided for them.

 

UPS_Corporate Image_L_Res_1_CJean-Francois Condamine

President, UPS Indian Subcontinent, Middle East, and Africa District

What was the greatest challenge for UPS in 2016?
From Syria to Nepal to Rwanda, some of the world’s greatest challenges today revolve around logistics. Humanitarian aid and relief efforts require the collaboration of many entities, across sectors and geographies. The core mission of UPS Foundation is to help build stronger and more resilient communities. UPS invests in the Middle East from infrastructure to technology to human capital to make a measureable impact for those in need.
You can see this with our relief efforts sent from UAE to Nepal and Haiti, where we worked with partner organisations to provide relief supplies and logistics support after the devastating earthquake and hurricane. Or our partnership with the Dubai government to convene dialogue around pandemic preparedness. We are constantly looking for innovative ways to enhance humanitarian logistics to help save lives.
Our partnership with Zipline and Gavi is transforming the delivery of critical life-saving medicines and supplies to remote areas in Rwanda.

What do you predict will be the key trends and events that will shape the regional logistics industry in 2017?
Look out for small and medium businesses – they are a source for growth that is not to be underestimated in the region. A recent report by the Dubai SME says Small and Medium Enterprises are the “engine” for economic growth and vital contributors to the country’s gross domestic product (GDP). We couldn’t agree more. That’s why UPS will continue to contribute to the national economy by supporting the SMEs in developing their businesses. We have the expertise, with 109 years of experience and access to more than 220 countries and territories, to tailor the right solutions for small businesses.  Our company started with two bicycles and a $100 loan, so you see the SME spirit is still part of our DNA. Small businesses represent the future and we are in the business of helping them grow and scale their operations to meet their customer needs.

What will be the leading “mega-trends” defining your 2017 plans?  
Boston Consulting Group identified six megatrends that we agree are impacting the regional logistics industry. Those include the rapid development of emerging markets, urbanisation, sustainability, infrastructure congestion and scarcity, e-commerce, and digitisation.

We also think that factors such as the Expo 2020, Qatar 2022 FIFA World Cup and National Logistics Development Plans will continue to drive the logistics sector.

While broader macroeconomic factors may potentially soften demand in some areas, we are bullish on the region – and see plenty of opportunity for economic growth. While broader macroeconomic factors may potentially soften demand in some areas, we are bullish on the region – and see plenty of opportunity for economic growth.

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