Monday, January 19, 2009

All your eggs in a few baskets

Another sector in which Dubai specializes is also hit hard by the global downturn: shipping. Global international trade is down.

I don't have a way of knowing whether it has hit the transshipment business in Dubai --stop rss feed, there's this* --, but remember that Dubai has worldwide holdings in Dubai Ports World.

Dubai's status as a key global sea-air hub has come under threat from falling air freight rates. Declining production in China and overcapacity at airlines — combined with low fuel prices — has made the all-air option more attractive to shippers.

"It looks as if Dubai is going down rapidly," said Tobias Siegl, MD of ECS's Dubai subsidiary, Globe Air Cargo.

"Air freight rates are cheaper than sea-air rates, which heavily affects the whole idea of the Middle East as a transit point.

"There is a rumour that Dubai may be on the financial edge. Nobody is willing to tell you anything in Dubai these days. Everyone is bugging you for cheaper prices, and carriers are offering rates just covering their costs."

Cutting rates in a transhipment market cannot stimulate demand if the volumes have dried up, he pointed out.

China is reducing production, so the incoming loads are simply not there any more. People are just trying to grab loads from others."

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