Thursday, October 04, 2012

Special Report Lebanese Industry: Round-about routes

Executive magazine 
If the Syrian crisis escalates further and the border with Syria closes, Lebanon would be cut off from the rest of the region with the only way in and out being by sea or air. So far the border has remained open, but the Syrian conflict has already caused a significant drop in cross-border trade and a rise in maritime shipping.  
Last year, an average of 450 trucks crossed the border daily with goods destined for Syria, Turkey, Jordan, Iraq and the Gulf countries. But with the security situation deteriorating, exporters are increasingly reluctant to transport cargo by land. Insurance is up 3.5 percent to cover the risk, and companies are being held financially responsible for hired trailers. The deposit on a 20-foot  (6.1 meter) container is $4,500 to $5,000, and $7,500 for a 40-foot (12.2 meter) container. “It is a cash deposit for the empty container to cover all issues, from accidents to kidnapping,” said Fadi Haddad, general manager of shipping and logistics firm Masafat International.  
In addition, there are increasingly delays at border crossings onwards from Syria, driver shortages and visa issues for Syrian drivers to enter Saudi Arabia (see box page 56). “We are facing a lot of obstacles: risk, the shortage of drivers, visa delays, and visa costs, and all this is adding up. There are also more checks at Masnaa [the Lebanon-Syrian crossing] and at Deraa [between Syria and Jordan], which holds up convoys for three to five days,” said Nizar Raad, managing director of Universal Metal Products. “So far Deraa has remained open but sometimes we wait a week or two for a trailer to go through.” 
Higher oil prices have also added to costs and the overall price of transporting a trailer to the Gulf has risen by 15 percent on last year. All of this has led to an approximately 50 percent drop in the number of trucks crossing from Lebanon into Syria, to between 200 to 250 a day, according to Gezairi Transport. 
Paying for Safety
With land transport having accounted for an estimated 70 percent of cargo to Iraq and the Gulf, unsurprisingly exports to Iraq have dropped, down 39 percent in the first quarter on the same period last year, and by 15 percent overall in the first half of the year. “Before the Syrian conflict, Beirut was a good transit point for cargo for Iraq, now there are a lot of doubts,” said Haddad. “Traders are asking what will happen to their cargo if it gets stuck due to a crisis during transportation in Lebanon or elsewhere.”  
The re-export trade has certainly been hit, at $193 million worth of goods moved in the first half of the year compared to $379 million for the same period in 2011. Meanwhile, exports to Turkey have dropped 40 percent, despite the launch in June of a privately operated roll-on, roll-off (ro-ro) vessel between Tripoli and Mersin to circumvent Syria. Sea transport has become an increasingly viable option for traders, especially if the cargo is expensive. “We’ve had requests from clients to study sea routes, as by land it is risky. But shipping costs are higher [so] trucks are still going,” said Haddad.   
Indeed, land transport is still the preferred option as it is more straightforward for a single trailer to go door-to-door than have to transport cargo to the Beirut port, load it into a container, unload it at the receiving port, and then re-load it into a trailer. It is also more time-consuming and costly.  
While a trailer would take roughly a week — without any unusual border delays — to get to the Gulf, by ship it takes on average 20 days. “[A] one week delay at sea is very common, and you can’t claim for a delay,” said Haddad. Shipping costs to the Gulf are also around 40 percent higher than trucking.  
Nevertheless, with land transportation increasingly fraught and time consuming, companies are clearly willing to pay the premium to make sure cargo arrives in one piece. According to statistics released by the Port of Beirut, export shipping operations by the top eight freight forwarders reached 26,305 TEUs (Twenty-foot Equivalent Unit) in the first half of the year, up 18 percent from 22,293 TEUs in the same period of 2011.

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