Analysis – Could DP World and Maersk prevent China from taking over all Haifa Bay ports?

Haifa, Israel (PortSEurope) November 2, 2020 - At the end of October, Israel Shipyards Industries together with Dubai-based DP World submitted a long-expected bid in the tender for the privatisation of Israel’s largest Haifa Port in the Mediterranean Sea. The tender is expected to generate offers of around $300 million. State-owned ports privatisation and the construction of new docks are part of the Israeli government strategy to modernise port infrastructure, reduce costs and attract transhipment of cargo. The important question is whether this strategy could backfire by placing most of Israel’s key ports infrastructure into the hands of the Chinese government? The old Haifa Port is in urgent need of an upgrade and reconstruction if it is to compete with the state-of-the-art container terminal that China’s Shanghai International Port Group (SIPG) is building nearby in Haifa Bay. It is expected to start operations in 2021. The SIPG concession is for 25 years. DP World and Israel Shipyards, owned by Shlomi Fogel (also an owner of Israeli’s Port of Eilat), Sami Katsav and the Schmeltzer family, will face fierce competition for the old Haifa port by many local and international contenders, including China Railway Engineering Corp (CREC) and Hutchison Group, a major Chinese concern based in Hong Kong. The Hutchison Group has several large investments in Israel and expressed interest in the privatisation of both Haifa and Ashdod Israeli ports already in 2004. Apart from these two Chinese state-controlled behemoths, with huge financial power, a serious contender in the tender is expected to be Denmark’s Maersk – the world’s largest shipping company. It is expected that Turkey’s Yildirim will also bid in the Haifa Port privatisation tender. Other potential investors include GraeStone Logistics of the U.S. and UK-listed Global Ports Holding, also under Turkish ownership. Other potential participants (all Israeli and likely to enter into alliances) in the privatisation of Haifa Port, according to local media, include: Taavura Taavura – infrastructure and transport company controlled by the Livnat family; Minrav – construction company controlled by Avraham Kuznicki; Israel Chemicals (ICL) and ZIM Integrated Shipping Services, controlled by Idan Ofer; Allied Holdings Group – investment company headed by Prof. Itzhak Swary; DAO Shipping – shipping group owned by KIA importer Rami Unger; Union Motors – car importer owned by George Horesh; Shapir Civil and Marine Engineering – infrastructure company owned by the Shapira brothers; Sonol – fuel company controlled by Dudi Weissman; Investment Funds – private equity fund focusing on kibbutz industries; and Aluma Infrastructure Fund – financial institution controlled by Uri Yogev In October, DP World, a global supply chain solutions provider, signed a Memorandum of Understanding (MoU) with Israel’s oldest banking corporation, Bank Leumi, to enhance trade and logistics in Israel and promote the flow of trade between Israel and the wider region. The MOU includes a framework for collaboration which will enable the parties to explore potential opportunities including the development of ports and logistics assets in Israel to drive trade. In September, the DP World and Israel Shipyards’ DoverTower subsidiary signed an agreement to cooperate in shipping and port activities. A joint bid to operate Haifa port. Also in September, Israeli Prime Minister Benjamin Netanyahu and the foreign ministers of the United Arab Emirates and Bahrain signed agreements formalizing diplomatic relations between Israel and two Gulf Arab nations. This has led to further corporate agreements linked to improving commercial relations between the three countries. China’s Shanghai International Port Group (SIPG) has reportedly spent over $3 billion in the new Haifa Bayport project – a huge amount that includes the cost for semi-automated loading technology (Israeli ports are notorious for high labour costs). The new terminal will have an initial annual capacity of 1.06 million TEUs when the first phase of its construction is completed in 2021. The second stage of the Bayport terminal (a total of 1,500 meters of quay length, a 78 hectares surface and 17.3 meters draft) will increase its capacity to 1.86 million containers per year. It will be the newest and by far the most advanced port in the Mediterranean Sea. Haifa Bayport’s infrastructure includes huge remote-controlled cranes that can handle the largest container ships, robotic transport systems, autonomous smart power supply systems and 5G wireless communication networks. SIPG is a global terminal operator, the exclusive operator of all the public terminals in the Port of Shanghai and provides cargo handling, port logistics, port commerce, pilotage, tugboat, shipping tally, and other port-related services. A presence in the Mediterranean, together with assets owned and managed by China’s COSCO Ports Shipping and China Merchants Group, would expand Chinese activities in the region, close to the Suez Canal. Together with Haifa port, they could form part of a transport corridor with Middle East countries. This fits into Beijing’s “One Belt and One Road” strategy. The new Silk Road (part of the Belt and Road initiative – BRI), also known as One Belt, One Road – OBOR), is a Chinese economic strategy to seek better access for Chinese-made products in European markets, which includes acquiring stakes in ports and other transport facilities, and cooperation agreements with countries along the Silk Road routes. Haifa Port is also close to the Lebanese border and in the past has been targeted during periods of security tension with Lebanon where predominant power is the Shi’ite movement Hezbollah. Haifa is also a strategic military port for the Israeli (and the U.S.) navies Washington has concerns with the SIPG development and does not want to see a new Chinese business with the latest technology at a port where the U.S. Sixth Fleet is a regular visitor. Also, Washington is concerned that China will use the harbour to improve its standing in the Middle East and potentially gather intelligence on U.S. interests. Israeli submarines, often reported to be capable of launching nuclear missiles, also dock in Haifa which regularly hosts joint U.S.-Israeli naval drills. The SIPG deal has raised intelligence and security concerns that are prompting an Israeli inter-agency review. Some Israeli officials frown on the mushrooming relationship with Beijing. Former Mossad head Efraim Halevy, for instance, has consistently warned against Chinese involvement in the Red-Med high-speed rail project to connect the cities of Eilat (a port on the Gulf of Aqaba by the Red Sea) and Ashdod (a Mediterranean seaport), concerned it could trigger a crisis with the U.S. administration. The 260 km of electrified double-track rail (not including the additional 100 km Tel Aviv – Beersheba section), if built, is expected to serve both passengers and freight, including minerals mined from the Negev Desert. The freight service will serve as an alternative to the Suez Canal, allowing countries in Asia to pass goods to Europe through Israel. The line is part of a greater plan relocate the Port of Eilat 5 km further inland. As a further example of China’s aggressive moves into the Mediterranean and specifically into Israel, Pan Mediterranean Engineering Company (PMEC), part of China Harbor Engineering Company Ltd, has won in February a tender to upgrade Ashdod’s main dock for NIS 1 billion (€270.3 million). The upgrade is part of a comprehensive plan for Israel’s Port Company to promote and upgrade the seaports in Haifa and Ashdod, including planning the expansion of silos at Ashdod Port, restoration of the fuel pier and passengers terminal, and the restoration of the old breakwater in Haifa port and more, in order to increase efficiency, and make ports more competitive and improve the level of services. Upgrading piers with a total length of 850 meters, will allow large container ships of about 400 meters in length and a carrying capacity of 18,000 containers to use the port. The upgrade will include deepening the eastern part of the platform to about 17.5 metres and strengthening it to carry cranes of 130 tons, as well as deepening the western part to about 16 metres and adapting it to receive large nuclear vessels. The upgrade works are expected to be completed in 2023. PMEC also won the tender to construct Ashdod’s Southport Terminal (HaDarom) project. Israel Electric Corp (IEC) said in July 2019 that it is selling the Alon Tavor power plant to a consortium of Chinese Harbor, Rapac Communication and Infrastructure Ltd unit Rapac Energy, and Mivtach Shamir Holdings Ltd. China Harbour Engineering is a subsidiary of China Communications Construction Co, providing infrastructure construction, including marine engineering, road and bridge, railways, airports and plant construction. Whilst China is not a controlling partner in the consortium, its presence again raises concerns about the growing Chinese investments in Israel’s infrastructure. In conclusion, the list of companies interested in being part of the future of Haifa port would appear to represent the various countries trying to influence regional politics and development- Israel, Turkey, China, the USA and the UAE. Copyright (C) PortSEurope. All Rights Reserved. 2020.

Analysis – Could DP World and Maersk prevent China from taking over all Haifa Bay ports?

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Analysis – Could DP World and Maersk prevent China from taking over all Haifa Bay ports?

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