Quicktake: Khalifa Port’s teaming up with China’s Cosco

The port’s 35-year concession agreement with the Chinese port operator is its first overseas greenfield investment

A Cosco Shipping vessel is moored at PSA's Pasir Panjang container terminal in Singapore. Reuters

The $7 billion Khalifa Port, which opened in 2012, has teamed up with Cosco Shipping Ports, the Hong Kong-listed unit of the world’s number three container shipping company China Cosco Shipping Corporation, to invest and operate a terminal at the facility

The terminal, which is CSP’s first overseas greenfield unit, has a capacity to 2.5 million twenty-foot equivalent unit or TEU, the measure for container volume, and will help boost the port’s overall capacity to over 5 million TEU. CSP has invested $300 million in the terminal and $130m in the container freight station under its 35-year concession agreement.

Here's why the Chinese investment in Abu Dhabi matters.

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Who is Cosco Shipping Ports?

CSP has five main ports globally, with a total annual designed capacity of 81.2 million TEU in China and 38 million TEU in its overseas portfolio. CSP is part of state-owned China Cosco Shipping Corporation, China’s biggest shipping company that was formed in 2016 from the two largest shipping companies in the country.

The CSP’s third quarter net profit rose 11.8 per cent to $75.1 million thanks to growth in container volumes.

Container volumes handled at its overseas terminals rose 36.6 per cent to over 6 million TEU in the third quarter from a year earlier period, accounting for 20.7 per cent of the company’s total volume.

Why is Cosco expanding into Abu Dhabi?

China is the UAE's second biggest trading partner after India and the UAE is the gateway to about 60 per cent of Chinese exports to regional markets.

China is expanding its reach in Abu Dhabi from energy to logistics as part of its Road and Belt Initiative, which seeks to emulate the riches of the old silk route. Cosco’s terminal investment is the first in the Middle East as it seeks to leverage its expertise in shipping to grow its global business.

China is a big investor in the Khalifa Industrial Zone Abu Dhabi and Kizad, the free zone adjacent to Khalifa Port.

Last year, Abu Dhabi Ports, the operator of Khalifa Port, signed a 50-year agreement with the Chinese Jiangsu Provincial Overseas Cooperation and Investment Company (JOCIC) that will attract investments of Dh1.1 billion to Kizad.

Why is the expansion of Khalifa Port important?

CSP has an option to expand its terminal at Khalifa Port by another 1 million TEU at an estimated cost of $200m in the next three to five years.

Meanwhile, Khalifa Port is targeting boosting its capacity from about 5 million TEU, including the current CSP terminal capacity, to 9.1 million TEU over the next five years.

These plans are part of Abu Dhabi’s strategy to boost its trade sector and contribute to the growth of the non-oil gross domestic product of the emirate.