Investments in port expansion help improve economic efficiencies

Given the country’s large quantity of imported goods and the importance of hydrocarbons exports, Algeria’s economic performance is largely connected to how well its ports function – even more so as up to 95% of Algeria’s international trade passes through its port network, according to the European Commission.

In recent years, several of the country’s primary and secondary ports have undergone significant capacity upgrades, partly under the purview of private operators that have helped bring down costs and times. The government and the concessionaires are working to continue these improvements over the medium term.

The World Bank puts the cost of importing a container in Algeria in 2014 at €978, compared to €713 in Morocco or €669 in Tunisia. These figures were up by nearly 1% in Algeria and 6.1% in Tunisia since 2010, while costs decreased by 3% in Morocco over the period. However, these figures were all well below averages seen in sub-Saharan Africa (see analysis).

Arzew

The most important in terms of shipping traffic is the port of Arzew, situated 40 km from Oran and responsible for handling the majority of the country’s vast petrochemicals exports. Next is the port of Algiers, which handles 60% of container traffic. However, its location in the centre of the capital has made it difficult to make improvements. Algiers port has been jointly managed by port operator DP World and state-owned Entreprise Portuaire d’Alger since 2009.

Djen Djen

The port of Djen Djen is the deepest seaport and attracts high traffic, up 25% in 2013. It is jointly managed by Entreprise Portuaire de Djen Djen and DP World, which won a partial concession alongside the Algiers port, and it handles heavy loads such as machinery, vehicles, construction materials and cereals.

Renovations are under way at the port, with South Korean contractor Daewoo Engineering & Construction extending two jetties to 250m and 400m in length to better protect unloading ships. Expected to cost €128m and scheduled for completion in 2015, this project will help improve efficiencies by extending the number of days the port can operate each year. The next phase of expansion will focus on building a new containerhandling terminal, with the aim of positioning the port as a trans-shipment hub in the Mediterranean. Building is scheduled to begin in late 2014 and cost AD60bn70bn (€558m-651m), up to AD39bn (€362.7m) of which will be financed through loans by the state.

Although regional competition is steep, a revamped Djen Djen port will be able to service larger ships and strengthen connections to two highway projects – the soon-to-be-finished East-West Highway and the Hauts Plateaux Highway. “Getting to the port will be much easier, and this will certainly increase competition between Algiers port and Djen Djen,” Farid Belbouab, deputy managing director of CMA CGM Agencies, told OBG.

Oran

Further to the east, the first phase of an expansion project is under way at the port of Oran. Construction of a new 23-ha area for containerised cargo will allow for centralised container handling in one part of the port. The project, led by the Entreprise Portuaire d’Oran (EPO), which manages the facility, is expected to cost €98m. Initial work will allow the port to handle 500,000 containers per year by establishing a 500-metre quay and extending the depth to 14 metres.

The first phase of the €443m project is scheduled for completion before the end of 2015, while a second phase will eventually extend the container-handling quay to 900 metres and the port depth to 17 metres, raising handling capacity to 1.5m containers per year. The facilities upgrade is particularly essential as traffic is poised to increase from the 5.8m tonnes handled in 2013, thanks to a new Renault factory in Oued Tlélat.

In 2013 EPO announced plans to build a dry-port area in Oued Tlélat to further improve logistics. The AD2.5bn (€23.3m) project would create handling capacity of 20,000 containers initially, which would increase to 40,000 after the second year. It would also add an extraport Customs area to deal with documentation procedures more quickly; however, the project’s starting date and completion deadline have yet to be announced. BÉJAÏA: Work is also ongoing at the Béjaïa port, which boasts Algeria’s third-largest hydrocarbons export channel. However, only half of its 16m-tonne annual shipping capacity can be used at present, as supertankers are unable to dock due to the shallow draught. To prevent accidents and expand capacity, the hydrocarbons terminal will be relocated to Sidi Ali Lebhar, set to start operations by 2015. The port is jointly operated by the state through the Entreprise Portuaire de Béjaïa and Portek, which manages the Béjaïa Mediterranean Terminal. While private operation has raised efficiency, with 254,000 twenty-foot equivalent units moved in 2013, the port quickly becomes saturated, as it is too small to accommodate a sufficient number of vessels.

Portek has been trying to implement a plan to build a dry-docking area to boost capacity. “Béjaïa port has worked very well. The problem, however, is the lack of space – there is definitely congestion. The port can do up to 20 movements an hour, which is a good average for Algeria,” Belbouab told OBG. Lack of space is not unique to Béjaïa, limiting the growth of Algiers port as well, where port operations are marred by inefficiency, as seen by the transport vessels that regularly crowd the bay of Algiers, awaiting their turn to dock. Discharging cargo takes an average of 27 days at the port.

Newcomer

In 2011 the government announced that a new port would be built on the central coast. More recently, in March 2014, authorities said that studies to select the best location were being finalised, with the site likely to be between Dellys, in the Boumerdès region, and Ténès. While this would obviously involve large capital investment, a new port tailored to current size and capacity needs would quickly recoup costs.

Soft Touch

Soft infrastructure upgrades are also taking place. Container scanning in Algiers port, which had at times been applied to all inbound containers, is now done only on select occasions. Lack of administrative coordination has been a source of inefficiencies, with redundant checking of merchandise cited as one of the most critical problems by transport operators. “Customs inspections slow the importation of goods because each division of Customs, such as fraud, veterinary and agricultural goods, spends a day inspecting one area, so the imports are stalled while they do rotations between ports,” Boualem Kini, general manager at SNTR-AGS, told OBG. Other measures are also slowly helping to modernise procedures. Indeed, a 2013 PwC report states that despite its relatively inefficient handling procedures, “the country has managed to improve its performance in areas such as Customs, track and trace, and timeliness over the past few years”.

With container import costs up 1% since 2010, versus a 3% reduction in Morocco, improvements to port infrastructure in Algeria are crucial for keeping pace. As multiple port expansion projects wrap up in 2015 and soft infrastructure improvements progress, Algeria should find itself in a better position to attract the 10% of global maritime traffic that passes its shores.