Since the Djibouti government took over facility management in 2018, Abdillahi Adaweh Sigad, CEO of Doraleh Container Terminal Management Company (SGTD), has oversaw the most advanced container port facility in the Horn of Africa. Since then, a number of efforts have been implemented by the new administration to increase activity in the port business. The most important is to list the port as a primary transshipment destination. The Djibouti government also decided to expand the gantry crane and stake yard significantly in order to handle the world’s largest container ships, in response to the increased demand. Transshipment has increased since expansion was completed a few months ago, and by the following year, it is anticipated to account for half of port activity.

Capital’s Muluken Yewondwossen met with the CEO of SGTD to discuss the benefits of the recent expansion and the rise in transshipment for clients in Ethiopia.

Capital: How has the operation gone thus far?

Abdillahi Adaweh Sigad: We would like to inform our partners that the terminal commenced a major expansion project in 2019 to boost its capacity. The project was chosen; regrettably, the COVID period caused a one-year delay, and the capacity expansion was divided into two phases. A high capacity gantry crane and Sea to Shore (STS) was one, while a yard extension was the other. The reason these two investments were required is that, in 2019, we were able to resurrect a very high level of productivity and, as a result, liners began to ask us for space for transshipment in addition to your local and regional markets. However, they said that you also needed more capacity, a gantry crane, and more space.

In order to ensure that we have adequate space for the gantry crane when it is installed, we need to consider both the volume and size of the vessel. With the previous gantry, we could handle vessels up to 15,000 TEUs, but these days, many vessels may hold up to 23,000 TEUs, which is beyond our capacity.

According to shipping companies, transshipments are typically carried by large vessels with a carrying capacity of more than 15,000 TEUs. That is why we chose to invest in a gantry crane at STS in addition to the space increase, so that the two projects could go side by side. We completed the yard extension project in December of last year, and we finished the gantry crane project starting in 2023. When they find out that the gantry cranes arrived even before the commissioning was put into place, liners start to arrive. We will have just 5 percent transshipment in 2022. Because the gantry was being commissioned during the last six months, we have increased our transshipment to 20 percent of the whole business.

We will now be hitting 35 percent after a full year of operation in 2024, and our goal for 2025 is to achieve 50 percent. It signifies a 50 percent shift in cargo. 50 percent local and the balance for transshipment, which really aims to have a more diverse and well-balanced clientele that includes Ethiopians and Djiboutian as well as an international market for transshipment to other nations.

Actually, that is what other major ports do. It is not a creation of ours. It is neither extraordinary nor speculative in any way. It is merely the way the ports have to expand due to limitations in the local or regional markets.

Now, you have practically limitless opportunities for worldwide company provided you have the potential and growth. Even if we just take one percent, international is still very important to us. Thus, there are no restrictions; the only ones are related to our ability to handle projects and manage finances. Other than that, we have complete control over our location, operational efficiency, and coastal water, which has a very special natural depth. Thus, funding and project management are required. That is the reason we are doing things step by step as far as our project management and financial capabilities would allow. Thus, the initial stage of development involves adding an extra five to 600,000 TEUs. That is what’s bringing the gantry crane and yard expansion.

Capital: How is this project financed? Did you consult any overseas sources?

Abdillahi Adaweh Sigad: We use in different ways. The government views it as a priority, and we are financing it because this port has potential. In order to carry out the project, the government mobilized the necessary resources.

Capital: Do you believe that staking yard is sufficient in this case? Could you elaborate on the next expansion?

Abdillahi Adaweh Sigad: As you can see, there are already cargos in the location. Thus, it is insufficient. When we say that it is not enough, we mean that it is not enough for the amount of transshipment that we want to attain, but at the moment, only 70 percent of the terminal’s volume comes for Ethiopia and Djibouti, and 30 percent comes from transshipment.

For Djibouti and transit that is Ethiopia, we have more than enough capacity, but we still want more. To be honest, we have to raise the transshipment notwithstanding your occasional comments because our local traffic has decreased since the COVID 19. The volume has decreased during the past three years. Between 2019 and 2022, we lost 30 percent of the volume; nevertheless, from 2023, there has been a little gain. Consequently, we have never heard of a capacity issue. There is not a problem. The terminal is visible. Our capability is sufficient. We do not want any empty space right now. Therefore, we introduce transshipment when we have such space.

Thus, when we say it is plenty, it is more than enough for Djibouti and Ethiopia, our transit countries. We will now hit a million this year if we wish to expand our reach over the million. But, we need to grow much more if you want to achieve two million. Thus, we must go on to the next stage. We just need yard space and yard equipment for the following phase. We have enough equipment to the seaside. With the amount we are doing today, we only require seven cranes, not the twelve we have.

Thus, you might estimate that the gantry crane is about 40 percent overcapacity. Transshipment is the adjusting factor in space, thus transit countries like Ethiopia and Djibouti do not need to worry about the terminal’s capacity since there is enough room for them there and transshipment is only brought in when there is space available.

Let’s imagine Ethiopian unexpectedly increases the volume of cargo tomorrow. Usually, we know this will happen gradually, so we take appropriate action. In addition to expanding the yard, we may gradually refrain the transshipment.

In business, we have what is known as our natural market or traditional market where we are the port, whether it is your country or a landlocked one, which is your customer. If we say that we will grow in the next two months, that is no problem for the transshipment that they move every week, and we say to our customer, okay, the time we make an extension.

As a result, we prevent people from accessing the port, which prioritizes serving this market first and transshipment second.

That is our modus operandi. We genuinely want our Ethiopian colleagues to realize, in my opinion, that we only compete when we have a spot available; otherwise, we prioritize serving the local market and transit, since it is their port.

We now wish to grow and generate employment. You are aware that transshipment offers certain benefits not found in the local market or transit. When it is fully occupied, you can rearrange some of the containers in the free zone to make room for more workers at the terminal. It generates jobs in the free zone and transportation in the terminal between here and there. In actuality, the containers arrive, are left for a while, and then are placed in the free zone. Some of that is unstuffed and reclaimed. For the other containers at the terminal they send to Yemen, Somalia, Sudan, Saudi Arabia, and other places.

However, that is not how local and transit work; they take their container and deliver it empty.

Capital: How much does the latest expansion consumed?

Abdillahi Adaweh Sigad: All, its USD 70 million, divided between USD 30 million for the yard extension and USD 40 million for the gantry crane.

Capital: What benefits would Ethiopia receive from this expansion?

Abdillahi Adaweh Sigad: Currently, we bring one vessel, say 1,000 TEUs, into Djibouti, and Ethiopia pays the entire vessel’s expenses. They refer to this as a deviation from the time the vessel enters Djibouti territorial water, and the time they leave is expensive. Shipping lines do not care how many containers you bring if they have to bring you pay; whether it stays for 12 hours, 2 days, or 3 days, you pay the full vessel daily charge.

Let’s say we only have 1,000, in which case we pay for the entire vessel. If we obtain 1,000 TUEs for Ethiopia and Djibouti and 4,000 transshipments, the transshipment will cover the majority of the cost. It works similarly to a taxi: if you ride alone, you pay the entire fare; if you ride with three people, you split the cost amongst them. That is the same thing. Thus, Ethiopia will gain from this transshipment investment in two main ways. The first is price, and the second is speed, since more cargo, both local and transshipment, is arriving at your port. If your fleet of vessels is more direct, there will be less transshipment to other ports.

We are not that loud today. Therefore, tiny feeders will handle the transshipment from Jeddah or other regional ports like Salalah or Jebel Ali to Ethiopia and Djibouti. If we have 5,000 containers tomorrow, they will not be transshipped. It will come right here and discharge. Because it will reach immediately, the Ethiopian client who had been waiting, let’s say, two months or a month and a half from Shanghai, may now wait three weeks. Thus, we argue that transshipment saves both import and export transit times and costs.

As a result, our connectivity will increase. You can have a direct call vessel with reduced timing from the primary supply chain point, which is China to Djibouti, when your connection rate increases. Thus, with the transshipment volume and the extension that would occur directly, today’s transshipment is mostly from Jeddah, Jebel Ali, and Salalah.

Capital: To the best of my knowledge, you can handle around 40 ships per month. How many vessels will arrive as a result of the expansion?

Abdillahi Adaweh Sigad: It is nearly the same, but the question is if the volume has gone up on what I just said. We are almost at 2,000 per call now, compared to 1,200 each call in the past. The idea is that while the total number of vessles will remain constant, there will be an increase in the size of the vessels and a larger call. Our goal is to exceed 3,000 calls each vessel, from 1,000 TEUs per call per vessel in the past.

Capital: Who is now your biggest liner client and who will it change as a result of the expansion?

Abdillahi Adaweh Sigad: First of all, the top 10 lines in the terminal are all calling, and their rankings are nearly identical. Thus, MSC, CMA CGM, PIL, COSCO, and Maersk are our primary carriers. They now compete in tandem. They compete not only with the Ethiopian market but also with the local one. Once the shipment arrives, they bargain with us, stating that they have a large volume and asking for what tariffs and space we can provide. In any case, since the terminal’s founding, the tariff has not altered.

The other point that, in my opinion, we should also emphasize is that Ethiopia pays between USD 400 million and USD 500 million to Djibouti. If you do not trust us about this number, simply double the official tariff book and the volume of the Ethiopian Statistics Office before drawing your own conclusions. We do not have any transportation from China to Djibouti, and other inland transport and dry port that Ethiopia operates.

Capital: You were impacted by COVID 19 and its aftermath, and the Red Sea situation is currently precarious. How is this affecting your operation? What do you hope to achieve in the near future?

Abdillahi Adaweh Sigad: Indeed, we have two main effects. One is, to put it mildly, inconvenient. Because some shipping lines would want to come, we have less visibility and visibility into when our shipment will arrive. They wish to travel to Jeddah as well because we live in a tiny market. Then, when they are in the middle of the Indian Ocean, they decide to travel somewhere else, which causes a delay. They are told that Djibouti only has 1,000 containers, whereas Jeddah has 3,000 to 4,000 containers. Therefore, the circumstance rather than Djibouti is the reason for the delay. They claim that I am shipping most of them to the Red Sea.

It is like you have one passenger and another 9 passengers then the majority passengers they cannot go through. Typically, you drop off the lone traveler at a different location. For freight, it is precisely the same. There was a delay, which had an adverse effect.

Positive effects also include certain liners coming and offering to provide local volume and asking for assistance in storing some of their cargo for a while. We respond, “Yes, we can,” and “We will do it.” Actually, we are employing this strategy to get them to advance our local volume. That was the main step we took to control the crises: we insist them to move forward Ethiopian and Djibouti cargos and give space for them. The crisis has led to an increase in our volume. However, some of the smaller liners cause delays.

However, in order to strengthen the link, we also intend to collaborate with the main shipping line. The direct call vessel signifies connectivity. Large vessels do not arrive in a small port. For instance, the port of Berbera or Massawa transships all of its volume, at least in part, to Singapore or Colombo before being carried later in the Gulf, which doubles both the cost and the time because every port will need payment, for instance, we charge for the transshipment. However, liner arriving at a major port instantly arrives there. We so have over 70 percent of direct calls in our situation.

In order to enhance both timing and cost, we aim to put it approximately 90 percent. Next, we are utilizing this circumstance to demonstrate to the shipping lines our ability to handle transshipment. Then connection may be established. Regarding this situation, we can say that there has been some delay since certain shipping line, mainly small ones, are transshipping elsewhere, but major liners are arriving, and we are assisting them by providing them with incentives by locating a transshipment, allowing them to deliver our goods quicker.

Capital: Maersk recently revealed that it has halted operations in Djibouti because to a security concern in the Red Sea. What is the effect of a decision like that?

Abdillahi Adaweh Sigad: They are a sizable clientele. These issues, in my opinion, require consideration from both a commercial and a security standpoint. As you are aware, Maersk said that they would only be pausing one service. As for the corporation, they maintain that it was a standard for security reasons. They said they wish to avoid being singled out. Furthermore, we learn that the individuals causing traffic disruptions have political agendas and are among the main targets for you may be able to imagine.

They believe they are being targeted. Then, even though they used to go here, there have occasionally been incidents that happened in Somalia, Indian Ocean before the Red Sea. They claim that we do not want to take a risk for our seafarers because of this. However, that merely represents one of the company’s Mediterranean businesses. Asia makes up the bulk of our freight, which is unaffected.