By: AGBI

Port of Neom’s new container terminal on Saudi Arabia’s Red Sea coast will not ramp up to full capacity until next year, despite logistical challenges caused by the Iran war that have lifted shipping costs across the region.

The container port, T1, capable of handling 1.5 million twenty-foot containers (TEUs) a year, was originally scheduled to open last year — a deadline later extended to 2026.

Its website now says T1 “launches from 2027 onwards”, without offering any explanation.

A spokesperson for Neom said the port is still scheduled to open by year-end, but that 2027 would see “activity and capacity ramp up”.

The effective closure of the Strait of Hormuz has shut off east coast ports and put increased pressure on other Red Sea terminals such as Jeddah Islamic Port. Meanwhile, the Yemeni Houthi militia group has declared a “blockade” on Saudi Arabia, threatening to harass shipping off the kingdom’s western coast.

During the disruptions to Gulf shipping since February, Port of Neom has played a statistically insignificant role, lacking the facilities to process large ships. It accounts for just 0.3 percent of Saudi Arabia’s imports and essentially zero exports, according to the International Monetary Fund’s Port Watch.

The opening of T1, which Neom has pitched as a viable new transit corridor for Saudi Arabia and nearby economies such as Iraq, should increase the port’s capacity sixfold and improve the speed and efficiency of cargo.

“Container operations at the Port of Neom are presently very limited and the port is more focused on roll-on, roll-off ferry traffic and bulk construction materials,” said John Manners-Bell, CEO of Transport Intelligence and an AGBI columnist.

Satellite images from as early as December last year show that extensive work has been carried out at the site. Six ship-to-shore cranes appear to have been installed, and images show the yard contains 15 cranes with wheels. An 18.5-metre-deep basin and 550-metre shipping channel have been completed, according to Neom’s website.

“Technically, this terminal should be operational as we speak,” said Jean-Paul Rodrigue, professor of maritime business administration at Texas A&M University.

The largest container port on the east coast of the Arabian Peninsula, Dubai’s Jebel Ali, has a capacity 10 times larger than that planned at Neom and is located much closer to large population centres.

“The port [Neom] is too far away to compensate for that,” Rodrigue said, referring to the loss of Jebel Ali.

Neom sits on the far northern side of Saudi Arabia, about 830km from Jeddah and more than 1,300km from Riyadh. Should container ships begin visiting the port, their cargo would still take days to reach major cities.

“There’s no rail connection,” Rodrigue said. “And right now, the trucking system has been very stressed, with all the additional drivers and trucks needed to redirect goods because of the war.”