Transport

Algeria eyes Mediterranean dominance with $3.3bn port project

el Hamdania

In January Algeria announced plans to develop a multi-billion-dollar seaport in El Hamdania, near the city of Cherchell, which will rank as one of the country’s most significant infrastructure projects since independence.

The 2000-ha, $3.3bn port facility, which will be located less than 100 km from the capital Algiers, is expected to more than triple the nation’s current general cargo-handling capacity to 35m tonnes per year. At present, existing ports in Algiers and Ténès have capacity for a combined 10.5m tonnes per annum, according to local media reports.

The port will include 23 docking quays with annual throughput of 6.5m twenty-foot equivalent units (TEUs), and will link up to Algeria’s rail and road networks, making it a national and regional trans-shipment hub.

Chinese involvement

Construction of the port, which will take place in two stages, will be carried out through a Chinese-Algerian joint venture, according to an agreement signed by the Algerian Ministry of Transport, China State Construction Engineering Corporation and China Harbour Engineering Company in mid-January.

According to the deal, and in keeping with the country’s foreign investment law, the Chinese partners will hold a 49% stake, while the Algerian government will retain a 51% stake.

Construction of the mega-project will take a projected seven years, with long-term funding for construction costs provided by China.

Trade trajectory

The collaboration is not a surprising one, given that China’s partnership in trade and investment with Algeria has been growing in recent years.

While Europe retained its position as Algeria’s largest export market in 2015 – led by Spain, Italy, and France – China stood as the largest import supplier for the third consecutive year. China has become an increasingly important trading partner with Algeria in the last decade, with bilateral trade volumes rising significantly from around $608m in 2003 to a reported $8.3bn in 2014.

China has also participated in some of Algeria’s largest infrastructure projects to date, including the €8bn East-West Highway, which was partially built by China Railroad Construction Corporation and China International Trust and Investment Corporation.

Chinese hub

The port should aid Algeria in attracting additional Chinese traffic, with regional competition for China’s shipping business already in full swing.

China Ocean Shipping Company (Cosco), one of China’s largest shipping companies, is currently eyeing ports in the western Mediterranean to reinforce its position in the region, according to media reports. In 2009 the company won a 35-year concession to operate two container terminals at Greece’s Piraeus port, which Cosco uses as its eastern Mediterranean hub.

Cosco is in the process of merging with fellow state-owned shipping giant China Shipping Company – a move that would lead to the world’s fourth-largest shipping company, with control of around 8% of global shipping traffic.

Shipping competition

The port of Cherchell has the potential to significantly alter maritime trade flows in the western Mediterranean, as regional ports – including Spain’s Valencia, Algeciras and Barcelona ports, and Italy’s Gioia Tauro facility – vie for the role of China’s western Mediterranean hub.

Authorities at the port of Valencia, in particular, will likely be following the Algerian mega-project closely. Potential for current trans-shipment flows to be diverted south – as well as the risk of losing valuable foreign investment that may otherwise have been applied along the Mediterranean’s northern rim – have the potential to impact fundraising and partnership opportunities for Valencia’s own port expansion project, set for tender at the end of this year.

A significant amount of bulk cargo ultimately destined for Algeria makes its first stop at the port of Valencia, which currently handles about 4.5m TEUs per year, where it is separated into smaller consignments for onward shipment. With new facilities of its own, much of that break-bulk business could be handled directly by the new Algerian port.

 Source: Oxford Business Group