DHL to boost network in eastern UAE amid regional uncertainty

DHL Global Forwarding aims to boost its operations in the eastern area of the UAE as part of its strategy to maintain operational agility amid the uncertainty over the Iran war, its regional chief executive has said.

The cargo and freight unit of German logistics major DHL Group does not see the geopolitical situation changing its €500 million ($557.5 million) commitment for the Gulf, Tobias Maier, who oversees the Middle East and Africa, told The National in an interview.

The investment pledged was revealed last year and was followed by the announcements of the launch of DHL facilities in the UAE and Saudi Arabia worth €120 million and €130 million, respectively.

"One of the things we're currently looking is to strengthen our position in the east of the UAE, closer to Khor Fakkan and Dibba in Fujairah ... [we] will continue to invest here," Mr Maier said, without elaborating.

Show caption: Tobias Maier, chief executive for the Middle East and Africa…

Authorities in the Emirates have planned to expand port facilities in those areas in an effort to bypass the Strait of Hormuz, where tensions remain high, and support the UAE's key shipping sector.

"Our plans didn't change, especially for the GCC [and] we will continue to spend money," Mr Maier said.

"Especially given that the government is continuing to develop alternative routes, especially for shipping, [the UAE] will continue to play an absolute essential role [in the industry]."

Mr Maier predicts the logistics industry would take three to six months to normalise after the conflict ends, although efforts in the industry have made operations largely manageable.

"Everybody knows the routes, so as long as no new shocks and disruptions happen, I think we can handle it," he said.

Mr Maier acknowledged the effect of higher freight rates in the industry, describing them as a "normal" given the current state of the market. It is not unusual for cargo to be unloaded at a certain port if a vessel could not reach its intended destination.

For example, cargo that could not make it to the Gulf might be dropped off in India or Sri Lanka, and reclaiming them is another cost to factor in, Mr Maier said.

"You have a big shortage in available [shipping] capacity. You have a lot of extra work ... because you're using different ports now" in addition to potentially requiring additional ship journeys and land transport to move cargo, he said.

"More people are touching [cargo], so you have longer waiting times for the vessels ... of course, logistics always depends on fuel prices [that] have gone up as part of the conflict."

Fuel costs for logistics companies, Mr Maier said, would depend on the mode of transportation and fluctuating prices in global markets. While it is "hard to say" if energy is the biggest cost hit for logistics, elevated prices still "play a big role ... and had quite a significant impact".

"On a positive note, I think [the sector], after the initial peak, has stabilised, and if things normalise, I would say I would expect that things get better again," he said.

DHL Global Forwarding has also signed a 20-year partnership with Etihad Rail, the developer and operator of the UAE National Rail Network, to set up a joint venture as part of the country's efforts to strengthen its freighter network.