Dubai's location at the mouth of the Persian Gulf has made the city-sheikdom a trade crossroads for six centuries. Today, Jebel Ali, one of its two ports, is the largest manmade port in the world and sits next to a huge free-trade zone.
The state-owned company that developed and runs Jebel Ali, its associated free-trade zone, which numbers more than 3,800 companies from 100 countries, including Colgate-Palmolive, H.J. Heinz, PB, Sony, Nokia, DaimlerChrysler, among its residents, and Dubai's smaller terminal, Port Rashid, is Dubai Ports.
Under its chairman, Sultan Ahmed Bin Sulayem, it had two roles; as a port authority, responsible for the regulation and administration of the the ports, and as a business, which develops and operates them.
Until last year, Dubai Ports was loosely separated into two parts, the Dubai Port Authority and DPI Terminals, its ever-further reaching investment arm. Last year, the regulatory functions were spun off as the Dubai Ports and Jebel Ali Free Zone Authority, leaving DP World to handle what had mushroomed into the world's sixth-largest port terminal-operating business, overseeing 22 container terminals in 15 countries.
Until 1999, that had been a domestic operation as well. But that year, it spread its operations to neighboring Saudi Arabia, running a container terminal at Jeddah Islamic Port in a joint venture with a local partner.
The following year, DPI won a contract to operate the port of Djibouti, which is now being expanded (see: " Mission To Djibouti, on the Horn of Africa. Contracts with the ports of Visakhapatnam (usually known as Vizag) in southern India, and Constanta on Romania's Black Sea coast followed in 2002 and 2003, respectively.
But DPI's big step came in 2004, when it spent $1.1 billion to buy CSX World Terminals, the international terminal business that CSX was unloading in order to concentrate on its North American railroad business.
The deal made the group one of the top-six terminal operators worldwide, with the capacity to handle 6 million twenty-foot equivalent units, or TEU, worth of containers, and occasioned a renaming as DP World. It also gave the group its first presence in the fast-growing container-shipping market of the Asia-Pacific region, notably in Hong Kong, the world's busiest container port.
ATL, the market-leading logistics operator based at Kwai Chung in the territory and which also operates in Shanghai, came with the deal.
Along with giving Dubai Ports operations in China (which in 2003 surpassed the U.S. as the world's largest handler of cargo), Australia, Germany, the Dominican Republic and Venezuela, the CSX World Terminals acquisition gave Dubai Ports a pipeline of future contracts, which have the potential to triple its container-handling capacity.
These included one for the development of Pusan Newport in South Korea, which had its first phase formally opened earlier this year. DP World has a 25% stake in the project as well as a management contract for what will eventually be a nine-berth terminal with a capacity of 5.5 million TEU.
Another port in development is a new deep-water international container transshipment terminal being built in Vallarpadam at Kochi in southern India, where DP World already has a management contract with the city's port authority.
The new terminal, aimed to win transshipment business away from Singapore and Sri Lanka, will be India's largest single-operator container terminal and the first to operate in a special economic zone. Pairing container terminals and free-trade zones is a DP World hallmark.
DP World moves easily in that often-opaque world, where officialdom and large-scale infrastructure projects overlap, especially in countries playing development catch-up. Last November, the company also announced agreements to develop new container terminals at Yarimca, Turkey, and Qingdao, China.
The terminals at Pusan and Kochi, along with a new container terminal at the Port of Fujairah in the UAE, will add 14 million TEU of capacity to DPI's global network over the next five years. In 2005, the DP World-operated terminals handled an estimated 13 million TEU.
DP World's $6.8 billion bid for the Peninsular and Oriental Steam Navigation Company would complete the global geographic chain for Dubai Ports, filling in the missing link to North America.
The combined group would have a capacity of 50 million TEU across 51 terminals in 30 countries, including the six at issue in the U.S. In addition, there is the London Gateway project in the P&O pipeline, slated to become the largest container terminal in the U.K., which when completed would raise the P&O's current 15 million TEU capacity to 31 million TEU.
The P&O deal would make Dubai Ports the world's third-largest ports operator, behind Li Ka-shing's Hutchinson Whampoa's ports business and the Singapore government's PSA (which lost out in the bidding for P&O), and leapfrog it over China's state-run COSCO and over APM Terminals, part of the AP Moller-Maersk transportation group, which is based in Copenhagen, Denmark.
Most of them, including the two government-owned operators, already run ports in the U.S., where at least 90 terminals are operated by non-U.S. businesses.
The industry is fast consolidating on a global scale because size offers shippers the opportunity for one global contract, rather than needing to negotiate with a number of ports around the world.
Size is necessary but not sufficient for a port operator these days. Terminals have to be productive, and DP's strong reputation in the industry--and its promise of dramatically improving the productivity of the ports it runs--is built on the success it has had at home.
Dubai is now the tenth-busiest container port in the world, within hailing distance of Europe's second-busiest, Hamburg, Germany, and America's busiest, Los Angeles, according to Dyna Liners, a shipping-industry newsletter.
As a private state-owned company, DP World's finances are shrouded in secrecy. One of the lists of the Arab world's 100 largest companies has Dubai Ports as a company that would likely qualify, but the numbers that would allow even an informed guess about its position are unavailable.