Red Sea crisis makes case for Saudi Landbridge
8 March 2024
As the logistics crisis in the Red Sea intensifies, the case for the $7bn Saudi Landbridge, a commercial rail link bridging the country from east to west, is being made like never before – for both strategic and commercial reasons.
Since the Houthi movement first declared its intent to attack vessels linked to Israel – and later the UK and US – in connection with the war in Gaza, indirect victims of the crisis have included the Yemeni people and all those reliant on the global logistics industry.
Sharply raised war risk insurance premiums, as well as the much longer travel times and greater fuel costs associated with re-routing around the Cape of Good Hope, have led to the global shipping industry incurring costs reminiscent of the heights of the Covid crisis.
A more surprising victim is Saudi Arabia’s logistics sector, which is being squeezed just as the construction industry requires dramatically elevated volumes of materials for its gigaprojects and other strategic schemes.
Vision 2030 logistics crunch
Since much of this Vision 2030-linked development is focused on Saudi Arabia’s west coast, a pinch point is the import of construction materials from Asia to west coast destinations such as Jeddah or the new Oxagon port at Neom.
Bringing these materials in while bypassing the Bad Al Mandab Strait should be readily achievable.
The kingdom has two coasts, east and west, and can shuttle goods by road between the two. Since the crisis began, some operators have been doing just that.
However, there are issues related to scale and cost. Trucking a limited quantity of expensive, specialty equipment cross-country is one thing, but low-margin orders of bulk goods are a less appealing proposition.
This was presumably the calculus of the two commercial shipping vessels abandoned following Houthi attacks that were carrying goods either from or bound for Saudi Arabia.
Both the Rubymar in February, which left from Damman loaded with fertiliser bound for Europe, and the True Confidence, which this week came from Asia with steel and commercial vehicles bound for Jeddah, opted against an overland leg for their bulky cargoes, despite the high cost and risk of a Red Sea transit.
Landbridge potential
This is where rail – and, even more so, rail integrated with multimodal sea and dry ports – has an edge. Forgetting traffic, road maintenance and environmental issues, a train engine pulling 20 carriages of containers delivers hugely improved efficiencies compared with using 20 trucks.
In this context, the $7bn Saudi Landbridge rail project is arguably the project under construction that the country needs most urgently right now. Unfortunately, it is just beginning, with US-based Hill International, Italy’s Italferr and Spain’s Sener winning the project management in December.
There is nevertheless a renewed sense of urgency to the project, with the Saudi China Landbridge Consortium, a joint venture of Saudi Railway Company and China Civil Engineering Construction, reported in November as being in the final stages of negotiation with contractors for the project.
Upon completion, the six-line network will connect Jubail and Dammam in the east to Jeddah and Yanbu via almost 1,500 kilometres of new railway tracks.
While the Landbridge cannot spare Saudi Arabia the headache of the current Red Sea crisis, it will ultimately improve the resilience of the country’s internal logistics network and potentially head off the next supply chain crisis.
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