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The news surrounding the Kenyan shipping sector over the past quarter once again centres on the woes and travails of Mombasas modernisation. The port authority is trying to bring the facility up to date, but it continues to suffer from congestion. Ironically a delivery of new equipment was behind one instance of this, as a delivery of new cranes occupied a berth for 10 days. There have been reports of shippers turning to using the Tanzanian port of Dar es Salaam, or even using air freight if possible, in order to avoid the Mombasa delays.

Some respite for the ageing port is in sight, as work is expected to soon begin on the new facility at Lamu. This will serve not only Kenya, but also Ethiopia and South Sudan, acting as an outlet for the oil wealth of the latter.

Headline Industry Data

- Port of Mombasa tonnage throughput forecast to grow 3.6% in 2012 to reach 20.63mn tonnes. Growth to average 4.4% to 2016.

- Container throughput forecast to grow 6.2% to reach 762,329TEUs in 2012. Growth to average 6.8% to 2016.

- 2012 total trade set for year-on-year (y-o-y) real growth of 4.5%, and to average 5.7% to 2016.

Key Industry Trends

Shippers Turn To Air As Mombasa Remains Congested

BMI believes there is upside potential for air freight volumes in Kenya. Shippers, increasingly frustrated by continuing congestion issues at the primary Kenyan maritime facility of Mombasa, are looking to air freight as a more reliable mode of transport, despite the higher costs. We believe this opens up opportunities for air freight carriers such as Kenya Airways Cargo, which has already committed to an expansion plan.

Feasibility Study Underway For Offshore Jetty

A feasibility study is being undertaken for the development of a single buoy mooring or offshore jetty at the Kenyan port of Mombasa, which would be able to accommodate supertankers of up to 280,000 deadweight tonnes (DWT), according to National Oil Corporation of Kenya (NOCK). The proposed offshore facility is to be constructed close to the port, which is currently able to cater for 80,000DWT tankers. The study is likely to be completed in January 2012.

Lamu Development To Begin In December 2011

The start of the new port at Lamu, in the north of Kenya, was expected to be commissioned by Kenyan President Mwai Kibaki in December 2011. The US$5.3bn port project is part of a wider investment of US$23bn in the region. The development programme will include the port, followed by an expressway, railway, pipeline, refinery and airport. The project will take advantage of the needs of landlocked Ethiopia and especially oil-rich South Sudan. It is estimated that the worlds newest country will pipe 500,000 barrels of crude oil a day to Lamu.

Key Risks To Outlook

Risks to our forecasts in Kenya continue to come from the troubled Port of Mombasa. Growth is dependent on the port being able to cope with the projected increase in custom. If work does not improve turnaround at the facility soon, then lines could look to other East African ports in place of Mombasa. Modernisation is needed at the port, but with workers threatening strikes at the mention of privatisation, this may prove hard to do without impeding throughput. With landlocked countries also complaining of theft, the facility risks losing business to other East African ports.

Political risk in Kenya should also not be underestimated. Elections scheduled to be held in 2012 have been delayed and there are concerns that there could be a repeat of the violence seen following the last poll in late 2007. Any boiling over of tensions would not only harm domestic confidence but would also likely deter foreign investment which would raise the prospect of a balance of payments crisis, with consequences for the countrys shipping sector.