Sohar Port turns to food, pledges to cut import costs

This week at Gulfood, port authorities unveiled a deal with Al Ghurair Investments to establish the Sohar Food Cluster Company, as well as a million-tonne-a-year sugar refinery. Last month executives announced a new US$170m agricultural terminal capable of handling 1.5 million tonnes of raw sugar and 700,000 tonnes of grain imports per year, along with a deal for a 180,000-tonne-a-year flour mill.

Sohar Port and Freezone CEO Andre Toet said last week that using the port, located on Oman’s Northeast coast and near to the UAE border, would allow importers to reduce shipping times and costs by avoiding the Straits of Hormuz. Food products or raw ingredients could then be shipped overland, via Sohar Port’s developing road or rail links.

Oman’s trade dividend​

“On top of not having to pay the additional costs of passing through the Strait of Hormuz, land and energy rates at Sohar are very competitive when compared with other ports and distribution centres across the region. Oman’s free trade agreements with the US and Singapore also offer potential costs savings that are not so readily available in some other parts of the region, especially its FTA with the US​,” said Toet.

“Growing populations and a 90% dependence on food imports is a perfect recipe for growth; the value of regional food markets will hit US$53 billion in 2020. This offers great returns for the industry, but it is also increasing the region’s food bill. Part of the challenge is operating costs in big cities, and our aim is to harness our location, connectivity, and rates to cut the cost of putting food on tables​,” he added.

The port will begin construction of its new agricultural terminal in March this year. The food processing cluster will initially see projects related to the sugar and flour refineries, before expanding to other categories, potentially including soft drinks, leveraging the US$600m PET packaging plant​ Sohar Port announced in December last year.

Value up, costs down​

With this series of announcements, Sohar Port has firmly established its intent to become a significant player in the region’s agribusiness sector. Between its location outside the Arabian Gulf, and its connection to the UAE’s Etihad Rail network, scheduled to be completed by 2018, the port aims to offer a compelling alternative to Gulf-based terminals.

“With the planned construction of an agricultural terminal and anticipated influx of grain products that will accompany its completion, our aim is to attract new investment in food and food processing industries and create a cluster than can feed the region. Grain silos and a sugar refinery are already in the pipeline, and as this sector grows, the opportunities for packaging companies to serve multinational businesses will grow​,” said Edwin Lammers, executive commercial manager at Sohar.

“The link between food and plastics is clear. The global packaging industry will generate US$975 billion in sales by 2018, and 60% of that will be created in the food industry. Thirty percent of packaging is made from plastics, and 90% of the region’s foodstuffs are imported. Much of this is pre-packaged elsewhere at a higher cost and our aim is to leverage our low-cost energy resources to reduce that cost​,” he added.