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Gary Lemke, the newly appointed CEO of the Port of Salalah, speaks to
Mayank Singh about the direction in which he wants to lead the port,
business prospects and enhanced competition

The year 2007 saw some important changes on the operational and managerial level at POS. What impact will these have on the port?
It was a successful year for us for a number of reasons. We commissioned berth five at POS and are now working on berth six. The new berth increased our capacity from3.5mn containers a year to 4.5mn containers per annum. Capacity building is an ongoing process and we are planning to take this up to 7.5mn containers by 2012. This will help us break into the top 25 ports in the world in terms of volume handled. On the management side we have put in place a strong team with a lot of local managerial talent.

POS saw a four per cent drop in the container terminal throughput volume in 2006. Has the port been able to reverse this trend in 2007?
In 2006 there were some changes in the industrial policies which impacted our throughput. The strengthening of the trans-shipment traffic with Asia has helped us to tide over this problem and grow our container throughput in 2007. An increase in the volume of trade to India and the Far East are the main drivers of this trend. We also handle a lot of trans-shipment trade which goes to the US, Africa, Europe and Asia. Despite the developments in the Salalah Free Zone (SFZ), local trade accounts only for one per cent of the volume that POS handles.

We hear about profit margins being under pressure due to increased competition. Has POS’ profitability taken a hit?
It is a fact that in this business everyone’s margins are under pressure. We are no exception. As a terminal, we are under pressure, but when it comes to end-to-end services there is no pressure. We work on contractually agreed rates. This negates any element of surprise. An increase in the throughput is another reason why we are not too anxious about a squeeze on margins.

What is fuelling the growth of container volumes at POS?
Location is the primary reason. Since we are at the southern end of Oman ships need to take minimum deviation from the main sea route. If fuel prices stay high we will see more people using container shipments as it is an economical option. Container shipping has been the fastest growing sector of the maritime industry for over 20 years now. This is because it is more efficient to use a 40-feet container to transport merchandise compared to break-bulk cargos like bags. So we see more and more general cargo being substituted by container cargo.

The sultanate has three ports – the Port of Sohar, POS and the Sultan Qaboos Port (SQP). Will these three develop their own competencies or will they cannibalise each other?
POS, because of its proximity to SFZ, will be servicing the needs of the industries in the free zone. The proximity to POS is one of the main reasons why companies like Octal and Salalah Methanol Company have set up operations in SFZ. The Port of Sohar is expected to play a more multifaceted role than POS. It will do trans shipment, look after the needs of the Sohar Industrial Area and may be involved in shipping oil and gas. SQP has traditionally handled imports and exports to Muscat and its adjoining areas. The port may start routing some of this traffic to POS and onwards. Since there is no overlap in their businesses the question of cannibalisation does not arise. Even otherwise, ports all over the world work together to deal with common issues like changes in the maritime legislation, sea freight security and so on.

Technically, how does POS measure up against the world’s best ports?
The AP Moller-Maersk Group is a 30 per cent shareholder in POS and APM Terminals has a management contract for the port. APM Terminals is a leading international port operator along with Hutchison Port Holdings, Port Authority of Singapore and Dubai Ports World. In 2006, we became the first container terminal in the world to introduce a vacuum-based mooring system which controls the movement of vessels. This system comes in handy during the Khareef season when vessels tend to move a lot due to strong winds. So when it comes to technology we are up there with some of the best ports in the world