DHL to boost network in eastern UAE amid regional uncertainty

DHL, a German logistics giant, intends to bolster its operations in the eastern United Arab Emirates (UAE) as part of its strategy to maintain operational agility amid geopolitical uncertainties, primarily stemming from the Iran war, according to Tobias Maier, the company's regional chief executive for the Middle East and Africa.

The company has pledged a €500 million ($557.5 million) investment in the Gulf region, with the recent announcement of DHL facilities in the UAE and Saudi Arabia worth €120 million and €130 million, respectively. Maier highlighted the company's focus on strengthening its position closer to Khor Fakkan and Dibba in Fujairah to enhance its capabilities.

Authorities in the UAE have also planned to expand port facilities in these areas to bypass the Strait of Hormuz, a route where tensions remain high, thereby supporting the UAE's key shipping sector. Maier affirmed that the company's plans in the GCC region remain unchanged, emphasizing the UAE's pivotal role in the logistics industry, even as the government continues to develop alternative routes for shipping.

He predicted that the logistics industry would take three to six months to normalize following the conflict, provided no additional disruptions occur. Maier acknowledged the impact of higher freight rates in the industry, attributing them to the current market conditions and normal circumstances. He noted that the shortage of available shipping capacity, additional work due to using different ports, potential extra ship journeys, and land transport requirements are factors that could increase operational costs.

Maier also emphasized that fuel costs, influenced by global market fluctuations, significantly impact logistics companies, although it remains challenging to determine if energy costs are the most substantial hit. Nevertheless, he noted that the sector has stabilized after the initial peak and expects a positive turnaround as things normalize.

Additionally, DHL Global Forwarding has signed a 20-year partnership with Etihad Rail, the developer and operator of the UAE National Rail Network, to establish a joint venture as part of the UAE's efforts to strengthen its freighter network.