PIF-owned Folk Maritime pauses growth as shipping costs jump

Folk Maritime has put its expansion on hold as the regional war pushes its costs by as much as 40% and makes it harder to secure additional shipping capacity, CEO Poul Hestbaek tells EnterpriseAM. The Public Investment Fund-owned container line had been growing across the Middle East, the Indian subcontinent, Southeast Asia, and East Africa. Hestbaek says it has “flattened out” that growth until market conditions normalize.

Why it matters: Saudi's state-backed carrier is sitting tight while the region's shipping market is in turmoil. As a PIF-owned company, Folk's priority is covering its added costs and keeping supply flowing into the Kingdom, Hestbaek says. It has no plans to expand aggressively on the back of the disruption.

Congested ports are cramping Folk’s volumes

Folk has the cargo, and its ships are full: The company runs six vessels, five of them owned, plus leased ships and capacity bought from partners. What holds it back is how quickly those ships can get through congested ports, and what it would cost to add more. “Everything is high. Shipment cost, cost of vessels, the cost of leasing vessels, the cost of fuel … the cost of insurance, everything is high,” Hestbaek notes.

Folk is moving about 1k fewer containers a week than it planned: The firm aimed to move around 250k containers this year, or roughly 5k a week, and is currently closer to 4k. A round trip between India and the Red Sea that normally takes around 20 days now takes about 30, and Hestbaek expects Folk to finish the year below target.

Overall costs are up 30-40%, and some individual expenses have more than doubled. Folk has passed much of the increase on to customers, which limits the financial hit, but conditions are changing so quickly that planning is getting harder.

Buying more ships doesn't make sense at today's prices. Vessel prices are roughly double their pre-Covid averages, Hestbaek says, and the few ships coming to market are often lower quality.

Folk is piling into the Red Sea and steering clear of Bab Al Mandab

The war has squeezed both of the region's main shipping chokepoints. The US-Israel conflict with Iran, which began in February, has severely disrupted traffic through Hormuz. Iran-aligned Houthi forces in Yemen have also widened their reach around Bab Al Mandab, the southern gateway to the Red Sea, seizing the port of Al Makha and reaching Perim Island in September. For shipping companies, that has meant longer voyages, fewer available vessels, and higher fuel, insurance, and chartering costs, which are the same pressures behind Folk's pause.

Folk has moved c. 75% of its capacity into the Red Sea, up from roughly half before the conflict. Business there is busy, Hestbaek says, as larger lines gradually return vessels to the Suez route and need feeder services to move cargo around the region.

Hormuz is open to Folk on a case-by-case basis: The company makes occasional test crossings and decides week by week, using intelligence providers to assess security. Its most recent crossing, in September, went through normally.

Bab Al Mandab is a harder call: Folk hasn't crossed the strait “for a while,” Hestbaek says, given uncertainty over which vessels the Houthis might target. “We want predictability, and for the time being, we don't have that.”

What's next: The firm will keep growing organically through 2030 and consider acquisitions or consolidation only once it reaches its target scale. In 2027, it plans to expand partnerships with Saudi logistics providers instead of building its own warehousing and land-side services.