Saudi’s “overbuilt” Red Sea port capacity is suddenly a lifeline for the Gulf

Logistics operators and customs officials on the Red Sea are working around the clock as Saudi Arabia looks to take advantage of something the UAE doesn’t have: Spare port capacity — and lots of it — as this third week of war in the Gulf grinds on.

Maybe overbuilding wasn’t folly, after all? Ports along the Kingdom’s west coast have annual capacity exceeding 18.6 mn TEUs, and they’ve been running well below that. Jeddah Islamic Port alone has capacity north of 10 mn TEUs but handled just over 3 mn TEU in 2024. King Abdullah Port adds another 5 mn TEUs. That means Saudi’s Red Sea ports were operating at roughly 40-45% utilization before the crisis.

Why it matters: The Gulf imports 85% of its food — and more than 70% of it came through the now-shut Strait of Hormuz. Rice, cereals, meat, medicine, construction materials, and the industrial inputs that keep desalination plants and factories running all funneled through there until two weeks ago.

How it works now: Companies and customs officials have scrambled to reposition trucks, customs operations, and specialists at Red Sea-coast facilities to haul cargo into and out of (but mostly into…) the Kingdom while Hormuz remains shut. Cargo arriving via the Suez Canal or around the Cape of Good Hope now lands at Jeddah, King Abdullah Port, or Yanbu, then moves overland by truck into the Kingdom and onward to neighboring GCC states.

This is traffic the UAE is losing. Jebel Ali, DP World’s flagship hub, handled 15.6 mn TEU last year. UAE ports outside Hormuz — Khorfakkan at c. 5 mn TEU capacity and Fujairah at under 1 mn — cannot compensate. Saudi’s under-used Red Sea ports are absorbing what the Gulf’s established hubs can’t currently handle.

That could create “healthy” competition: Saudi Arabia’s investment in inland logistics zones and Red Sea gateways will narrow the perceived gap with operations in the UAE, the former head of supply chain and transport industries at the World Economic Forum Wolfgang Lehmacher tells EnterpriseAM.

This could signal a long-term shift: Logistics routes in the region are likely to become more diversified to hedge against geopolitics, markets, or climate-driven volatility, Lehmacher told us. “By shifting part of the flow away from the Gulf and toward the Red Sea and the Mediterranean, these corridors do not make Hormuz irrelevant, but they do change the geometry of power in the region: market access, risk, and bargaining leverage will no longer be concentrated in a single narrow waterway,” Lehmacher said.

There’s more value for everyone — Jeddah, Yanbu, Dammam, Dubai, Abu Dhabi, Salalah, Aqaba — in a Mideast platform of interoperable hubs, Lehmacher argues, than there is in any one center becoming “the” undisputed hub. When the conflict ends, he says, operators should compete on performance, but collaborate on standards, data and interoperability. The goal: To make the region indispensable to global shippers and investors — and more resilient.

As with anything governmental, it needs a name before it can be declared real: Saudi Transport Minister Saleh Al-Jasser has dubbed it the “Western Coast Logistics Corridors Initiative.” He made the announcement in Jeddah Islamic Port, flanked by the heads of the customs authority and the national port authority.

It’s a land bridge — but not the Landbridge: The Saudi Landbridge railway, a c. USD 7 bn Vision 2030 project linking Jeddah to Riyadh and Dammam, is still under construction, with operations not expected until the late 2020s. What’s running today is tires-on-asphalt. Trucking is slower, costlier per TEU, and harder to scale than the rail network the Kingdom is building.

The Red Sea is getting a second act — and carriers are already repositioning. DP World — which operates the South Container Terminal at Jeddah Islamic Port — expects rising volumes at its Red Sea terminals, Group CEO Yuvraj Narayan said on an earnings call last week, though he stopped short of saying how much volume or what cargo types were moving.

Worth noting: APM Terminals, Maersk’s terminal subsidiary, recently acquired a 37.5% minority stake in that same Jeddah terminal, meaning the world’s two largest port operators are now co-invested in the facility positioned to become the Gulf’s primary relief valve.

Shipping lines are building new routes around the Hormuz blockade. The Gemini Cooperation (Maersk and Hapag-Lloyd) launched AE19, a new Asia-Europe service that sails from Chinese and Korean ports to Tanjung Pelepas, rounds the Cape of Good Hope into the Mediterranean, then calls at Jeddah. The first westbound sailing departed Xingang on 13 March. That it routes via the Cape rather than Suez — just weeks after Gemini had returned its ME11 service to the Red Sea in mid-February — tells you how fast the security picture shifted once Israeli and US warplanes started flying.

BACKGROUND- Saudi Arabia has been working on supply chain hedges for some time. The launch of Folk Maritime in 2024 was part of that drive: Focused on feeder connections in the Red Sea, the company is basing a core part of its business strategy on offering a Plan B (shipping option) or “backup offer” for shippers, a consideration often neglected by large global industries in the past, CEO of Folk Maritime Poul Hestbaek previously told us last year.

What to watch for next: We’ll be keeping an eye on Jeddah’s throughput numbers over the next 30 days — and for signs that Maersk, Hapag-Lloyd, and others add more AE19-style services routing via the Cape to Jeddah. War-risk insurance pricing on Gulf-bound routes — and what the still largely-silent Houthis do — are also on our radar.