A new $530 million terminal in Saudi Arabia's main shipping hub will ease congestion and help lure back trade which had gone to other ports in the past few years, a senior executive said.

Aamer Alireza, chief executive of Red Sea Gateway Terminal Co, said the SR2 billion facility has already started operating.

Jeddah, on the Red Sea, is the main port for the world's top oil exporter but congestion has led to hefty charges for many delayed ships as well as the diversion of some shipping lines to other ports over the past two years.

'The Red Sea Gateway Terminal is part of the solution to address that problem by adding capacity and more importantly, next generation ship handling capability,' Alireza said in an interview. 'We received our first vessels on December 22.'

Red Sea Gateway is a majority owned unit of Saudi Industrial Services Co (Sisco) and led the expansion under a 40-year scheme that allows it to build and operate the facility.

The new terminal is ramping up its volume and expects to run on its full capacity of 1.8 million TEUs (Twenty-Foot Equivalent Units) by September of next year, Alireza said.

Container trade is measured in TEUs.

Jeddah's Islamic Port (JIC), the largest in the kingdom with a capacity of 3.2 million TEUs, represents 73 pe rcent of the country's container traffic. It is expected to nearly double its capacity to 6 million TEUs by 2011 as the port's two other terminals are undergoing expansion as well.

'We will represent roughly 64 per cent of that expansion, taking Jeddah (container port capacity) from 3.2 million to 5 million TEUs,' Alireza said.

While the capacity has increased this year, container volumes at the port are estimated to have dropped due to the global economic slump.

'This year Jeddah will (handle) 3 million TEUs because of the global slowdown,' Alireza said. 'The transshipment businesses have come down in Jeddah.'

He added that Jeddah expected to see a 10 percent drop in volumes from its 3.32 million TEUs in 2008, when the port operated beyond its capacity.

'It will be very difficult to quantify exactly how much Jeddah is able to attract because of the expansion,' Alireza said.

'That will depend on the global financial situation because the shipping business is, probably after banking, the second largest industry affected by the financial crisis.'

Shipping markets have suffered in the global economic downturn though port operations have continued to make money.

Sisco holds a 57-per cent stake in Red Sea Gateway and Malaysia's MMC Corporation Bhd owns 20 per cent. – Reuters