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UAE’s AD Ports to develop Egypt Red Sea cruise terminals despite instability

Attacks by the Iran-backed Houthis on international ships have prompted some firms to steer clear of the waterway.

An Abu Dhabi-based ports operator announced an agreement with Egypt on Friday to develop Red Sea cruise ship terminals, indicating continued interest in the sea from the United Arab Emirates in ports industry despite security issues stemming from the Gaza war.

AD Ports Group said it initiated a 15-year agreement with Egypt’s Red Sea Port Authority to operate and manage three cruise terminals at the Sharm el Sheikh, Hurghada and Safaga ports on the sea. The agreement will also include the renovation of the Sharm el Sheikh terminal with the goal of “enhancing the cruise tourism experience” in Egypt, the company said in a statement.

AD Ports Group will invest $3 million in the terminals over 15 years to improve access for cruise operators and add new cruise itineraries, according to the firm.

The Egyptian Transportation Ministry said in a statement on Thursday that the deal with AD Ports Group will help develop yacht and cruise ship tourism in Egypt, including cruise lines between the group’s Mina Zayed port in Abu Dhabi and Egypt’s Red Sea ports as well as ultimately ports in the Gulf, Jordan’s Aqaba, Europe and Asia.

AD Ports Group said the agreement is expected to be finished in the first quarter of 2024, subject to regulatory approvals.

Why it matters: The agreement comes amid shipping disruptions in the Red Sea. Since the Gaza war, Iran-backed Houthi rebels in Yemen have increased their attacks on international ships disrupting maritime navigation. 

The shipping giant Maersk said on Friday that it would divert its ships around Africa and bypass the Suez Canal and the Red Sea for the "foreseeable future,” building on previous announcements that it would avoid the area, Agence France-Presse reported.

On Sunday, the US Navy sank three Houthi ships in defense of one of Danish shipping giant Maersk’s commercial ships. On Wednesday, the United States and allies issued a warning to the Houthis, saying they “will bear the responsibility of the consequences” if the attacks continue.

Other major shipping companies, such as Germany’s Hapag-Lloyd, have recently announced that they will avoid the Red Sea as well.

AD Ports Group, however, appears to be doubling down in the Red Sea. In addition to Thursday’s agreement, AD Ports Group signed a 30-year deal with the Red Sea Ports Authority late last month to develop a multipurpose terminal at the Safaga port. The agreement will involve $200 million in investment over three years, according to the group

Know more: The Houthi attacks will likely drive up insurance and related shipping costs as companies divert around the Red Sea, especially for Israel, David Rosenberg wrote in a memo for Al-Monitor PRO last month.

Relatedly, Reuters reported on Tuesday that the French shipping giant CMA CGM is increasing its container shipping rates from Asia to the Mediterranean by up to 100% as of Jan. 15.