Israeli company Trucknet Enterprise (TASE: TRAN) whipped up a minor storm in the Middle East, when it declared at the start of the month that it "had found a solution for the Houthi threat on Israel." The Eilat-based company said that with permission from the Ministry of Defense it would operate a special transport land bridge," as it calls it, from Dubai Port to Haifa Port using convoys of trucks travelling from the UAE via Saudi Arabia and Jordan to Israel and back.
Trucknet's technology brings together importers and transport companies on a digital marketplace, with the aim of reducing transport costs and increasing occupancy of goods on trucks. Trucknet has signed an agreement with UAE logistics company Pure Trans, which allows it to transport containers unloaded in Dubai or Bahrain ports to Haifa Port, with the Israeli company's platform make it easier for it to find exporters who will agree to fill the same container on its way back to the Persian Gulf.
Trucknet's announcement made waves in the Arab world, after it spoke of the passage of goods to Israel through Arab countries in the midst of the war in Gaza, and was mentioned extensively in the Arab media especially after Jordan published a denial of the existence of such a land bridge through it, connecting Israel to the Persian Gulf.
Teams with an Egyptian company
On Monday Trucknet formed a partnership with an Egyptian transport company, which transports between two ports along the Suez Canal via the Sinai peninsula to Jebel Ali, the biggest port in the UAE. But this route is limited in its capabilities because the southern exit from Egypt does not have container x-ray facilities.
Is this a geopolitical breakthrough, or a marketing gimmick by a tiny publicly-traded Israeli company? Trucknet employs 35 people in Eilat, Tel Aviv, Paris and Pitesti in Romania. The company has a NIS 48.9 million market cap on the Tel Aviv Stock Exchange, which has more than doubled in just a month, partly in light of its latest announcements.
The company's revenue for the first half of 2023 was NIS 162,000 - about NIS 27,000 per month. Main shareholders include CEO and founder Hanan Fridman, Ofer Glazer (ex-husband of Shari Arison, who invested in the company as a resident of Eilat), the Hon Hateva Fund, Phoenix and Avi Arditi.
To date the company has mainly operated in Europe. Trucknet began operations in France before opening a branch in Romania and says it works with a fleet of 500,000 trucks transporting goods between Eastern and Western Europe. It recently began operations in the Persian Gulf.
Before this year, the company's annual revenue was less than NIS 100,000, and according to Hanan Fridman, they were mainly based on pilot projects, apparently with the aim of acquiring market shares. This year, it began charging a 5% commission on each order, and it hopes that its revenue will increase because of this.
Trucknet did not "invent" the land transport route between Dubai and Bahrain to Israel. The route allowed the transfer of goods through Saudi Arabia and Jordan, even before the signing of the Abraham Accords, although since then the volume of traffic has increased significantly.
At the same time, the company has taken advantage of the network of connections it has with shipping companies to allow customers to transport the same container from Dubai to Israel in trucks. Other transport companies are forced to transfer the contents from container to container at the border points, and exchange the goods by transferring pallets from truck to truck. Trucknet allows the logistics companies to keep containers arriving from the east into Israel's borders with the same shipping companies.
The company hopes that when the truck reaches Haifa Port, there will be company that rents it for the return journey, which will reduce transport costs in both directions by 25%, although there is no way to know if this will actually be achieved.
The announcement to the Tel Aviv Stock Exchange was more restrained than the one issued to the media. Trucknet is still in talks with its partners in the Gulf for the Israeli customers who are looking for an immediate solution to the Red Sea shipping crisis. The company also reported that it cannot estimate at this stage the commencement date for cargo transport activity on the land bridge route as part of the cooperation, the size of expected demand for it, and the timing and revenue that will be received from this project.
The Iranian-backed Houthi rebels have fired more than 100 missiles and drones at cargo ships causing major companies like BP, Maersk, MSC and Evergreen to reroute ships around Africa's Cape of Good Hope rather than through the Suez Canal, making goods millions of dollars more expensive and adding three weeks to journeys.
Meanwhile Maersk has resumed sailing through the Suez Canal but cargo prices have risen fourfold. The price of 40 square foot in a container leaving Shanghai for Israel has risen from $1,600 to $7,600 over a few days due to the need to circumnavigate Africa and risks associated with anchoring during the war.
Is the land bridge cheaper?
Does the land corridor between the Persian Gulf and Israel really cut costs for importers? The cost of fuel for a trip for a truck from the UAE to Israel is about $3,200, and from Bahrain about $2,200. To this must be added the toll fees of $300 in Saudi Arabia, $300 in Jordan and another $70 in Israel. In addition there are the costs of the ports in the Gulf and in Israel, which amount to about $400 per container, and the additional shipping costs to Dubai or Bahrain from the countries of origin - such as China, India or Kenya - which vary Between $200 and $1,600. Thus, a container going from Shanghai to Haifa using trucks may cost about $5,800 through the UAE, or $4,800 through Bahrain.
In relation to the high container prices that Maersk has imposed on Israel in recent days, this is a lower freight rate, but Israel Chamber of Shipping president Dr. Yoram Zeba believes that this is a temporary problem: "Maersk has already announced that it will return to sailing through the Suez Canal. In a normal situation we would see the cost of transporting a container from China to Israel of only $1,200-1,500. The price of $7,000 seen in recent days is an anomaly. At the same time, transporting containers by truck overland takes only about four days between Dubai and Haifa, and two days from Bahrain, so this could be suitable for relatively expensive cargo, for which speed of arrival is important."
"We have a high-speed line that can save ten days traveling to the destination," says Fridman. "It will be 25% more expensive, but will reach Europe faster than a ship, and will function as a sort of express route. We do not come to compete with the Suez Canal, but to be a land-based alternative for some of the goods."
Israel Tax Authority data says that imports by land from the UAE in 2023 amounted to NIS 23.2 million as of December 24, about 2% of all imports from the country. The overall value of imports from the UAE by sea is NIS 1.11 billion. The percentage of overland imports of all imports from the UAE has fallen in recent years. In 2022, it accounted for 2.4% and in 2021, 2.8% of total imports from the UAE.
Published by Globes, Israel business news - en.globes.co.il - on December 26, 2023.
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