Container trade is on a recovery path, led by restocking in developed markets, even as the Middle East consolidates its position as a transhipment hub on the Asia-Europe trade, according to a recent research analysis by Credit Suisse.
Capacity constraints will likely reappear as throughput will grow at a 5.5 per cent CAGR globally in 2009E-2017E, 3.2 times faster than the capacity, the report predicts.
The Middle Eastern countries are investing significantly to expand the ports infrastructure and the region will consolidate its position as a transhipment hub on the Asia-Europe trade. The growth expected in O&D cargo throughout the region already seems to be driving the need for capacity upgrades, the report said.
Container traffic growth typically replicates the trend of world GDP growth with a multiplier of c2.7x as global trade tends to be widely affected by protectionist measures in recession periods as well as openness during years of expansion. "We believe the main change over the past 60 years is the emergence of Asia as the world trade hub. International trade is now greatly containerised. Although this process is seen by industry experts Drewry as having reached maturity at c80 per cent of volumes, we think there is still room for expansion in emerging markets," the report said.
According to the report, macro data from the main developed economies shows that the currently high level of inventory rebuilding in GDP growth, which directly affects the dry bulk and container volumes traded, is forecast by the Credit Suisse Global Economics team to decline to below one per cent in as early as third quarter of 2010, and stay below 0.5 per cent in Japan for the whole period.
The medium to longer-term growth outlook looks quite moderate and "in our view, that industry experts rely on a much more measured recovery than what would have traditionally occurred with the past pattern".
The report also argues that the global emerging markets regional differences are high. "Containerised cargo trade has, for some time already, been significantly switching towards Asia. China has become the world's number one exporter with 26.5 per cent of volumes of containers by far."
With regard to the recent boom of intra-Asia trade, out of the 20 busiest container trade routes 11 involve Greater China as origin or destination representing 37.6 per cent of world volumes. "It is also worth noting that seven routes have an emerging market for both origin and destination for 21.3 per cent of total volumes," the report said.
During a year of anticipated volumes recovery, regional differences are expected to be as large in 2010 as in 2009 in emerging markets, according to Drewry's container volumes forecasts, ranging from a continued drop of 7.7 per cent in Eastern Europe to growth of 5.7 per cent in the Far East sub-region.
"This number includes China, where there would be a throughput growth of 14.8 per cent," according to Credit Suisse's ports analyst, Ingrid Wei. Meanwhile, the Middle Eastern countries are investing significantly to expand the ports infrastructure. "We expect the region to consolidate its position as a transhipment hub on the Asia-Europe trade. The growth expected in O&D cargo through out the region already seems to be driving the need for capacity upgrades," the analysts said.
With Gulftainer, originally operating from the Sharjah terminal and now expanding in Kuwait, there is competition to DP World in the Middle East, to some extent. "Although we do not think this competition is as strong as the one that HPH and PSA seem to be facing in Asia, it could limit the pricing power of DP World in the region in the future," the analysts said.
Gulftainer already reported throughput growth of 9.9 per cent in 2009 to TEU 2.75m compared with an expected decrease of 7.2 per cent over the region, according to Drewry.
The only presence of global operators in the region comprises APMT in Salalah (Oman) and HPH in Dammam (Saudi Arabia).
In other regions, Russia's port industry is export-orientated with the majority of goods exiting the country directed to Europe. "Africa is the only sub-region in the world where we expect capacity to grow faster than throughput and privatisations will be the main driver of port investments, especially by global operators looking mainly for transhipment hubs such as Tanger in Morocco or DP World in Djen Djen, Algeria.
Freight rates have strongly rebounded, especially on the Europe and Mediterranean services with some lines back at their peak tariffs of early 2008. In India and South Asia although ports operators see a big opportunity in terms of demand, a severe lack of infrastructure is hampering the potential in the short term.
When it comes to Latin America the analysts argue that up to 2016, at least, container volumes in Brazil have potential to grow at c8-9 per cent per annum. "This assumption is based on a straightforward calculation. Brazil's trade flow-to-GDP ratio is low, at around 21 per cent, while the world average is above 50 per cent. Countries such as Russia, India and China have numbers close to or above 50 per cent. Brazil's neighbour, Argentina, has a trade flow/GDP ratio of 45 per cent. We believe there is little doubt that the BRL appreciation has helped this ratio to stay low in the case of Brazil. However, both Brazil and Argentina had similar ratios, around 21-22 per cent.
Credit Suisse's Brazil analyst, Ivan Fadel, said: "In 2010 the container volume will grow by 13.5 per cent given by Santos Brasil for the Santos port (where DP World started to develop a TEU one million terminal to be opened by 2012).
"After showing strong signs of a slowdown across the board in 2009, we estimate that the Brazilian port industry will show some recovery in 2010. Given the appreciated BRL, we should expect a higher contribution from imports, while exports should grow by five per cent.
By Staff Writer
© Emirates Business 24/7 2010
