Saturday, December 12, 2009

Analysis Of Global Air Sea Road And Rail Freight Transport Trends To 2014

A Look at What the Market Analysts Predict for the Industry
Shipping News Feature

WORLD WIDE – Lies, damned lies and statistics is an expression that proves even more accurate if one looks at the predictions of market “experts”, and this applies as much to the area of intermodal cargo transport as it does to any other commercial sector. The Handy Shipping Guide has been taking a look at anticipated future prospects for several countries in different continents and seeing what the economic crystal ball gazers see in the future.

Study of predictions made for the past five years have, in most cases been largely well clear of the mark. Past months have seen all predictions reduced downward and one hopes that these latest indicators have been suitably toned down in the light of bitter experience. Many of the countries surveyed had ambitious plans for transport infrastructure development which have now been reduced, postponed or even cancelled. The price of fuel is, needless to say, a crucial factor in determining the cost of moving cargo nationally and internationally yet predictions on this subject vary widely, are affected directly by geography and local resources and, to a large extent, are purely speculative.

We have taken as many of these factors into account and prepared a rough table of average growth predictions for the countries concerned in this narrow look at the freight trade. We have tried to factor out vested interest reports and included local factors we believe will have some meaningful influence on the analysts own data. Many analysts, quite reasonably, utilise GDP projections as the major factor in their own transport analyses. These in turn however are compiled from an infinitely complex web of data, much influenced by those who release it, back to statistics.

So here, for what it’s worth, is our compilation of what the average market analyst thinks will be the trend in freight transport for the next five years. We have only included those countries for which we felt data was generally reliable and available. This has meant leaving out great swathes of the worlds major economies, Africa, Brazil etc. We shall attempt to remedy this at some future date. Please note, the figures shown are not ours; they are based on an average from the disparate published sources.

Australia – The mood of the country has lifted in recent months and predictions for the various transport sectors are generally good, despite recent dock handling and rail development problems and the fact, common in many countries, that airport development has not proceeded as envisaged. We have seen a move toward privatisation of some state transport assets and the bulk grain market has steadied somewhat. Rail refurbishment and stock updates lead to an anticipated annual growth prediction for all shipping sectors (Average Freight Growth –AFG) of around 5%.

Japan – Fuel costs are the major concern for this market and a shrinking GDP has left the country feeling vulnerable. The reduction in aircraft landing fees should go part way to lifting this sector but JAL’s situation is of concern. Generally analysts are predicting a very slow but sure recovery with road haulage and rail development dawdling behind a stronger marine sector recovery, a number of the worlds major shipping lines being Japanese based. Predictions for the airfreight sector vary wildly with the AFG being only around 1 – 2 %.

China – Most predictions are based on the fact that the Chinese economy still has plenty of legs. Uncertain factors are the real value of the currency and the political situation, where there is still plenty of controversy surrounding the climate agenda, internet freedom and Tibet, all things which have the potential to cause international problems. On the whole however China’s economy is simply too big to be thrown off in such a small time frame as the next five years so all analysts are backing the big rising star. Tariff reductions, infrastructure developments make for an AFG of over 6% with many forecasts exceeding 10%.

India – Once again a massive, expanding market and the opening of freight sectors to competition as European and American companies move into previously monopolised areas means high growth predictions. The subcontinents drawback has always been the perception that its Government and people were long on promises and short on delivery and observers will be watching major freight infrastructure developments with a close eye. Despite failure to deliver on rail truck production estimates and the India Air staff strike, rising rail tonnages coupled with discounted rates and an expansive highway development programme mean a large AFG of 12%. Predictions for truck transported cargo growth exceed 14% in some cases.

Vietnam – Viewed by many observers as potentially a lucrative, expanding market. Whether the outcome will be as rosy as many predict, remains to be seen. Billions of dollars have been invested by the US but also China, the EU and Japan. Major road network developments to improve access to ports are under way as are improvements to the country’s air freight capacity. A stronger export capability leads to predictions of over 10% per annum in air freight and, providing fuel costs can be contained, an AFG of 8-9% is envisaged.

Saudi Arabia – Once again the Chinese seem to be intent on buying up the country with several major investments, particularly in rail freight development. Developments like Al Jazan proceed but there is a general feeling that the party is over and all analysts we sampled took a more pessimistic view than they had 12 months ago. Seafreight is predicted to virtually stagnate with rail due to pick up 3 or 4% as is road cargo. The AFG comes out at a lowly 3 to 3.5%.

Kuwait – Accurate figures for development and current statistics are thin on the ground with, as usual, oil exports being the underlying strength behind the numbers. In consequence of the Iraq situation road and rail figures may rise as the country rebuilds and freight transits through Kuwait but experts agree an AFG of 1 -2 % is the likely outlook for the next five years.

Turkey – The country sees itself in a relatively strong negotiating position due to the EU’s desire to free itself from its member states’ dependence on Russian oil. The Nabucco pipeline project is an essential component of the EU’s energy policy and is intended to carry Asian oil, principally from Azerbaijan, across the country. Rail development is seen as lagging behind the air, truck and sea freight sectors, producing an AFG of 5%.

Poland – The economy is very directly affected by the Russian oil supply situation with a virtual embargo on exports through Poland. This reflects on analyses for transport in the coming years but renewed vigour in the economy and talk of privatising the national airline LOT, one of the oldest in the world, set against poor highway development, means an AFG of around 4.5%.

Bulgaria – Another country looking to the Nabucco project to improve their fortunes. EU funds have been frozen since the scathing report on the country’s corruption and maladministration, particularly with regard to irregularities concerning EU investment funds destined to revive transport infrastructure projects. Such developments are necessary to upgrade import and export trade with neighbours Greece and Romania (which has its own dishonesty disputes with the EU). Despite this promises made by the Government to self finance infrastructure seem to have influenced analysts predictions. The nett result is a somewhat surprising AFG to 2014 of almost 7%.

Czech Republic – Somehow the positive attitude of the nation usually manages to instil a sense of confidence in market observers and this is generally not misplaced. Although, as with all predictions, figures are down on what was envisaged a few years ago the Czech’s are seen to be in a fairly strong position relative to their neighbours. In a way the country is a microcosm of what is happening in the battle for road versus rail supremacy throughout the region. Rail traffic is expected to build steadily, taking an ever increasing market share from trucking, not in time however to materially affect the transport figures over the period we are looking at. After almost unanimously positive comments by the observers we have reviewed however the AFG is as surprisingly low as Bulgaria’s is high at only 3.5%.

Argentina – A brief look at South America shows generally that the continent is down against other areas we surveyed. The road sector is, unsurprisingly the dominant sector but lack of investment in infrastructure whilst the economy was perceived as thriving, is now taking a toll. The congestion has eased on the highways simply due to reduced tonnages and not improvements according to sources and the predictions for growth are a dismal AFG of 0.5 – 1%.

Mexico - As with Argentina only slow growth is expected. An average for freight growth annually to 2014 works out at 2% when all the analysts figures are calculated. Rail seems to be the most promising area but all sectors are expected to be slow in recovery.

During the course of our computations we have been conscious that such figures are tenuous to say the least. A look at the sources we used suggest that most in the past have been over confident of market development and that now that trend may have been eliminated and even possibly reversed.

What is certain comes as no news to those within the industry. Freight levels, of all types, are strikingly down against former highs and even more so against predicted futures. Markets generally seem to be recovering and it is probably quite reasonable to accept that, with proper management at company and government level, and the slimmed down and consequently more cost effective supply chain the growth levels predicted by the market analysts may, this time, not be so far off the mark.