2013-02-01 18:15:49 - New Transportation market report from Business Monitor International: "South Korea Shipping Report Q1 2013"

Fully in line with our expectations, the South Korean economy slowed in Q212 with real GDP expanding a seasonally adjusted 1.6% quarter-on-quarter annualised, decelerating from 3.6% in the first quarter. As expected, exports and investment activity were the main impediments to growth, as these components contracted an annualised 2.4% and 9.2% respectively.

Looking ahead, we expect this economic weakness to maintain course. External demand will continue to soften as a slowing Chinese economy (China is by far South Korea's largest export partner) and a persisting eurozone crisis continue to place substantial drag on the local economy. Indeed, Korean shipbuilders are expecting to face their first drop in ship and offshore product exports, according to the Ministry of Knowledge Economy. The sector,

therefore, faces a tricky time traversing such potential pitfalls going forward.


Full Report Details at
- www.fastmr.com/prod/529404_south_korea_shipping_report_q1_2013.a ..


Shipyards typically take three to four years to fulfill orders, and the weakness during that period has manifested in falling shipping exports (which comprise 10% of total exports) this year. Outbound shipments from the electronics industry are also unlikely to pick up anytime soon, judging from the weakness in the book-to-bill ratios of the semiconductor industries in the US and Japan.

Headline Industry Data

* 2013 tonnage throughput at the Port of Busan forecast to increase by 3.52%.
* 2013 tonnage throughput at the Port of Incheon forecast to grow by 4.74%.
* Container throughput at the Port of Busan is set to rise by 5.75% in 2013, while the Port of Incheon is predicted to see a 4.53% increase.
* The total value of South Korea's trade (imports plus exports) is set to enjoy real growth of 3.80% in 2013.

Key Industry Trends

Busan Builds For The Future

We believe that the port of Busan is set to maintain its position in the top 10 through continuing to innovate, develop and expand at its facilities. Two new developments reported at the end of September offer upside risk to both Busan's short-term and long-term growth outlooks.

Design The Order Of The Day

Singaporean ocean carrier APL, South Korean shipbuilder Hyundai Heavy Industries and Norwegian marine classification society DNV are to link up to produce a hull design that could provide fuel savings of 20% per twenty-foot equivalent unit (TEU) for APL, reported the Marine Information Centre in September. Specifically designed and optimised for the Asia-Europe route, the 10 new 13,800TEU ships could save APL US$3mn each year, by introducing flexible speed and draft combinations. The first vessel is set to be delivered in 2013.

Seaports See Box Throughput Slip

Container volumes at major seaports in South Korea are predicted to have fallen in October 2012, compared with the corresponding period 12 months earlier, the Yonhap news agency reported. The development was put down to a drop in import-export cargo. The drop is put at 1.6%, to 1.87mn TEU containers handled, according to the South Korean Ministry of Land, Transport and Maritime Affairs. The ministry explained in a statement that 'uncertainties in the local and global market' have affected the freight industry over the past 12 months.

Key Risks To Outlook

Economic data released during October 2012 reaffirms our view of a continuing slide in South Korean economic activity, with a fall in exports set to potentially detrimentally affect the country's freight industry. Industrial production witnessed its third successive month of decline, as the contraction in output accelerated to 1.7% year-on-year in August from 1.5% in July. Trade maintained its dismal performance, as both exports and imports remained underwater in September.

Indeed, export growth has been in negative territory in seven out of nine months this year. According to the Purchasing Managers' Index report, alongside the fall in output, export orders also saw a fourth straight month of decline, with the Middle East and, more crucially, Europe, singled out as regions of demand weakness.

On the upside, the government of South Korea has been asked to offer financial support to the country's shipping industry. The funding will enable local shippers to cope with an industry-wide slump. Most South Korean shipping companies, including Hyundai Merchant Marine and STX Pan Ocean, registered losses in Q212. The loss was mainly attributed to lower shipping rates and a drop in trade volume, alongside a fall recorded in Europe and other major economies. The shipping industry has also called for imposing a ban on foreign rivals, including Japanese companies, from bidding for shipping deals. These deals were scheduled to be placed in October by the five units of Korea Electric Power.

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