2013-02-03 16:37:17 - New Transportation research report from Business Monitor International is now available from Fast Market Research
BMI has again reduced its Taiwan GDP growth estimate and forecast, respectively, for 2012 and 2013. We continue to see the local economy picking up pace as we move into 2013, but the recovery will be less vigorous than we originally hoped, for a variety of reasons. They include external factors, such as a rebalancing economy in mainland China and a slow recovery in the eurozone. The internal picture also gives us cause for concern. We are worried that investment interest in Taiwan has cooled. And while the tech industry is leading the recovery, we believe local companies are no longer as innovative as they once were, and Taiwan is beginning to fall 'behind the curve' in this respect. Add
to this, a banking system in need of deregulation and reform and a political scene that doesn't seem to support further economic reforms, and the conclusion is that the island's long-term growth trend may be coming down. In fact, we have now cut back our longer-term growth projections, to an annual GDP average of 3.9% in the 2014-2011 period, compared with 4.7% previously.
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The less optimistic economic outlook will have a significant impact on port and shipping activity. We still expect an upturn in 2013 port activity levels, but this will be in the low single percentage digits. Broadly speaking, Kaohsiung, Taiwan's largest port, remains the most resilient. Keelung, the country's second largest port, will recover weakly from a difficult 2012, when we estimate it experienced percentage falls of around 8-9% in both bulk tonnage and box traffic.
On the plus side, the policy of cross-straits integration is expected to continue. Further liberalisation of relations between Taiwan and mainland China remains on the cards. In this context Taiwan's ports and shipping lines continue to position themselves to work through a series of alliances and partnerships with mainland companies over the next few years.
Headline Industry Data
* 2013 Port of Kaohsiung tonnage throughput forecast to grow by 1.5% to 124.947mn tonnes, over the mid-term we project an annual average increase of 1.6%.
* Port of Kaohsiung container throughput forecast to grow 2.7% to 10.127mn twenty-foot equivalent units (TEUs) in 2013, over the mid-term we project an annual average 3.5% increase.
* Port of Keelung will see tonnage recovering by 1.0% in 2013 to 70.1mn tonnes, with container traffic up by 1.3% to 1.621mn TEUs.
* 2013 total trade growth forecast to recover by a strong 10.0% in real terms, compared to a drop of 1.3% in 2012.
Key Industry Trends
Big Is Still Beautiful For Yang Ming
With shipping line Yang Ming reported to be back in profit in Q312, the company has got approval from its board to order five 14,000TEU container vessels, with the option for five more. The plan is for the first newbuild to be delivered in Q115. The order signals Yang Ming's determination to retain its exposure to the Asia-Europe trade route, despite the tough operating environment on this route in the past few years. It also poses the risk of further overcapacity being added to the already saturated Asia-Europe trade route. BMI has previously highlighted that despite the projected pickup in demand as the eurozone starts its recovery from its double-dip recession in 2013 the massive influx of mega vessels due online in 2013 and 2014 will lead to ongoing issues of overcapacity, which will take time to iron out.
Kaohsiung On The Up
Taiwan International Ports Corporation said that Kaohsiung Port registered a 7.9% month-on-month rise in box throughput to 875,000TEUs in October 2012. A total of 8.2mn TEUs of containers had been transported from the port in the first 10 months of 2012, up 2.5% year-on-year. Meanwhile, construction work on the phase 2 projects at the port's 6th Container Terminal is moving ahead. Phase 2, which is likely to be concluded by June 2014, includes two new container wharves (110 and 111), the CY-3 container yard, and various support buildings and infrastructures.
Evergreen Eases Back On Fleet Growth
While still enthusiastic for large ships, Taiwan shipping group, Evergreen Line, is beginning to ease back on its expansion plans. Ever Lawful, the latest 20 L-type containership built for Evergreen Line, has been launched at the shipyard of South Korean shipbuilder, Samsung Heavy Industries. The 8,452TEU vessel will be deployed on Evergreen's Far East-Europe services. Evergreen has ordered 30 such vessels since 2010, 10 of which will be built by Taiwan Shipbuilding. Earlier, there were signs that Evergreen was easing back on its fleet expansion programme. In October 2012, the company said it would undertake no more shipbuilding in the immediate future. Evergreen Line Executive Vice-Group Chairman, Bronson Hsieh, had previously said that the company would instead adjust capacity in order to meet demand. Evergreen Line's fleet currently comprises approximately 60 vessels.
Risks to Outlook
Rebalancing in mainland China remains an important downside risk for Taiwan's shipping sector. As the mainland switches away from an export-led growth model to one which focuses more on internal demand, BMI believes its long-term growth trend will begin to come down. While there will still be opportunities for Taiwan to benefit from mainland demand, they will be less dynamic. Importantly, given low levels of mainland investment in Taiwan, and a fall in FDI from other sources, there is a possibility that some of these opportunities may be missed.
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