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New Market Report Now Available: Poland Freight Transport Report Q1 2014

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2014-01-23 19:08:52 - Fast Market Research recommends "Poland Freight Transport Report Q1 2014" from Business Monitor International, now available

Recovery Will Be Slow And Protracted

Although we continue to predict a recovery in the Polish economy, it looks a rather long, drawn-out affair and we have reduced our growth forecasts since our last quarterly report. We now expect 2013 GDP growth of 1.2%, down from the 1.5% we had pencilled in three months ago. We have also cut the projection for 2014 to 2.3% GDP growth (vs. 2.7% before) and for 2015 to 2.8% (vs.4.1% before). Over the short term, net exports will continue to be the main engine of growth, although we see them improving relatively tentatively. The key here will be the performance of Poland's main export market, Germany. Although the domestic labour market remains weak, an improvement

in H213 should help lift household consumption: certainly there are signs of gradual improvement in consumer confidence. We expect government spending to be muted and investment remains in the doldrums. While all this points to a gradual improvement, medium-term growth prospects are becoming increasingly challenging given low levels of R&D and innovation in Polish manufacturing and increasing competition from South-Eastern European countries such as Romania and Turkey. This is likely to prevent a rapid return to 4%-plus annual growth rates.

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Within this context, the outlook for the country's freight transport modes is mixed. After a slow 2013, greater GDP and foreign trade growth in 2014 will make a positive contribution. Some freight modes will have the additional benefit of increases in capacity or extra demand because of Poland's role as a gateway into north-eastern Europe. The port of Gdansk is an example, still enjoying double-digit expansion, reflecting the rapid development of its capacity, as well as its good business links. The largest global container line, Maersk Line, is its customer, and the shipping company now offers the facility as a port of call on some of its direct Asia-Europe services.

Headline Industry Data

* 2014 air freight tonnage is expected to grow by 4.9% (on a par with our estimate for 2013);
* 2014 rail freight is forecast to grow by 2.0%, after a 4.2% fall the preceding year;;
* 2014 Port of Gdansk throughput is forecast to grow by a still-strong 10..9% (slower than the estimated 30% surge in 2013);
* 2014 road freight is forecast to grow by 2.6%, after contraction of 2.4% in 2013;
* 2014 inland waterway freight is forecast to grow by 2.7% (-2.7% in 2013);
* 2014 total real trade growth is forecast at 3.3%, up from 2.5% in 2013.

Key Industry Trends:

PKP Cargo IPO Moving Ahead: Polish rail operator Polskie Koleje Panstwowe is aiming to raise up to US$518mn by selling shares in its freight subsidiary PKP Cargo. The proceeds will be used to cut its debt and fund infrastructure investments. The fully-owned freight firm will sell 50% minus one share of the unit. "The sale should attract solid demand as the company is a good proxy for an economic revival in Poland, and there are no companies of this kind listed on the bourse. PKP Cargo is also a restructuring story with an upside potential," said analyst Dawid Czopek of BRE Wealth Management. Earlier, in preparation for the IPO, PKP Cargo entered an agreement with labour unions. The company has said its 24,000 employees would be provided with a one-time bonus in shares and a four-year job guarantee as part of the deal. The company has already cut its work force by 39% since 2008. First half net income was down 44% year-onyear (y-o-y) to PLN76.8mn, as revenue for the same period fell by 9.2% to PLN2.29bn.

Swinoujscie LNG Terminal Makes Strategic Sense Despite Uncertain Profitability: The Swinoujscie liquid natural gas (LNG) terminal will help Poland reduce its dependence on Russia for gas supplies, according to consultants Ernst & Young Advisory (EYA). An EYA report said that because of volatile market conditions in recent years, there have been doubts over the profitability of LNG terminals and investors have become 'quite rightly wary'. However, the picture changed somewhat with the emergence of a range of new export terminals in places as diverse as Angola, Senegal, Australia and the Siberia-Arctic region. Perceptions of pipeline supplies being more secure than maritime tanker supplies have also changed, with growing awareness that a pipeline can be 'held hostage' by the countries it runs through. While it was best to focus on the long term to assess the cost-benefit of building new terminals, once a port decided to invest, 'none of its decisions are ever again going to be entirely just about the market' as it would be tied into a country's energy strategy, EYA said.

Room For Growth In Polish Ports: A combination of growing exports and containerisation 'could become the main force driving the demand for port services both in Poland and the whole region of Central and Eastern Europe', according to a study by real estate research company Jones Lang LaSalle. Jones Lang LaSalle argues that unlike some of their competitors, Polish ports have significant potential for further growth. Whereas the biggest ports in Europe are already crowded and their spatial potential is greatly limited, on the Polish coast there is still room to invest and expand. Simplification of tax, customs and sanitary procedures, as well as further development both port and inland infrastructure will allow Polish ports to efficiently compete for clients from industrial regions of southern Poland, some regions of the Czech Republic, Slovakia and countries of the former Soviet Union, the study concludes.

Risks to Outlook

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