2013-02-02 16:00:40 - New Transportation research report from Business Monitor International is now available from Fast Market Research
BMI View:All Eyes On The Global Picture
South Korea's export market is experiencing some turbulence at present, with this having a detrimental effect on the country's freight industry. 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. Additionally, domestic orders for machinery continued to exhibit significant weakness, declining 16.1% year-on-year (y-o-y) in August, following on from a 18.5% contraction in Q212.
Therefore, our forecasts for 2013 across the different modes is relatively muted, although we expect this scenario to alter over our forecast period. For 2013, the best performing freight mode in terms of
y-o-y growth will be the maritime sector, with the Port of Incheon enjoying steady annual tonnage throughput growth. Air freight will also see a decent outcome this year, while rail freight is forecast to witness uninspiring growth over the same period.
Full Report Details at
- www.fastmr.com/prod/529401_south_korea_freight_transport_report_ ..
Headline Industry Data
* 2013 air freight tonnage throughput forecast to increase 3.39%.
* 2013 rail freight tonnage throughput forecast to grow 1.67%.
* Total trade (imports plus exports) in real terms is set to grow 3.80% in 2013.
* The Port of Busan will see gross tonnage growth increase 3.52% in 2013.
* The Port of Incheon is forecast to see gross tonnage growth of 4.74% in 2013.
Key Industry Trends
Korean Airlines To Up Capacity On Russian Route
Korean Airlines is to boost its cargo offering on the route from Incheon Airport in South Korea and Vladivostok in Russia, announcing at the end of August 2012 that it is to begin switching over aircraft on the route from the B737-900F to a wide-bodied B777-200F.
Busan Builds For The Future
BMI believes that the Korean port of Busan, one of the world's largest ports in terms of container throughput, will continue to maintain its position in the top 10 through continuing to innovate, develop and expand at its facilities. Two new developments reported in September 2012 offer upside risk to both Busan's short-term and long-term growth outlooks.
Special Economic Zones Face Uphill Struggle
North Korea is set to experiment with reform by developing Special Economic Zones (SEZs) to attract greater foreign investment, with South Korea an obvious benefactor. However, neither of the two long standing SEZs at Rason and Sinuiju have been successful, suggesting that future ventures will also fall short of expectations.
Key Risks To Outlook
With China being South Korea's largest export partner by far, the latter will be looking with keen interest at the macroeconomic situation in the Asian powerhouse. China's economic imbalances have grown consistently over the past decade, to a point where we now believe they have reached a peak. We stress that the process of rebalancing will be disruptive, and the post-rebalancing economic structure will be much less conducive to rapid headline GDP expansion. We are forecasting real GDP growth of 7.5% in 2012 and 7.1% in 2013. This compares to consensus expectations of 7.7% and 8.1%.
On the domestic front, the recent move by the government to launch a US$5.2bn stimulus plan could improve the earnings of homegrown companies such as Korean Air Cargo and Korea Express, as well as boost new orders growth from South Korea.
Upside risk presents itself most obviously with the scheduled developments at the ports of Busan and Incheon, which both continue to expand and innovate, so that they are not solely reliant on East-West trade. Aside from this, the South Korean government is still to decide on the construction of an airport on Ulleung Island in the East Sea, which could boost the country's freight industry. The KRW500bn (US$440mn) project is yet to get the green light due to concerns over the economic feasibility of the plans. A 50-seat plane is likely to be able to fly from Seoul to the island as early as 2017, provided the airport is constructed. This will reduce the travel time from the current seven hours to approximately two hours.
Politically, closer ties with South Korea's northern neighbour is obviously welcomed although whether that becomes a reality is a different matter entirely. North Korean leader Kim Jong Un appears to be favouring much-delayed economic reforms to modernise the country and reduce its development gap with the South. According to reports in the South Korean media, Kim on June 28 2012, approved a new economic liberalisation policy named after that date aimed at making prices of goods reflect market conditions as opposed to state directives, and allowing the expansion of private economic initiatives.
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