2014-01-05 23:35:23 - Fast Market Research recommends "South Korea Shipping Report Q1 2014" from Business Monitor International, now available
We reiterate our cautious expectations towards South Korea's economic growth prospects, this time from a sectoral perspective. Korean semiconductor manufacturers will have to constantly innovate and invest in R&D in order to maintain its competitive edge and fend off competition from the Chinese or risk taking the route of the Japanese tech sector. Additionally, we highlight a possible stagnation in the Korean petrochemical industry and a reversal in the shipbuilding industry as additionally downside risks.
South Korea's consensus-beating real GDP growth in Q3 2013 gave cause for optimism in the country's economic growth trajectory. Despite this, however, we remain cautious towards its economic growth trajectory given the structural weakness that we believe will continue to plague the Korean economy (see 'Staying
Cautious In 2014 Despite Upside Growth Surprise', October 31 2013). In this article, we articulate the same convictions we have from a sectoral perspective, and highlight three industries we believe may potentially carry some near to medium term downside risk for South Korea's economic growth prospects. The Korean shipbuilding industry appears to be going through a revival in fortunes, at least for now. The country's three largest shipbuilders have seen their order books swell while Maersk Line (the world's largest container shipping line) has called the bottom of the trade cycle. The surge in 'smart money' inflows into the global shipping industry also reflects the positive sentiment that has been emanating from the industry, while the recovery in the Baltic Dry Index (BDI) - that measures the cost of transporting a range of dry-bulk commodities - has added further weight.
Full Report Details at
- www.fastmr.com/prod/754737_south_korea_shipping_report_q1_2014.a ..
Headline Industry Data
* 2014 tonnage throughput at the port of Busan forecast to increase by 7.27%.
* 2014 tonnage throughput at the port of Incheon forecast to grow by 1.70%.
* Container throughput at the port of Busan is set to rise by 5.40% in 2014, while the port of Incheon is predicted to see a 7.70% increase.
* The total value of South Korea's trade (imports plus exports) is set to enjoy real growth of 3.75% in 2014.
Key Industry Trends
Cameroon Iron Ore Story Entices South Korea: South Korea's US$220mn investment to rebuild the port of Limbe in Cameroon is a positive development for both countries, we believe. South Korea is commodity-hungry; Cameroon is rich in minerals and provides a transit point for exported oil produced in neighbouring landlocked countries Chad and Niger. Work on the port will start in June 2014 and will be completed in 2018.
Tristar Orders Six Oil Tankers: US logistics services firm Tristar Transport announced plans in November 2013 to add six new oil tankers to its fleet. Tristar placed an order worth US$200mn with South Korean manufacturing firm Hyundai Mipo Dockyard, and is due to receive the vessels in 2016, Hellenic Shipping News reports. The tankers will benefit from a streamlined design, making them environmentally friendly, and are expected to be the subject of extended charter agreements.
Busan, Long Beach Sign Sister Port Agreement: South Korea's port of Busan and the US port of Long Beach have signed a sister port agreement, according to the Journal of Commerce in November 2013. The agreement will see the respective port authorities exchange engineering, professional and technical information. The deal is not legally binding, but will reportedly see the two entities work together to improve environmental practices and modernise their operations.
Key Risks To Outlook
Following US President Barack Obama's decision to back away from 'limited' airstrikes on Syria in September 2013 amid widespread opposition from the American public and Congress, North Korea has most likely concluded that the United States lacks the appetite for major military engagements abroad. This could conceivably embolden the North in its actions towards the South. For example, Pyongyang could be tempted to carry out a new small-scale military provocation against the South, similar to its sinking of the South Korean warship Cheonan and its attack on the Southern island of Yeonpyeong in 2010 which claimed 50 South Korean lives. Neither the US nor South Korea took any action against the North following those incidents.
That said, North Korea is almost certainly mistaken if it thinks that the US and the South would tolerate major Northern provocations in future. For a start, South Korea has upgraded its rules of military engagement to respond forcefully against the North. In addition, we believe that the US takes its commitment to South Korea's defence (which is stipulated in a 1953 treaty) much more seriously than President Obama's verbal 'red line' against Syria's use of chemical weapons that was issued in 2012.
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