2013-10-10 14:09:16 - New Transportation market report from Business Monitor International: "Estonia Shipping Report Q4 2013"
Estonia Remains Resilient, But Investment Dips
We have reduced our GDP forecast for 2013, largely because of a sharp contraction in fixed investment in the first quarter. Following three years of real GDP growth in Estonia averaging 4.8% per annum, the rate fell to 1.1% in Q113. The main cause seems to have been the conclusion of a programme through which government revenue from carbon emission was funnelled into public investment projects. This led to a sharper than expected fall in overall investment. After a few years of strong investment growth and capacity expansion, it is in any case to be expected that the pace will be slower in the next few quarters.
Against that, private consumption still remains strong and is
one of the main drivers of the economy. Although Estonia's main trade partners (Finland, Latvia, Russia and Sweden) have been showing greater vigour than the still-troubled eurozone, we still expect export growth to slow to 4.0% in 2013, down from 5.6% in 2012. On the political front we expect the popularity of the Reform Party, the senior partner in the ruling coalition, to continue ebbing on the back of various corruption scandals. However we think it will maintain a fiscally responsible and market-friendly policy stance until the 2015 general elections, when on current showing, it is likely to lose power. Taking all these factors into account, we have cut our GDP forecast for this year down to +2.1% (from +3.2% previously). However, we do expect the economy to gather pace thereafter, with growth of 3.2% in 2014, followed by 3.0% in 2015.
Full Report Details at
Looking at factors specific to the ports and shipping sector, competition from the new Russian Baltic port of Ust-Luga continues to cast a shadow over Estonia's port of Tallinn, even through the worst may now be over. Throughput at the Estonian port fell by 19.2% in 2012 and, we now expect that fall to moderate to a 6.0% contraction this year. The port authorities have claimed that a policy of diversification will eventually begin to pay off. On the other hand, container activity levels are set to remain strong, with double-digit growth.
Headline Industry Data
* Port of Tallinn gross tonnage set to decline by 6.0%, to 27.707mn tonnes in 2013, following a 19.2% fall in 2012.
* Box traffic at Tallinn to grow by 10.9%, to 252,595 twenty-foot equivalent units (TEUs) in 2013, down from 15.2% growth in 2012.
* Estonian foreign trade to gain 5.5% in real terms in 2013, after 7.3% growth in 2012.
* Import growth will lead with 7.0% expansion, ahead of exports, which will be up by 4.0%.
Key Industry Trends
Tallinna Sadam Tonnage Drops In First Six Months: Estonian port operator AS Tallinna Sadam handled a total of 14.93mn tonnes of cargo in H113. This represented a 6% decline from the previous year. The volume of container cargoes increased by 9%, liquid cargoes remained unchanged, and bulk cargoes decreased by 29% over a year. The company also reported a 33% increase in profit over the course of the period. Profit increased to EUR17.4mn (US$23mn) in H113.
APM Terminals Sees Strong Box Growth In Russia And The Baltics: Global port operator APM Terminals is upbeat about container prospects in Russia and the Baltics. Speaking in June at the TOC Container Supply Chain Conference Europe, Ben Vree, chief executive of APM Terminals Europe Region, said that that the outlook in these two areas was bright compared to an otherwise gloomy panorama for European box traffic. He stressed the importance of growing demand from Russia. 'Russia is the largest country in the world in terms of area, ninth by population and sixth globally in terms of national GDP, but Russian ports handled less than 5mn TEUs last year,' noted Vree, adding 'clearly this will change, particularly with Russia's joining of the World Trade Organization'. He added that recent industry forecasts identified Eastern Europe as the fastest-growing region in terms of container volume, with 7.3% growth projected in 2013, followed by 6.7% for the Middle East and 6.1% for Southeast Asia. In contrast north European ports were expected to see 2013 box traffic growth of 0.8%.
Transiidikeskuse Projects 10% Per Annum Container Expansion: The Transiidikeskuse container terminal at the port of Muuga handled 105,116 containers in the first five months of the year, a year-on-year increase of 8%, the company said. May box traffic was 20,451TEUs, an increase of 1% on the comparable year-earlier period. Erik Laidvee, Transiidikeskuse chairman, said that over the next five years he expected container throughput to grow at 10% per annum, reaching 260,000TEUs in 2014.
Key Risks To Outlook
As we were taken slightly by surprise by the sharp drop in first quarter investment, we believe weaker gross fixed capital formation (GFCF) is an ongoing downside risk this year. If Q213 GFCF plunges down again we may need to trim back our headline GDP forecast for a second time running. However, given Estonia's strong consumer story, growing wages and favourable business environment, we believe it is unlikely that investment would remain in contraction throughout the entirety of 2013.
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