2013-08-23 09:11:44 - Fast Market Research recommends "Estonia Shipping Report Q3 2013" from Business Monitor International, now available
BMI maintains its fairly upbeat forecast for the Estonian economy in 2013, although we recognise that this small country is, to some extent, sailing against the prevailing regional headwinds. The main positive factor remains private consumption growth, supported by falling unemployment and rising real wages.
Government spending will be relatively flat and investment, which has been strong in the last couple of years, will be levelling off as capacity utilisation stabilises. The disappointing factor looks like being exports: even though the country's main export markets are mainly its Scandinavian and Baltic neighbours, who are among the most resilient of the European economies, the general sluggishness of the eurozone is making itself felt. Net exports will therefore be a drag on GDP
expansion. After 2012 GDP growth of 3.2%, we are maintaining our forecast for 2013 growth at 3.3%; we then see the pace easing to 3.0% growth in 2014, and 2.8% in 2015. Despite an earlier corruption scandal, which undermined the popularity of the Reform Party, the senior partner in the ruling coalition, we believe that the government is sitting fairly comfortably in office, with elections not due to until 2015. Despite the faster growth of imports over exports, we expect total foreign trade (imports + exports) to grow by a healthy 7.2% in 2013, which is good for the shipping sector.
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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. Throughput at the Estonian port fell by 19.2% in 2012 and, despite continuing weakness in the first quarter, we are projecting a small increase in 2013. The port authorities suggest a policy of diversification is beginning 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 31.244mn 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 7.2% in real terms in 2013, after 7.3% growth in 2012.
* Import growth will lead with 9.5% expansion, ahead of exports, which will be up by 5.0%.
Key Industry Trends
Muuga Terminal Delayed, But Parties Agree A Way Forward
The Muuga Container Terminal will not now be ready until July 2014, around a year later than originally planned. The deadline extension proposal was submitted by Rail Garant Estonia, the developer of the terminal, after several issues related to legal disputes hampered the development process. This decision was taken by the board on the basis that a two-year litigation stalemate would come to an end if Transiidikeskuse, a terminal operator, were to acquire Rail Garant Estonia and begin the execution of the terminal's restructuring plan with all relevant parties. This scenario seemed to be increasingly probable when, in late April 2013, the takeover was formally confirmed. The inauguration of the new facility is likely to double the turnover of containers moving through the port of Tallinn, to up to 500,000 TEUs annually, according to the port.
Estonian Minister Stresses Benefits Of Freight Transit Role
While opening the ninth international transit conference, known as Transestonia 2013, foreign minister Urmas Paet said that Estonia's transport and energy connections with other countries in the Baltic Sea region are of vital importance. Paet said that today Estonia is the most integrated country in the Baltic Sea region, being a member of the European Union, NATO, the eurozone, the Schengen area, and the OECD. 'Within 24 hours, goods sent from Estonia can reach 50 million consumers and within 48 hours, 300 million consumers,' he noted. 'Our logistics sector is tied to the Baltic Sea, an excellent waterway. The Baltic Sea must remain our home sea even with increasing maritime traffic, more complex cargo, and climate conditions,' he added.
Port of Tallinn Lagging A Little Behind?
Total bulk cargo handling in the Baltic Eastern Coast seaports rose by 3.9% in the first two months of 2013, to reach 55.12mn tonnes. While some ports registered strong gains in tonnage, Estonia's main port at Tallinn performed relatively poorly, with a 4.9% year-on-year (y-o-y) fall to 5.383mn tonnes. By cargo types, the Estonian port saw a 6.7% gain in oil products (to 4.074mn tonnes), a 7.4% drop in ro-ro shipments (to 550,900 tonnes), and a 3.6% fall in fertilisers (to 149,700 tonnes). In terms of containers handled, however, Tallinn registered 6.1% growth, to 38,788 TEUs.
Key Risks To Outlook
As in our last report, we see two main risks to our ports and shipping outlook. The first, which if anything is looming slightly larger, concerns the fate of the eurozone: any faltering of the recovery will be a negative. In the event that economic growth comes in lower than we are currently forecasting in key Baltic and Scandinavian countries to which Estonia exports, Estonia's net exports will drag more on growth than we have already pencilled in. Weaker external growth would also filter through to weaker consumer confidence. Given a high reliance on private consumption for growth, this would have a detrimental impact on Estonia's economic outlook and we would concomitantly revisit our trade and shipping forecasts.
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