2014-01-24 22:48:17 - Recently published research from Business Monitor International, "Taiwan Freight Transport Report Q1 2014", is now available at Fast Market Research
BMI Forecasts 3.0% GDP Growth For Taiwan In 2014
Weaker for a bit, stronger for a bit, and then back to a comparatively low trend rate - that is the BMI view of Taiwan's economy in three different periods: Q313 (actual), Q413 (estimate) and then 2014 as a whole (forecast). Third quarter GDP growth, according to preliminary data released in November 2013, was poor.
GDP was up by only 0.1% quarter-on-quarter, and by 1.6% on an annual basis. This rather stagnant performance was in line with weaknesses in trade, always critical for an open and outwardly focused economy such as Taiwan.
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However, we are confident there will be a pick-up in the last quarter of 2013 based
on a short-term bounce in the Chinese economy and the global tech industry cycle - Taiwan depends rather heavily on exports of semi-conductors and other related IT products. Unfortunately, we do not see this end-2013 strength running through into 2014. On the contrary, we believe the Chinese economy will slow again as the Beijing government seeks to tackle imbalances, and foresee that the tech cycle will turn against Taiwan, potentially with a downwards inventory adjustment in global electronics supply chains.
Two further factors also cloud the outlook for 2014. One is the qualitative change in the mainland China economy, where local manufacturers are shifting focus away from production for export markets and towards meeting the needs of an increasingly sophisticated domestic consumer sector. This means, for example, that China is producing its own flat-panel TVs and therefore importing less from Taiwan. The second relevant fact is the way the local administration of President May Ying-jeou is getting bogged down in political infighting, a process which seems to be undermining its resolve to tackle reforms of pension and energy policies. The fiscal balance is coming under pressure, and businesses are becoming cautious in advance of local elections, to be followed by presidential elections in 2016. Taking into account these factors, we estimate GDP growth in 2013 will be 2.1%, rising to 3.0% in 2014, which is below the trend rate of recent years.
In line with a modest acceleration in both GDP growth and foreign trade in 2014, we expect cargo volumes across all freight modes to rise in the low single percentage digits. Bulk tonnage at key ports such as Kaohsiung and Keelung, will see gains in the 0%-2.0% range. Airfreight, rail, and road haulage will all register small increases.
Headline Industry Data
* 2014 airfreight tonnage is expected to grow by 2.9% to 1.198mn tonnes.
* 2014 rail freight is forecast to grow by 1.5% to 14.262mn tonnes.
* Maintaining a four-year run of positive growth, 2014 road freight is forecast to increase by 2.7% to 687.396mn tonnes.
* 2014 Port of Kaohsiung tonnage throughput forecast to recover by 1.5% to 120.728mn tonnes, over the mid-term to 2017 we project an annual average increase of 1.5%.
* Port of Keelung will see tonnage recovering by 0.6% in 2014, to 68.765mn tonnes.
* 2014 total trade is forecast to rise by 2.8% in real terms, compared to weaker 1.8% growth in the preceding year.
Key Industry Trends
EVA Air Reduces Exposure To Air Freight Sector: EVA Air Cargo has embarked upon a tactical redevelopment of its business strategy due to the continued slump facing the wider Asia Pacific region, and Taiwan's air freight carriers in particular. The plight of the latter is largely due to the rising popularity of smartphones and tablets, which are usurping the market share of bulkier computers, resulting in smaller, lighter cargos. In light of this, we view EVA's decision to offload a third of its freight fleet and expand its passenger fleet in a positive light, as we believe this will allow the company to reduce its exposure to an oversubscribed market, while allowing it to capitalise on rising air passenger numbers.
Kaohsiung Hopes LME Deal Will Help It To Compete: Taiwan's port of Kaohsiung is expected to add thousands of cargo tonnes per year to its existing capacity following its partnership with London Metal Exchange (LME). The port will become a merchandise delivery location for the LME. The move is likely to reduce base metal transportation costs and increase shipment logistics efficiency in the South East Asia and mainland China areas. Kaohsiung port is expected to compete with LME's 37 designated ports worldwide in the metal shipment business, according to Taiwan International Ports Corporation (TIPC). Taiwan's Premier Jian Yi-hua said the deal showed how Kaohsiung was uniquely placed as a hub for ventures into the mainland China market. He expected the port to be used as an international metals warehousing transfer centre. Despite the good news, Hsiao Ding-hsun, chairman of TIPC, said that Kaohsiung Harbour should remain focused on adding value through service diversification to offset the decline in its annual cargo handling volumes. The port, he said, was planning to create two new container terminals with a total of 11 new deep-water wharfs between them, able to take total container capacity to 17mn twenty-foot equivalent units (TEUs) per annum by 2019. Public and private investment in the terminals would exceed TWD120bn (US$4.07bn), Hsiao said.
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