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Canada Shipping Report Q2 2011
Business Monitor International, Feb 2011, Pages: 82
The Canadian Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Canada's shipping industry.
The outlook for the Canadian ports and shipping sector is moderate to good. Although the global recovery is continuing at a somewhat subdued rate in 2011, we see some risks to all three core shipping sectors (container and dry and liquid bulk), with overcapacity and a drop in demand continually threatening to push down rates and impinge on lines' profits.
That said, the sector will be supported by the Canadian economy, which will perform somewhat better than the US. Canadian banks have remained healthier than US ones, and consumers continued spending through 2010, although we believe they may be slightly more cautious this year. Unemployment has come down but remains quite elevated. Government spending will cool in 2011, although private sector investment will remain robust.
Based on our analysis, the publisher forecasts 2011 GDP growth of 2.4% in Canada (following from 3.3% in 2010 when the country was recovering from the global recession in the preceding year). The economy will then gather a little more pace - to 3.0% in 2012. In the five years to 2015 we expect growth to average 2.8% per annum, not a bad performance for a mature industrialised economy.
Headline Industry Data:
- On the Pacific coast, 2011 Port Metro Vancouver (PMV) tonnage throughput forecast +3.1% to 111.345mn tonnes following estimated growth of +6.0% in 2010
- On the Atlantic seaboard, Port of Montreal (POM) tonnage +8.6% to 30.273mn tonnes, after estimated 13.8% growth in 2010
- Box traffic growth will diverge. Montreal will lead the way with a strong 12.5% increase, to 1.670mn TEUs in 2011 (after 19.0% growth in 2010). Port Metro Vancouver will be more subdued gaining 1.9% to 2.541mn TEUs (after 15.9% growth in 2010)
- 2011 Canadian trade growth forecast at 4.5% in real terms, down from 9.8% in 2010.
Key Industry Trends:
Montreal is performing well. In terms of both bulk and containerised trade, The Port of Montreal has been consistently achieving growth rates in excess of Canada's general economic expansion. The port is a key transshipment centre and handles cargo including liquid bulk, dry bulk and non-containerised cargo.
Multimodal integration may further boost Montreal's attraction. A new agreement between POM and Canadian National Railway (CN) should improve onward freight links to Ontario and the US Mid-West. CN operates the country's only transcontinental rail link, which is of vital importance to Canada's trade sector and in particular to exports of major commodities such as crude and refined oil, coal and grains.
The trans-Pacific business environment is a little more difficult for Canada. Although Vancouver remains the country's most important port, it faces a number of challenges this year. Container demand from the US remains subdued, contributing to uncertainty on rates. And while Vancouver saw a very strong recovery in 2010, it faces a competitive threat from the nearby US port of Seattle, and a potential recurrence of labour disputes.
Key Risks to Outlook:
There are a range of risks to our ports and shipping outlook for 2011, tending slightly more towards the downside than to the upside. First, a range of external factors could weaken Canadian trade growth further than we expect. These include lower than expected growth in the US and Chinese economies, and the prospect of 'currency wars' between some of the world's leading economies.
Second, domestic factors could lead to lower than expected Canadian growth. Federal elections could be called early (they are due to be held by October 2012 at the latest, but a snap poll in 2011 is a possibility); and there is a prospect (unlikely in our opinion) of a housing market crash that could adversely impact domestic demand levels.
Third, industry specific issues are a risk: top of our list would be the possibility of new labour unrest at PMV.
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