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Japan Freight Transport Report Q1 2011
Business Monitor International, Feb 2011, Pages: 38
The Japan Freight Transport Report provides industry professionals and strategists, corporate analysts, freight transportation associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Japan's freight transportation industry.
Yasumi Kudo, CEO of Japanese shipping line Nippon Yusen Kabushiki Kaisha (NYK Line), said in October that container shipping lines were yet to prove they could efficiently manage vessel capacity in order to ensure profitability over the longer term, reported Journal of Commerce Online. He added that although container shipping had pulled off an unexpectedly swift recovery, it did not mean that the container ship business had become a fully sustainable business model as yet. He added that carriers' profitability was due to reduction in capacity that facilitated them to charge profitable rates.
The Japanese shipping company slashed its capacity by 4% in January to August 2010, according to Alphaliner. Kudo raised concerns over whether other carriers would be able to adjust their capacity in accordance with demand when volumes decline.
Japan entered the first months of 2011 amid signs of political dissatisfaction with the government and a weakening economy, both of which could constrain prospects for the freight transport sector. Approval ratings for the administration of Prime Minister Naoto Kan slumped to around 20% in late 2010, with the government suffering as a result of territorial disputes with China and Russia, seen by many Japanese voters as a sign of the country's waning geopolitical influence in the region.
On the economic front, there were signs of weakness in exports, and vehicle and convenience store sales, which suggested domestic consumption growth was trending lower. After falling by 5.2% in the recession of 2009, BMI estimates that Japanese GDP will have grown by 1.9% in 2010, but we forecast that it will dip down again to 0.9% growth in 2011. We see what is happening as a rebound - and a weakening one at that - rather than a recovery. In the medium term - the five years to 2015 - we expect annual GDP growth to average only 1.1%.
After 2009's very steep falls in volumes (-10.6%), the airfreight sector is now enjoying a recovery. Japan Airline's bankruptcy and restructuring remains a big story within the sector, but its competitors are better positioned for growth. BMI forecasts that cargo volume will rise by 1.5% in 2011 to 2.064mn tonnes, a slower pace than 2010's 3.5% gain. Airfreight carried (volume x distance) will rise a little more strongly, up by 2.8% to 6.088bn tonnes-km (bntkm).
Japan's highly-developed roads have periodically suffered from heavy congestion and as in many mature economies, road haulage growth is limited. As Japanese economic growth cools in 2011, so will road freight volume. We have lowered our forecast for 2011 with road freight volume up by 0.5% to 4.612bn tonnes, following 2010's recovery-driven 6.1% expansion. Traffic (volume x distance) will gain 0.6% to 333.909bntkm.
After collapsing by almost one-fifth (-18.7%) during the recession, BMI estimates that rail freight had a standstill year in 2010, with marginal growth of 0.5%. For 2011, BMI is forecasting another standstill year (+0.2% to 37.86mn tonnes). The emphasis remains on passenger travel as the number one priority, so freight capacity remains limited.
At the Port of Yokohama (POY), BMI is estimating 3.7% growth in total tonnage in 2011 to 130.717mn tonnes, representing a slower year after the 9.1% recovery-dominated surge in 2010. At the Port of Tokyo (POT) in 2011, BMI predicts total tonnage gaining by 2.8% to 91.121mn tonnes, again a slowdown on the 9.1% rate achieved in 2010.
In real terms, Japan's foreign trade (imports plus exports) slumped by 20.3% during the global recession in 2009. BMI estimated an 8.6% recovery in 2010, followed by a forecast of lower growth of 5.2% in 2011 as we enter global 'double dip' territory. Average annual foreign trade growth in the five years to 2015 will be 6.1% per annum. There is evidence of a rebalancing of Japan's trade patterns in the future, with imports outpacing exports, reflecting a number of factors including somewhat higher Japanese export production costs, an ageing population, and an expected dip in demand from China and the US. As a result, imports will grow by 7.6% per annum in real terms in 2011-2015, ahead of exports at only 4.7%.
Japan's main export commodities are transport equipment and vehicles. The country's main imports are machinery equipment, crude oil and other raw materials. The country's main export partners are the US, China, South Korea, Hong Kong and Thailand. Japan's main import sources are China, the US, Saudi Arabia, Australia and the UAE. Japan's location on the Pacific Ocean allows it access to the main shipping routes to the west coast of the US, from where goods are shipped overland to the Mid-West and east coast.
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