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Hungary Freight Transport Report Q3 2011
Business Monitor International, June 2011, Pages: 48
Business Monitor International's Hungary 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 Hungary's freight transportation industry.
The Hungarian economy will experience a recovery in 2011, but it will not be plain sailing. BMI continues to see two big structural problems that will limit economic growth and therefore affect prospects for the freight transport sector. They are a large budget deficit, not unusual in Europe, which will require ongoing fiscal austerity, and high levels of household debt, which will dampen consumer demand. A weak forint also means that exports will make a positive contribution to GDP, but this will be somewhat offset by lower demand from neighbouring Germany, where growth in 2011 will cool off.
With commodity prices elevated across the board and with Brent crude oil prices still above the US$120.00/bbl level, we could see further pressure on imported energy and food prices in Hungary in the coming months. However, we hold to our view that the previous three 25 basis point rate hikes between November 2010 and January 2011 will prove sufficient to temper inflation over the medium term.
While we note that investor sentiment towards the Fidesz administration has improved in the past few months owing to its acknowledgment of Hungary's long-run fiscal problems, the administration's attempts to consolidate power in recent months (particularly by changing the law governing appointments to the monetary policy committee and its attempts to increase state control over private media) are likely to continue weighing on investors' attitudes towards the country's business environment.
Meanwhile, Waberer's, a leading player in the Hungarian and Central and Eastern European road freight markets, sold a 49.25% stake to Mid Europa Partners, a private equity firm. Waberer's exposure to growing freight markets no doubt caught the attention of Mid Europa Partners and despite the Europewide drive to decrease the role of road freight and diversify the transport of goods throughout the region to increase the use of rail and inland waterways, road freight continues to lead.
Headline Industry Data
- 2011 air freight tonnage forecast to grow 1.53% year-on-year (y-o-y);
- 2011 rail freight tonnage forecast to grow 5.22% y-o-y;
- 2011 road freight tonnage forecast to rise 5.18% y-o-y;
- Total trade (real growth) expected to increase 7.05% y-o-y in 2011.
Key Industry Trends
Private Equity Firm Takes Slice Of Waberer's Waberer's is to benefit from investment after a 49.25% stake was sold to a private equity firm. BMI believes that Mid Europa Partners has made a strategic investment in acquiring a stake in Waberer's, as not only does the company operate in a market where we project further growth, but the company also offers a springboard for other freight acquisitions in Central and Eastern Europe.
Express-Interfracht/Schenker Link Up The Hungarian subsidiaries of the Austrian and German logistics companies Express-Interfracht and Schenker would be merged. According to press reports the operation would involve four Schenkercontrolled units and two Interfracht divisions.
New York And Budapest Link Up American Airlines Cargo launched direct services in April 2011 between New York and Budapest. Tristan Koch, managing director of European cargo sales at American Airlines, praised the move, stating that 'this service opens up a new part of Europe for our customers'.
Key Risks To Outlook
BMI believes the main risk to our Hungarian freight forecasts is on the downside and is associated with political risk. The government is treading a fine line between relying on the private sector to invest and develop new freight business, on the one hand, and increasing the tax burden on corporations on the other, in an attempt to raise revenue as a way of tackling its fiscal difficulties. We see a number of scenarios in which this balancing act could go wrong, leading freight operators in eastern Europe to choose to avoid Hungary and locate their hub operations elsewhere.
On the upside, the investment by a private equity company of a 49.25% stake in Waberer's represents positive news for the sector. We believe that Mid Europa Partners has made a strategic investment in acquiring a stake in Waberer's, as not only does the company operate in a market where we project further growth - Over the mid term (2011-2015), we forecast a growth of 21.9%, which if realised will see Hungarian road freight volumes recover back to pre-downturn levels in 2012 - but the company also offers a springboard for other freight acquisitions in Central and Eastern Europe.
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