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Viewing report
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Israel Freight Transport Report Q4 2011
Business Monitor International, Sep 2011, Pages: 45
BMI View: Growth Still Solid But Global Economy Is A Drag Israel's economy is still set for moderate to strong growth, even though the international climate is becoming more difficult. Demand for Israeli exports is beginning to taper off, so domestic consumption and investment are likely to be the main drivers of expansion. The Netanyahu administration has been shaken by large demonstrations against the high cost of housing; we expect it to react by boosting investment in residential building work.
Political risk factors need to be kept under review. The Middle East remains a volatile region and Israel's relationship with Egypt has become less predictable. BMI forecasts 2011 GDP growth of 4.8% (following the 4.7% expansion in 2010). Our outlook for 2012 is now for growth to ease back to 4.3%. In the five years to 2015 we expect growth to average 4.5% a year.
Freight industry-specific factors are somewhat mixed. High fuel costs have caused El Al temporarily to suspend its airfreight service to Hong Kong, but we are maintaining our growth forecast for air cargo. A spate of attacks on the Egypt-Israel gas pipeline may cause the authorities to develop a floating LNG terminal and rely more on maritime imports of liquid gas. In general, however, we see freight demand moving broadly in tandem with wider Israeli economic growth.
Headline Industry Data
- 2011 air freight growth is forecast at 5.3%, following estimated growth of 10.4% in 2010, and to average 5.0% to 2015.
- 2011 port of Haifa tonnage throughput growth forecast at 2.3%, following estimated growth of 10.2% in 2010, and to average 4.1% to 2015.
- 2011 rail freight tonnes is forecast to grow at 4.5%, following estimated growth of 23.6% in 2010, and to average 5.1% to 2015.
- 2011 total trade growth in real terms is forecast at 6.7%, and to average 4.8% to 2015. Key Industry Trends
High Fuel Costs Hit El Al's Cargo Service To Hong Kong National flag carrier El Al Israel Airlines temporarily suspended its regular cargo flights to Hong Kong owing to a rise in fuel costs. Shali Zahavi, director of El Al's cargo division, announced the company's decision would be reviewed later in 2011. The airline's regular services include six flights to Bangkok, five flights to Hong Kong, four flights to Beijing and three flights to Mumbai on a weekly basis.
Global Operators Interested In Eilat Port Concession APM Terminals from the Netherlands and SSA Marine from the US are among 17 international operators said to be interested in a concession to operate Eilat Port in the Gulf of Aqaba. The tender is scheduled to be launched in late 2011 and will offer the port's entire equity for a 15-year period. Subsequently, the government will have to buy back the port's shares and reimburse investments made during that period.
Attacks On Egypt-Israel Gas Pipeline May Cause Rethink A series of bombing attacks on the Egypt-Israel gas pipeline, together with Egyptian plans to increase the price it charges for gas sales could lead Israel to diversify its sources of gas imports. Israel relies on Egyptian gas to meet 40% of its needs, but it is examining the option of building a floating LNG terminal, which would allow it to import liquefied gas by sea from a wider range of suppliers. The authorities are believed to be looking into the feasibility of a terminal off the coast of Hadera, with a capacity to handle LNG tankers of up to 140 thousand cubic metres (mcm).
Key Risks To Outlook We see two main risks to our freight transport forecasts. The first is the downside risk that the global economy could cool more sharply than we are expecting. For Israel, the main linkage is with the US and eurozone economies. If growth in these two export markets is harder hit by the combination of sovereign debt worries and financial market nervousness, then Israel's GDP and freight demand will also underperform. The second risk is the volatility of the Middle East region as the 'Arab Spring' upheavals continue into the summer and autumn.
In the short term, some of this may actually be an upside risk for freight demand (worries over the unreliability of Egyptian gas supplies might actually lead to an increase in freight demand as LNG tankers are used to bring cargo in from further afield), but on the medium to longer term this is much more of a downside risk as investors could be scared off the region as a whole.
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