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Canada Freight Transport Report Q1 2012
Business Monitor International, Nov 2011, Pages: 47
Business Monitor International's Canada 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 Canada's freight transportation industry.
BMI are forecasting real GDP growth in Canada of 1.8% in 2012, a downgrade from their previous forecasts of 2.9%. While the economy showed signs of a slowdown in H111, with real GDP growth estimated to have come in at just 1.0% quarter-on-quarter annualised in Q211 (the slowest since Q309) compared with 3.7% in Q111 - BMI believe there will be a modest pick-up in H211 led by business investment and despite a potential slowdown in consumer activity.
Canada's external accounts will continue to be buffeted as a strong dollar pushes up imports, even as global demand for commodities maintains an elevated level of exports, both of which bode well for the country's port sector. Although BMI expect domestic consumption growth to slow, the strong dollar should maintain a high level of imports. A strong dollar would otherwise be bad for exports, but BMI note that its strength is partly due to high commodity prices; around 50% of Canadian exports are related to natural resources, including energy and metals. BMI expect external demand for commodities to remain strong. Both imports and exports should increase by 4.0-4.5% in 2012.
Headline Industry Data
- 2012 Port of Vancouver tonnage throughput is forecast to grow 3%. Over the medium term, to 2016, BMI project a 2.6% increase.
- 2012 air freight tonnes/km to grow 0.77%, with average growth of 0.5% during their forecast period.
- 2012 rail tonnes/km to grow 5.9%, with average growth of 5.1% during their forecast period.
- 2012 road freight tonnes to grow 6.3%, with average growth of 5.4% during their forecast period.
Key Industry Trends
US Ports Losing Out To Canadian Neighbours Due To Harbour Tax
With the outlook for the US peak shipping season remaining cautious, the country's ports are growing increasingly concerned about the business they are potentially losing to their North American neighbours. Shippers seeking to avoid the Harbour Maintenance Tax are sending their cargo via Mexican or Canadian ports, putting further pressure on US facilities which are already seeing import declines as consumer sentiment remains sluggish.
Canadian Rail Freight Going With The Grain BMI believes Canadian Pacific is well placed to benefit from increasing Canadian exports of both oil and grain. Canadian Pacific is spending US$300mn to improve its northern mainline across the Canadian Prairies to ensure it copes with anticipated strong exports of potash and grains.
Risks To Outlook BMI's positive outlook for the Canadian economy indicates a strong base for growth within the country's freight transport sector. Volumes will be driven mainly by exports, boding well for ports and the shipping sector. Real GDP is forecast to increase by 2.3% in 2011.
On the downside, any significant slowdown in the US recovery would be highly negative for Canadian business confidence, commodity prices, and exports, and therefore for the transport sector. Similarly, although exports to Asia Pacific countries increased in 2010, a significant slowdown in Chinese demand would be negative for commodity prices and Canadian exports and therefore presents potential downside risk to their forecasts.
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