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Egypt Shipping Report Q1 2012
Business Monitor International, Nov 2011, Pages: 129
Business Monitor International's Egypt Shipping Report provides industry professionals and strategists, corporate analysts, shipping associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Egypt's shipping industry.
As we go into 2012 the key factor affecting the wider Egyptian economy, and the ports and shipping sector, is political uncertainty. After the collapse of the Mubarak regime in early 2011 there are still many question marks over the future of the country: BMI believes Egypt is a country which combines strong medium- to long-term growth potential with significant short-term risks. The short-term negatives include a deteriorating security situation, uncertainty over the November elections, uncertainty over the role of the military, and worries over religious and ethnic tensions. In terms of the economy the fiscal deficit is growing, policy is uncertain and a new financial rescue package, preferably from the IMF, is anxiously awaited. In contrast to the long term state of Egypt's economy, with a population of 80mn that is under-banked, under-housed and in need of major infrastructure investment; there is a major opportunity for growth and development particularly if the country can find a path to stable democratic rule.
Looking specifically at the ports and shipping sector, increasing militancy by dock workers has been an important issue. Strikes at El-Dekheila and Sokhna broke out in September/October 2011, and more stoppages over wage demands and other issues look likely. On the upside, with GDP growth in 2011/12 expected to rise to 2.6% from 0.5% in 2010/11, BMI expects to see some growth in cargo turnover.
Headline Industry Data
- 2012 total tonnage throughput at Damietta is forecast to grow by a subdued 1.4% to 29.727mn tonnes, and to average 1.7% per annum to 2016.
- 2012 East Port Said container throughput growth forecast at 11.2% to reach 2.887mn 20-foot equivalent units (TEUs), and to average 11.5% to 2016.
- 2012 Egyptian trade real growth forecast at 8.4%, and to average 9.1% over the medium term.
Key Industry Trends
Trouble On The Docks
El-Dekheila - Egypt's Mediterranean Port of El-Dekheila, near Alexandria, was hit by work stoppages, sit-ins and hunger strikes in early October as workers and trade unions protested over wage levels and reductions in profit sharing. Although a return to work was agreed, BMI notes that the ports sector is being caught up in the general wave of labour militancy sweeping the country.
Sokhna - After a five-day strike in September DP World, the operator of the Port of Sokhna resolved the dispute with the offer of hardship payments. Workers had walked off the docks in protest over low pay, and mistreatment of employees. According to the port's monthly throughput data, container throughput for the first four months of the year declined by 21% y-o-y. BMI expects volumes to have picked up since then.
No Trouble On The Suez Canal?
BMI continues to believe that it is unlikely that strike action or protests will be allowed to affect the Suez Canal. The reasons for this is that Egypt's interim military-lead government will not let anything disrupt the Canal's operations for domestic reasons (the canal is a major revenue earner for Egypt) and due to international pressure (the canal is the major gateway for seaborne trade from Asia to the West). The Suez Canal Authority revenues increased by a record 11.3% y-o-y to US$5.05bn in the 2010/11 fiscal year, which is attributed to a surge in global shipping activities. However, BMI notes that industrial action at ports at the entrance, exit or along the canal could affect not only Egyptian shipping, but could cause backlogs for international shipping, as ports along the canal are used for transhipment and bunkering.
Key Risks To Outlook
Egypt continues to be volatile and it is still difficult to say what form of government will emerge once the transition period is over, providing upside and downside risk to BMI's port throughput forecasts. Unfortunately in the short term, BMI believes the balance of risk is definitely on the downside. The two major threats are further political upheavals, strikes and demonstrations which disrupt normal port activities, and on the other hand, the possibility of a sharp downturn in economic activity if the government fails to get a grip on the deteriorating fiscal and financial situation. Both these scenarios pose serious downside risks for the country's ports.
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