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Colombia Freight Transport Report 2012
Business Monitor International, Dec 2011, Pages: 41
With GDP set to grow by 4.5% in 2012, according to forecasts, BMI's outlook for Colombia's freight transport sector is broadly positive, although they caution that much more investment in infrastructure is needed to enable the country to handle its increasing mining output. BMI expects growth in both imports and exports. Oil exports should continue to provide the bulk of export revenues as Colombia ramps up production. With production increasing from 742,000 barrels per day (bbl) in January 2010 to 927,000 bbl/day in May 2011, Colombia's target of 1mn bbl/day by the end of 2011 should be comfortably achieved.
Coal exports have remained steady, although BMI outlines some risks to this. The mining industry analysts expect the US, which currently sources 75% of its coal exports from Colombia, to become a significant coal exporter by 2015, suggesting that Colombia will have to find new markets for its coal exports if it is to avoid losing out.
BMI’s view of consumer-led growth in Colombia means that rising imports will continue to weigh on the goods trade surplus. Domestic demand is stronger than ever in Colombia, with vehicle sales soaring, posting a 52% year-on-year (y-o-y) rise for the first four months of 2011 as the country's burgeoning middle class and private sector credit growth continue to stimulate household consumption, boosting imports of containerised goods.
Key Trends and Developments
Badly Needed Investment Coming Barranquilla's Way
BMI sees upside risk to the forecasts for the Colombian port of Barranquilla, which is in line for significant investment in 2012. This is good news for the port, which serves Colombia's main industrial zone but is badly in need of modernisation.
Vertical Integration Trend Continues As Cerrejón Unveils US$1.3bn Investment Plan
The three companies behind Cerrejón (Anglo American, Xstrata and BHP Billiton), Colombia's biggest coal mining project, have approved a US$1.3bn expansion plan for the mine, including significant upgrades to its freight transport infrastructure. The announcement reflects BMI's long-held view that mining companies in emerging markets will invest increasingly in vertical integration of their supply chains as local funding of infrastructure proves inadequate.
South Korea Warms To Colombia As It Seeks Access To 'Second Cerrejón'
Colombia is continuing to attract Asian investment in its port and freight infrastructure as rapidly growing economies seek to secure access to the Andean nation's vast reserves of coal by developing its transport links. BMI has already seen China express its interest in developing Colombia's coal hauling rail network. Now South Korea looks set to make its first major investment in the country as it seeks to ensure access to a coal mine that is being billed as a 'second Cerrejón'.
Risks to Outlook
Colombia suffers from an infrastructure deficit because its economic development has far outpaced investment in its infrastructure. This needs to be rectified if the country is to handle its increasing mining output.
A second downside risk comes from the possibility of a hard landing in China. This would result in reduced demand from the Asian country for the raw materials and minerals which Colombia exports.
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