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China Freight Transport Report Q1 2012
Business Monitor International, Dec 2011, Pages: 69
Business Monitor International's China 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 China's freight transportation industry.
BMI expects continued growth in China's freight transport sector as it continues to benefit from the country's demand for minerals and raw materials. BMI expects Chinese ores and metals imports to slow from 2011's estimated 25.4% year-on-year (y-o-y) growth in value, but BMI still expect strong demand, with a 16.3% growth in imports predicted in 2012. BMI also expect sustained demand for the coking coal used in the steel production process. In 2010, Australia, China's biggest coal supplier, exported 155mn tonnes (mt) of coking coal. The US, the next biggest exporter of coking coal, shipped 51mt. BMI forecast that Chinese demand will outstrip domestic supply, resulting in a shortfall that will have to be met by importing coal from Indonesia, Mongolia, Australia and other coal exporting nations. In 2010 Australia, the world's biggest coal exporter, exported 143mt of the steam coal used in electricity generation, while Indonesia exported 160mt.
However, while BMIs demand outlook remains positive, BMI caution that the possibility of a slowdown in Chinese economic growth presents a considerable downside risk to this. BMIs core view on Chinese growth is that BMI are past the boom phase and are entering a period of much weaker expansion, with headline real GDP growth set to fall to 7.5% by 2013. While not an outright collapse, sub-8.0% growth is a concern. The main reason BMI are calling for a sharp slowdown is their belief that the country's investment boom has involved a serious misallocation of capital, and as a result is finally set to be unwound in the near term. Among the recent examples BMI have seen are the boom and bust of high-speed rail as well as the loss of momentum in the housing market, which suggest that the boom is coming to an end. This slowdown in growth is likely to affect demand for the raw materials and minerals shipped on the country's freight transport network, leading to a reduction in volumes. BMI could also see a reduction in investment in the country's freight transport network.
Headline Industry Data
- 2012 air freight tonnage is expected to grow by 7.8%.
- 2012 rail freight is forecast to grow by 5.7%.
- 2012 Port of Shanghai throughput is forecast to grow by 5.4%.
- 2012 road freight is forecast to grow by 6.6%.
Key Industry Trends
Landbridge Going Both Ways With BMW Germany-China Auto Parts Deal The development of the Asia-Europe Landbridge scheme has received a boost, with a major question surrounding the scheme's viability to function not only as a link for trade from Asia-Europe, but as a conduit for goods from Europe to Asia, being answered: BMW is to use the rail link to meet its logistic requirements to supply its China assembly plant with auto parts from Europe.
China Rising To Coal Supply Chain Challenge
BMI have previously highlighted the fact that the main drivers of development in the coal supply chain are the coal miners, who stand to benefit the most from a congestion-free and reliable export network. However, as a major consumer of coal - China ranked as the world's second largest importer of coal in 2010, according to IEA data - the country has an interest in ensuring that the raw material can reach it easily. As such, BMI believe that it is set to become more involved in global coal transport projects.
New Yangtze River Port To Capitalise On Growing Inland Trade
Singapore-listed Keppel Telecommunications & Transportation (KTT) and Hong Kong-listed Sinotrans have established a joint venture (JV) to build and operate a river port at the Chinese city of Wuhu, located on the Yangtze River in Anhui Province. BMI believes the location of the port and the trend of Chinese manufacturing moving further inland will guarantee the JV's success.
Risks To Outlook
Risks to China's freight transport sector are primarily to the downside, with our growth projections for all modes contingent on the strength of the country's international trade volumes. The increasingly bearish outlook for the US consumer threatens to dampen US demand for Chinese imports, which will in turn slow down Chinese economic growth. As a result there is a possibility that BMI could see a slowdown in Chinese demand for raw material imports, leaving the Chinese freight transport sector with weakening volumes.
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