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Israel Freight Transport Report Q1 2012
Business Monitor International, Jan 2012, Pages: 46
Business Monitor International's Israel 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 Israel's freight transportation industry.
BMI View: Slower GDP Growth, Mixed Freight Performance
Because of global economic headwinds and lower demand from key export markets such as the US and Europe, BMI are cutting back their growth forecasts for the Israeli economy in 2012 and 2013, with a negative knock-on effect for overall freight transport demand. BMI have reduced their forecast for 2012 GDP growth to 3.4% (following the 4.8% expansion experienced in 2011).
That said, freight volume growth performance will remain varied with some bright spots. Rail freight will lead the way with 5.5% growth, followed by air freight at 4.5%. Tonnage growth at Israel's main ports will be mixed, with Haifa, the country's largest facility, experiencing expansion of 4.6%. These above- GDP rates of expansion will coexist with a less encouraging financial performance: the aviation sector is being punished by high fuel costs, while shipping lines are struggling with low rates.
- Headline Industry Data
- 2012 air freight growth is forecast at 4.5%, following estimated growth of 5.3% in 2011; BMI forecast growth averaging 4.6% per annum to 2016.
- 2012 Port of Haifa tonnage throughput growth is forecast at 4.6%, following estimated growth of
2.3% in 2011, and to average 4.6% per annum to 2016.
- 2012 rail freight tonnage is forecast to grow by 5.5%, following estimated growth of 4.5% in
2011, to average 5.2% to 2016.
- Total trade growth in real terms in 2012 is forecast at 4.4%, and averaging 4.3% to 2016.
Key Industry Trends
Gas Pipeline From Egypt Bombed Again
A reminder of high political risk factors in a region experiencing the 'Arab Spring' upheaval came in the shape of another bomb attack on the gas pipeline linking Egyptian gas fields via Jordan to Israel. Two explosions damaged a section of the pipeline in Egypt: this was the sixth attack since the uprising that toppled the Egyptian regime of Hosni Mubarak in early 2011. Egypt and Israel have signed a 20-year natural gas deal under which Egypt exports gas to its neighbour.
El Al Boosts Q2 Cargo Revenue, But Still Makes Loss
El Al boosted its Q211 cargo revenues by 6% year-on-year to US$51.3mn. However, because of rising fuel costs and the disruption to supplies caused by the Arab Spring, El Al as a whole made a net loss in Q211 of US$19.7mn, compared with a profit of US$14.8mn in Q210. 'The company's expenditure on jet fuel increased largely as a result of the sharp increase - about 47% - in the average price of fuel, compared with in the parallel quarter last year: from 227.4 cents a gallon to 334.6 cents a gallon', the company said.
Zim Integrated Shipping Still Loss-Making
Press comment suggested that because of low freight rates, Zim Integrated Shipping's losses were set to increase further in Q311, after reporting a loss of US$124mn in Q211. The company says that it is hoping to return to profitability soon, but that continued troubles in the world economy and the shipping industry in particular are frustrating its efforts.
Key Risks To Outlook
The downside risk that the global economy could cool further than BMI are expecting remains present. For Israel, the main linkage is with the US and eurozone economies. As in their last quarterly report, the risk remains that growth in these two export markets could be harder hit than BMI are expecting by the combination of sovereign debt worries and financial market nervousness. If this happened, Israel's GDP and freight demand would also underperform.
BMI believe a second downside risk, the volatility of the Middle East region as the 'Arab Spring' upheavals continue, has become heightened since the last quarter. While the October 2011 prisoner exchange negotiated with Hamas helped boost the standing of the Benjamin Netanyahu government in the eyes of domestic Israeli public opinion, the Middle East remains a dangerous neighbourhood for Israel. Concerns include renewed volatility in Egypt, the ongoing violence in Syria and the ever present tension surrounding Iran's nuclear ambitions.
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