Israel Shipping Report Q1 2011

On a global level, we see risks to all three core-shipping sectors (container and dry and liquid bulk), with overcapacity and a drop in demand continually threatening to push down rates and impinge on lines profits.

We see growth returning to the Israeli ports sector, and expect that the two major Israeli ports of Ashdod and Haifa will both return to positive figures this year following last years contraction, and we expect them to continue to grow through our forecast period.

We also expect Israeli trade to continue to grow this year. Israels private final consumption dominates the countrys GDP, accounting for an estimated 56.1% of total GDP in 2010. This share is expected to remain fairly static over the long term, with our country risk desk forecasting the countrys private final consumption to average 56.2% per year in the long-term forecast period. This further supports our positive demand outlook, with us typically favouring private-consumption-orientated economies over trade-reliant states because of their expected greater resilience to global demand weakness.

Headline Industry Data

2011 Port of Ashdod tonnage throughput forecast +2.5% following projected growth of +24.7% in 2010.

2015 Port of Haifa throughput expected to reach 1.52mn 20-foot equivalent units (TEUs).

Port of Haifa tonnage throughput expected to grow by an average of 4% per annum over 2011-2015.

Key Industry Trends

Shipping lines add new services - a number of international shipping lines, including Panalpina and MSC, as well as Israels own Zim, have added new services connecting with Israel to their schedules. New Carmel terminal opens at port of Haifa - the facility will enhance the nations ports sector, but we maintain our view that it will be largely used to cater for the domestic Israeli market. This is despite Haifas ideal location as an entry point from the Mediterranean to the Levant.

Zim - The line has been busy over the quarter, introducing a number of new services following its recent return to the black.

Key Risks To Outlook

Israel is susceptible to the global economic slowdown, especially to economic developments in the US where the economy continues to recover sluggishly and unemployment remains high.