Saudi Arabia Freight Transport Report Q3 2012

The outlook for Saudi Arabia is currently a strong one. The country benefited from elevated oil prices through 2011 and the government, influenced by the Arab Spring which has toppled regimes in other regional countries and destabilised others, is pumping some of the surplus from this into a massive stimulus package. The infrastructure investment and higher disposable incomes this will cause will help growth continue at the countrys maritime ports, and in air, rail and road freight. Specific investments in expanding these maritime facilities, and in projects such as the Saudi Landbridge and the North-South railway, will further boost volumes. Headline Industry Data

Total Saudi Arabian trade set to increase 2.8% in 2012 in real terms, with imports growing 6.0% but exports forecast to contract by 0.4%. Real trade growth will average 2.7% to 2016.

Air freight volumes set to grow 4.8% in 2012, to reach 639,664 tonnes. Growth to 2016 to average 3.6% per annum.

2012 Jeddah Islamic Port total tonnage throughput growth forecast 12.5%, and to average 3.9% per annum to 2016.

2012 rail freight volumes forecast to grow by 6.3% in 2012 and to average 2.7% over our forecast period. Key Industry Trends North-South Railway To Commence Operations In July Saudi Arabias North-South Railway, developed by state-owned Saudi Arabian Railway Company, is scheduled to commence mineral operations in July 2012. The 2,400 kilometre (km) railway will be entirely operational in July 2013, with passenger services to commence in July 2014. Saudia Focuses On Africa Saudi Airlines Cargo (Saudia) has continued its Africa expansion, this time increasing its connections to Chad. BMI believes that Saudia, and Middle East carriers in general, will focus their 2012 expansion plans on the region.

It remains relatively niche and so lacks the high level of competition that plagues other routes. Africas air freight sector continues to grow, and it is one of the safe haven markets for the industry. The region is also relatively close to the Middle East carriers hubs. JIP Seeks Metals Hub Status BMI believes that if the Saudi Arabian Jeddah Islamic Port (JIP) lists itself as a delivery point for the London Metal Exchange (LME), there could be serious upside risk to our forecasts for the facility. Furthermore, Jeddah could turn into a key metals hub. Key Risks To Outlook A major risk to our outlook would come from a major downturn in the West. We are already projecting an economic contraction of 0.5% in the eurozone in 2012. If this intensified and the demand for oil was reduced, it would hit our macroeconomic forecasts for Saudi Arabia. However, we currently expect high oil prices to continue in 2012, not least from sanctions against Iran which preclude the EU and US from importing Iranian crude, increasing demand for Saudi volumes.

Iran is the source of another threat to our outlook: if the pariah state were to go through with its threats to try and close the Strait of Hormuz it would impact Gulf ports such as the Port of Dammam. Equally, were Israel to unilaterally strike against the Islamic Republic it could greatly increase regional instability which would affect volumes through Saudi ports. Risks to the upside for our forecasts come from Saudi Arabias significant infrastructure investment programme, the Landbridge in particular. This offers upside to our forecasts for the Jeddah and Dammam ports. Jeddahs application to be a metals hub for the London Metals Exchange also offers upside potential to the facilitys tonnage throughput. More immediately, if the North-South railway begins freight operations in July, as is scheduled, then it will present considerable upside risk to our rail freight forecasts for Saudi Arabia.

The price of this market report covers 4 quarterly reports on this sector. This quarterly report will be downloadable instantly as a PDF document, with the 3 remaining reports delivered at regular intervals throughout the year.