Taiwan Freight Transport Report Q3 2009

Taiwan-based container shipping company Evergreen Marine Corporation (EMC) reported a net income of TWD639.26mn (US$18.8mn) for 2008, down from TWD10.38bn (US$305.3mn) in 2007. The plunge in profits was primarily attributed to a decline in freight rates. The company also witnessed a slump in container volumes on the back of the ongoing economic slowdown. Revenue declined by 19.4% year-on-year (y-o-y) to TWD22.43bn (US$659.6mn) in 2008, as compared to TWD27.84bn (US$818.7mn) in 2007. EMC, a fully-owned subsidiary of Evergreen International Corporation, is one of the world's largest international shipping companies, with an available fleet of 108 container vessels, of which 92 are owned and 16 are on long-term charter. The combined capacity of these ships is 305,694 twenty-feet equivalent units (TEUs), with a gross dead weight of 4.208mn DWT. It has created a number of strategic alliances with partners worldwide through slot charters, slot exchanges, and joint services.

About 40% of the company's revenue comes from US-Asia routes, with less than 40% from Asia-Europe.

EMC said in mid-February that it would hike freight rates on its Asia-Europe routes by US$300 per TEU from April 1, which is the first rate hike in the industry in more than a year.

In the latest Taiwan Freight Transport Report, we predict that despite a sharp recession this year, cross-Straits traffic will be an important factor contributing to medium term freight transport traffic growth, which should average 1.4% over the 2009-2013 period. The rush of business towards the mainland affects all freight transport modes. The move is something of a mixed blessing for air freight, as we think Taiwan will, on the whole, lose business to China’s emerging airport hubs. We thus forecast Taiwan air freight growth of a low 1.7% over the next five years. In the field of shipping, competitive pressures exist, but we are predicting that sea freight carried will grow by 1.8% per annum over the next five years nonetheless. In our view, Taiwan-based shipping lines are somewhat ahead of the game, having established themselves as global players. Road freight traffic on the island will achieve average growth of 0.9%. In this area, Taiwan resembles a developed economy where traffic growth tends to trail, rather than lead, GDP expansion. We are also predicting rail cargo growth at around 1.0% per annum.

The report gives Taiwan a composite score of 50.2 (out of a potential maximum of 100) in its Freight Ratings Index. The country’s strengths are quite evenly distributed across long-term economic and political risk, infrastructure growth, and the regulatory environment. Areas for potential improvement include the competitive environment, freight growth, and the transport intensity index – a measure of the current and future dynamism of foreign trade.

In view of the current global downturn and the competitive challenge from the mainland, we project low to moderate growth for Taiwan’s freight transport industry. The total value of transport and communications GDP should rise to US$30.8bn in nominal terms by 2013, representing 7.2% of Taiwan’s GDP.