Taiwan Freight Transport Report Q4 2011

Following a year in which we saw the recovery begin, there will be further growth in 2011, although some freight modes are yet to return to pre-downturn levels.

Total trade is projected to pick up, with our Country Risk desk forecasting a y-o-y increase of 8.45% in 2011 following growth of 26.9% in 2010.

Road freight is to continue to dominate the sector, and is projected to grow by 6.54% in 2011. The sector promptly recovered from the downturn and is projected to continue increasing over the medium term. Direct cross-strait shipping continues increasing and has already cut transport costs by more than US$100mn.

Headline Industry Data

- 2011 air freight tonnage is expected to grow by 3.79%.
- 2011 rail freight is forecast to grow by 6.03%.
- 2011 port of Kaohsiung throughput is forecast to grow by 2.95%.
- 2011 road freight is forecast to grow by 6.54%.
- 2011 total real trade growth is forecast at 8.45%.

Key Industry Trends

Container Lines Buffeted By Rate Declines And High Fuel Prices

Taiwans two major container shipping companies, Evergreen Marine and Yang Ming Marine Transport, were hit by the twin destructive forces of rate declines and high fuel prices in H111. We believe lines should be wary about their bottom lines not just in the second half of 2011, but over the next few years, as mega-vessel ordering creates an ongoing threat of overcapacity.

Growing Cross-Strait Trade And Introduction Of Shipping Restrictions

Maritime links between China and Taiwan are growing. We wrote earlier in 2011 of the first instance of direct trading between the port of Taichung in Taiwan and the mainland. Now cross-strait shipping is to be restricted to Chinese and Taiwanese companies as Chinas Ministry of Transport is looking to enable the domestic fleets to develop further.

Chinese Bids For The Investment At Taiwans Largest Port

China Ocean Shipping (Group) Company (COSCO), the worlds second largest integrated shipping company, has entered into negotiations to invest in a stake at a new container terminal at Taiwans largest port, Kaohsiung. China Merchants Group has also made a bid for the investment, and should either of the two state-owned companies be successful it would be the first investment in a Taiwanese port by a Chinese firm.

Risks To Outlook

The growth forecasts for the countrys freight sector stem from our positive outlook for the Taiwanese economy. The countrys real GDP is forecast to increase by 4.3% in 2011.

An upside risk to our port throughput forecasts comes in the form of Chinese interest in Taiwans ports and expansion projects at its facilities. Downside risk to our freight volumes forecasts stems from the dangers to countrys export growth: should we see a hard landing as opposed to a moderation of economic activity in Chinas economy or a double-dip recession playing out in the US, we would expect net exports to take a harder hit.

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.