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Having benefited from the economys strong growth, particularly in the first half of 2011, the Turkish ports and shipping sector is likely to be affected by a GDP slowdown in 2012. BMI has revised down its forecasts for Turkey, taking note of continuing domestic inflationary pressures, a precarious balance of payments position, and deteriorating global economic conditions, particularly in the eurozone, an important trade partner. Political risk also remains high, not least because of the continuing violence in neighbouring Syria. BMI now estimates 2011 GDP growth of 7.0%, falling sharply to 1.8% in 2012 (a reduction on our previous 2012 forecast of 4.5% GDP growth).

In terms of industry specifics, we are still projecting reasonable growth at Turkeys main ports, with throughput still expanding but generally at a slower rate than in 2011.

Headline Industry Data

- 2012 Port of Ambarli general and liquid bulk cargoes tonnage throughput forecast to grow 12.6% to 4.55mn tonnes; over the mid-term we project an average annual 11.6% increase.

- 2011 Port of Ambarli container throughput forecast to grow by 8.2%; over the mid-term we project average annual growth of 7.8%.

- Turkeys 2011 total trade growth forecast at 5.7% (down from an estimated 8.3% in 2011).

Key Industry Trends

Turkey Trade Routes To Bypass Syria

As the violence in Syria continues and Damascus-Ankara bilateral relations continue to deteriorate, Turkish economy minister Zafer Caglayan said the country was developing new trade routes to bypass Syria. These include a maritime route via Egypt and an overland route via Iraq. In 2010 Turkey had a trade surplus with Syria, exporting goods worth a total of US$1.8bn to its neighbour in 2010, while imports from Syria were US$663mn, accounting for only 0.3% of Turkeys total imports.

Prospects For New Mersin-Alexandria Shipping Route

Although prompted by the situation with Syria, the launch of a new shipping service between Turkeys Mersin port and Alexandria in Egypt may reflect longer term changes in Turkish trade. The shipping service further highlights Turkeys increasing interest in the MENA region, something BMI first drew attention to in September 2011, when Turkeys Prime Minister Recep Tayyip Erdogan visited states in the region that had experienced significant political turmoil during the Arab Spring. Egypt was Erdogans first port of call on a trip that included visits to Tunisia and Libya and was interpreted as a move to foster Turkeys regional influence. We expect Turkey to continue to diversify and strengthen its trade and investment linkages away from the West towards the more vibrant emerging markets in the Middle East, as well as the Commonwealth of Independent States (CIS).

Botswana Coal Deal Will Boost Shipping Demand

According to press reports in December 2011, Turkey was close to a deal to buy coal from Botswanas Morupule Colliery. If confirmed, a sales agreement could boost dry bulk shipping demand on an East Africa-Mediterranean route. The mines marketing manager Jonathan Vergeer said: We have found a niche market in Turkey and we are looking to export through Mozambique. During a recent conference in Mozambique, we looked at both Maputo and Matola ports. The current rail and port infrastructure can support between 1.5 and 2mn tonnes of coal exports per annum through Mozambique.

Key Risks To Outlook

Since our last quarterly report, when we believed that the key risks to our Turkish ports and shipping forecast were evenly balanced, we have moved to a somewhat more bearish view. We now believe downside risks are more prominent. BMI does not exclude the possibility of a hard landing for the Turkish economy, given the combination of ongoing inflationary pressures, a weak balance of payments, and a slowing global economy. In that scenario, demand for shipping services would be negatively affected. In the medium term, upside risks remain present: it is possible, for example, that Turkeys role as a shipping hub in the Eastern Mediterranean will develop faster than we expect.