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.

Our overall outlook for the US economy is that private consumption growth will remain subdued, government deficit reduction will weigh on economic activity, and the European crisis poses downside risks to the export sector, all of which would have negative knock-on effects on port volumes.

We have lowered our expectations for growth in the external sector in 2012, with real imports now expected to rise by 3.8% (from 5.0%) and exports by 3.5% (from 5.0%). This will result in a 0.2 percentage point (pp) drag on headline growth in 2012, with a similar drag expected in 2013. While the US will still run an external deficit, current levels compare favourably to the average 0.4pp drag on real GDP growth in the 1990-2007 period. External demand for US goods and services has been supported by relatively robust growth in emerging market economies, and on the whole, the US has managed to reduce its trade and current account deficits significantly since the pre-crisis era. It has been difficult to assess the impact of the Japanese earthquake and tsunami in March 2011 on global supply chains, but it likely reduced both export and import dynamism in the US and elsewhere in Q211 and possibly into Q311.

Key Industry Data

- At the Port of Los Angeles (LA) we forecast 4.7% year-on-year (y-o-y) growth in total tonnage in 2012, to reach 64mn tonnes.
- At the east coast port of New York/New Jersey (NY/NJ), growth is forecast to be 3.88% y-o-y in 2012, to reach 153mn tonnes.
- We predict growth of 3.6% in air freight volumes, to reach 72bn tonnes-km in 2012.
- We predict growth of 4.1% in rail freight tonnes-km, with annual average growth of 5% during our forecast period.

Key Industry Trends

West Import Volumes Continue To Disappoint

US containerised imports continue to disappoint as shippers keep inventories low due to sluggish consumer demand. Containerized imports at West Coast ports lagged across the board at the ports of Oakland, Tacoma and Seattle. However, export volumes remain strong, continuing a trend we identified at the beginning of what is traditionally the US peak shipping season. However, with imports historically counting for the lions share of West Coast port throughput, we predict tough times ahead for these facilities.

Costly Rail Strike Narrowly Averted

A strike that would have proved very costly for the US economy has been averted, after railroads reached tentative agreements with 12 out of 13 workers unions. While the prevention of a work stoppage is good news for rail freight and for US trade in general, BMI cautions that with US Class 1 railroads posting record profits and powerful transport unions seeking better deals, the threat of further labour unrest in the sector cannot be ruled out.

BMIs Bearish US Air Freight View Continues To Play Out, More Consolidation Expected BMI believes there are more tough times ahead for air cargo carriers in the US and Europe, as volumes continue to nose dive on the back of sluggish consumer demand. American Airlines Cargo is no exception. AMR, parent company of American Airlines and its cargo division, has filed for Chapter 11 in the US Bankruptcy Court. In a difficult operating environment, BMI expects to see more air cargo carriers seeking to merge in order to cut costs and capacity.

Risks To Outlook

BMI believes the main risks to our outlook for US container shipping are on the downside. A bearish consumer outlook, combined with the withdrawal of shipping lines from the transpacific route and cuts to federal funding for port projects mean that growth in the freight sector could be slower than expected. Over the longer term, the expansion of the Panama Canal, due for completion in 2014, presents upside risks to our forecasts for East Coast ports, as well as for railways and road haulers with networks on the East Coast. However, the development presents downside risk for those on the West Coast. In other areas, there is plenty more upside for our rail forecasts, which should benefit from increasing shipments of coal, containerised grains and oil.