United States Shipping Report Q2 2012

We have upgraded our US real GDP growth forecast for 2012 to 2.0% from 1.6%, owing primarily to stronger-than-expected economic activity in Q411. Our overall outlook for the US economy, however, has not changed, and we maintain our outlook for subdued growth at the US main container ports in 2012, on the back of continuing concerns about the health of the US economy. We believe that US private consumption growth will remain subdued and government deficit reduction will weigh on economic activity, while the European crisis poses downside risks to the export sector. We have lowered our expectations for external trade growth in 2012, with real imports now expected to rise by 3.6% and exports by 3.8%. These factors combine to put considerable negative pressure on port throughput volumes.

Key Industry Data

- At the port of Los Angeles (LA) we forecast 4.8% year-on-year (y-o-y) growth in total tonnage in 2012, to reach 66.7mn 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 145.4mn tonnes.

- We expect LA to record growth of 1.02% in twenty-foot equivalent unit (TEU) throughput in 2012 to reach 7.98mn TEUs.

- We expect NY/NJ to record a 3.2% increase in TEU throughput in 2012, to reach 5.7mn TEUs.

Key Industry Trends

Charleston Secures State Dredging Funds, But More Needed To Fill Funding Gap

BMI believes that the proposed dredging works at the US port of Charleston are closer to being realised, with the facility having been awarded state level funding as well as the federal funding allocated in President Barack Obamas 2013 Fiscal Year Civil Works Budget. We caution, however, that other sources of funding will have to be found to come up with the shortfall to finance this expensive and lengthy project, which is unlikely to be finished in time for the expected increase in traffic in the region when the Panama Canal expansion is completed in 2014.

NY/NJ Sees Record Volumes In 2011, Continues Investment To Prepare For 2014

BMI sees another year of growth ahead for the Port of New York/New Jersey (NY/NJ), after it reported record throughput levels in 2011. NY/NJ is currently the east coasts busiest container terminal, due to its location close to the US biggest consumer markets. BMI believes that the port should be in line for an uptick in volumes when the Panama Canals expansion is completed.

Port Of Miami Dredging Project To Face Further Delays On Environmental Concerns

Despite the passing of a bill in support of the Port of Miamis delayed dredging project, BMI believes that the facility still has some hurdles to clear before it can begin works. A group of environmentalists have challenged the project, claiming that it threatens the Biscayne Bay. The challenge means that the port, which is already lagging behind neighbouring facilities in the dredging stakes, could face further delays.

Risks To Outlook

Downside is presented by the expected slowdown in Chinese economic growth, which will damage demand from the US biggest export market. The eurozone is unlikely to be able to pick up the slack, due to the ongoing crisis there.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 box shipping sector could be slower than expected.

On the dry bulk side there is upside potential from the fact that we expect the US to become a net exporter of coal over the medium term as domestic demand slows and Asian demand remains strong. We are already seeing the development of new port facilities on the west coast, such as SSA Marines Gateway Terminal, in order to cater for an expected increase in coal shipments.

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