TOP 10: Emerging Logistics Markets 2012
TOP 10: Emerging Logistics Markets 2012
Transport Intelligence has published its annual ranking of the hottest emerging markets in global logistics, which compares 39 up-and-coming countries and identifies a series of key attributes that make them attractive for investment. “It is clear that emerging markets are playing an increasingly important role in global supply chain strategies as manufacturers look to the next wave of low cost production locations,” explains John Manners-Bell, chief executive officer of Transport Intelligence. “However, investors need to be cognizant of the specific challenges which exist in each market as well as the opportunities. Our index enables companies to differentiate between those markets which offer immediate potential and those which will take much longer to develop.”
Down two places from last year’s index, Mexico’s economy still expanded 1.34 per cent in the third quarter of 2011. Gross Domestic Product expanded between approximately 3.5 per cent and 4 per cent, down slightly on August 2011 estimates which forecast that growth would be in the vicinity of 3.5 per cent to 4.5 per cent, reports Bloomberg. But with Business Monitor International (BMI) forecasting airfreight tonnage to average annual growth of 7.67 per cent up to 2015, and total tonnage from the shipping ports of Manzanillo and Vercruz expected to achieve 5.71 per cent and 9.11 per cent annual growth respectively to 2015, the Central American country’s logistics future looks promising. A key consideration over the coming months will be the cost of fuel and still wary sentiment of the consumer. Whilst consumer confidence has made a recovery, there is still reportedly a gap between external and domestic demand, reports BMI.
Retaining the number nine spot for the second year running, Chile continued to experience strong domestic demand in 2011. According to BMI, Chile’s strong consumer demand continues to drive container traffic at its ports, with the Port of Valparaíso forecast to experience an average growth of 14 per cent over the next five years, whilst rail freight tonnage is forecast to grow 4.6 per cent during the same period. Latin American air freight continues to outperform developed markets with Lufthansa Cargo’s strong tonnage growth in the first six months of 2011 mainly attributable to strong growth in the Americas. In terms of risks, BMI observes some speculation over the threat of the Chilean economy overheating. Though policy makers continue to address economic issues as they arise, political tension remains an issue.
Jumping three places from last year’s index, Malaysia was the biggest mover in the top 10, moving from 11 to eight. According to BMI, although the global economic recovery could potentially stall, Malaysia’s domestic demand is likely to remain resilient, based on a tight labour market and the government’s desire to boost its popularity in the run-up to national elections expected by 2013. Malaysian GDP growth of 4.2 per cent is predicted in 2012 by BMI, down from 4.8 per cent in 2011. The freight sector is, however, expected to see above-GDP rates of cargo growth in 2012, influenced by the domestic economy, intra-Asian trade, and the expansion of energy demand across the Malaysian economy. According to BMI, rail freight volume is projected to rise 6.6 per cent to 5.83 million tonnes in 2012.
Unmoved in 2012, Russia again placed seventh in the emerging markets index. Following a year which saw increasing volumes, according to BMI’s estimates, 2012 will signal further growth, with some freight modes continuing a recovery of their pre-downturn levels. Total trade is forecast to grow, with BMI’s country risk desk predicting a year-on-year (y-o-y) increase of 6 per cent in 2012. Road freight is set to continue a domination of the sector and is projected to grow by 2 per cent in 2012. BMI projects that rail, the second busiest freight mode, is also on the way to achieving its pre-downturn volumes, which are expected to be reached by 2015.
Falling one place from last year’s index, Indonesia retains its place in the top 10. In terms of freight demand, BMI’s overall outlook is dependent on the performance of the Indonesian economy in 2012. BMI remains relatively bullish on this point, believing that the economy is resilient enough to resist increasing global economic headwinds. BMI now forecasts 2012 GDP growth in Indonesia of 5.8 per cent (following the 6.3 per cent expansion experienced in 2011). Its outlook for 2013 is for growth to accelerate again to 6.2 per cent. Industry-specific factors also remain broadly positive. Investment interest in modernising the country’s port, road and rail infrastructure is gathering strength. BMI observes that if the government can reduce red tape and political risk, a series of major projects may go ahead over the next couple of years. Air freight volumes are forecast to grow by 6.6 per cent in 2012.
5) United Arab Emirates
Jumping one place to five, the UAE continues to appeal to investors, but may face some tough challenges in 2012. While BMI predicts GDP growth to hit 3.3 per cent this year, the recent deterioration of global financial markets and downward revisions to a host of growth forecasts in Europe, Asia and the Americas, underpin their view that the UAE economy will be hit by global headwinds. In the near term, bright spots include the tourism, hydrocarbon and industrial construction sectors. BMI notes that it is important to keep in mind the underlying structural weaknesses, such as a large real estate and debt overhang, which continue to hold back more robust rates of economic expansion. Weaker growth among the country’s trading partners in particular, could have a negative effect on the country’s exports over the midterm states BMI, especially if a double-dip recession in “the west” becomes a reality.
4. Saudi Arabia
Retaining fourth spot from last year’s index, Saudi Arabia continues to grow at levels the envy of developed economies. Over the past year, Saudi Arabia has benefitted from elevated oil prices, whilst pumping some of its surplus into a massive stimulus package. The infrastructure investment and higher disposable incomes this will generate, BMI states, will help further growth at the country’s maritime ports. Specific investments in expanding maritime facilities, and in projects such as the Saudi Landbridge, is expected to boost throughputs. BMI predicts rail volumes are set to rise on the back of the Landbridge and the North - South Railway, while air freight volumes are being boosted by the continued expansion of national carrier Saudia. BMI notes however, that a slowdown in growth in China, and the continued economic crises in “the west” pose a significant challenge.
Steady at three again this year, BMI believes 2012 will be another year of strong growth for Brazilian freight transport, but cautions that there are a number of risks to their outlook, including the infrastructure deficit and signs of economic overheating. BMI notes that Brazil’s freight transport network has not developed the infrastructure needed to handle increasing throughput levels, causing delays and increased costs for shippers. As such, BMI expects to see more investment in infrastructure, both public and private, as ports seek to deal with growing traffic and to capitalise on trade opportunities. BMI notes that Brazil has some of the lowest saving rates in the region and growth in real average incomes has been slowing for some time. These factors could point to the possibility of a slowdown in consumer spending, it observes.
Unmoved from last year, India holds on to position two in 2012. BMI observes that India’s economy and trade continues to expand rapidly, but that this growth is expected to gradually slow over the next few years. BMI notes that the volumes of dry bulk and containers being processed at the country’s facilities are causing congestion at the ageing state-owned ports. Positively, this is leading to a raft of new private facilities being established all over the country, of which these new ports are now benefiting from increased inter-modal links with India’s rail network.
Stable at number one and unlikely to be pipped soon, China remains a powerhouse of the emerging markets scene. In 2012, BMI (Business Monitor International) expects continued growth in China’s freight transport sector as it continues to benefit from the country’s demand for raw materials. And whilst BMI expects Chinese ores and metals imports to slow from 2011s estimated 25.4 per cent year-on-year (y-o-y) growth in value, it still expects strong demand, with a 16.3 per cent growth in imports predicted. However, while the outlook remains positive, BMI cautions that the possibility of a slowdown in Chinese economic growth presents a considerable downside risk. Their view on Chinese growth is that China is past the boom phase and entering a period of much weaker expansion, with headline real GDP growth set to fall to 7.5 per cent by 2013.