BMI holds a positive view on Thailand's logistics and freight sector over the medium term as strong domestic demand and an equally robust manufacturing outlook as well as increased interest from major players in the freight transport and logistics sector is set to drive the development of this market.
Major Global Players Expanding
Logistics giant DHL and air freight operator Emirates SkyCargo are the latest global players to announce that they are increasing their exposure to Thailand's freight transport and logistics sector. DHL has announced that it will spend US$63.83mn on developing its business in Thailand over the next two-and-a-half years. The company is also seeking to expand its operations in Thailand's automotives and retail sectors, too.
Emirates SkyCargo is increasing its exposure to Thailand's air freight market with the launch of a new service to Phuket offering bellyhold cargo capacity of 13 tonnes. Phuket is Emirates SkyCargo's second destination in Thailand, the company already connects Dubai with Bangkok four times a day. The Phuket service brings the company's weekly capacity to Thailand to more than 640 tonnes and will cater meat, spare parts, diving equipment and office supply imports and fish exports.
|World Bank Logistics Performance Index (Asia)|
BMI classes Thailand as an emerging logistics and freight market and therefore the country is developing from a relatively low base offering growth opportunities for logistics and transport companies. According to the World Banks' Logistics Performance Index (LPI), which in 2012 graded 155 countries on their logistics sector's performance, Thailand was ranked 38th. In comparison with 13 regional peers the country ranked in ninth place, below Malaysia, but above India.
Developing Consumer To Drive Imports
Thailand's imports and internal freight demand is being driven by an expanding economy fuelled by a young and growing population. In 2013, we forecast the country's real GDP growth to strengthen y-o-y up from a projected 4.3% in 2012 to 4.4% in 2013. Over the medium term (2013-2017), we forecast the country's economy to expand on average by 4.3%, a stronger growth outlook when compared with the previous five years when the country's real GDP y-o-y percentage averaged 2.5%.
|Stronger Medium Term Growth Dynamics|
|Thailand Real GDP % Change y-o-y Average|
BMI highlights that consumer demand looks set to be robust. The country's population is forecast to expand by 1.3mn people over the medium term to reach 70.5mn in 2017. Consumer demand will benefit from the country's low unemployment outlook, forecast to average just 1.7% of the population in the medium term and both consumer demand and the country's manufacturing outlook will be boosted by the country's youthful customer and employee base with over 70% of the country's population classed as active.
These factors will drive imports, with BMI forecasting the country's imports to grow by 5.22% on average per annum over the medium term.
Major Textiles Exporter
The country's exports are being driven by Thailand's growing manufacturing sector. Textiles and footwear dominate the country's exports. The country is set to benefit substantially from the growth in intra-Asia trade, with Thailand's top five export partners all located in Asia. Exports will steadily benefit from the free trade agreement that ASEAN, of which Thailand is a member, signed with China in 2010.
Over the medium term we forecast Thailand's exports to grow on average by 5.3% y-o-y.
All Freight Modes To Benefit
All transport modes will benefit from Thailand's growth outlook. At the country's largest container port, the port of Laem Chabang, we forecast box volumes to increase by 6.2% over the medium term to reach 8.4mn TEUs. Thailand's air freight volumes are projected to grow by 4.4% over the medium term forecast period to reach 1.88mn tonnes in 2017.
|Maritime And Air Freight To Benefit|
|LHC: Port Of Laem Chabang Container Throughput (TEUs). RHC: Thailand Air Freight ('000 tonnes), 2007-2017|
The country's internal freight network will also benefit, with DHL set to be a major force for development in this area. As part of its US$63.83mn investment in Thailand, mentioned above, the company is seeking to address the potential problem of a shortage of truck drivers by offering benefits and training, the company has already managed to boost its headcount to 9,500 in the last three years.
Retail A Major Logistics Demander
Thailand's freight transport and logistics demands are set to be dominated by the retail sector. As highlighted textiles are a major export for Thailand and this is set to remain the case. The country is also an exporter of fish and, according to our Food & Drink team's forecasts, the country's food and drinks exports are forecast to grow by 58% over the medium term.
The country's domestic consumer outlook will also play a role in the retail sector's demand for supply chain options. While making up a smaller percentage of the country's net trade balance the country's demand for food and drink imports is increasing. Over the medium term our Food & Drink team forecasts it to grow by 64%.
Autos Supply Chain Requirements Expanding
Autos is another consumer-driven market, which BMI highlights will require Thailand's logistics sector to grow at the same pace, if its supply chain needs are to be met. The ramp up in autos production in the country continues with a growth of 44.3% projected over the medium term.
Domestic demand for autos is also increasing, an indicator of a growing consumer market, with Thailand's auto sales forecast by BMI's Automotives desk to increase by 52% over the medium term.
|Driving Up Logistics Demand|
|Thailand Vehicle Sales (Units) and Thailand Vehicle Exports (Units)*, 2000-2017|
Freight transport and logistics firms will not only be required to meet the domestic logistics needs of Thailand's autos industry, but also need to keep up with the country's growing automotives export market, with the volumes of autos exports forecast to increase by 47% over the medium term.
Automotives logistics in Thailand is an area DHL has highlighted that it wishes to expand its exposure to. The company is set to open a second automotives campus in Thailand in 2013.
Pharmaceuticals Demand: A Growth Area For Air
Another developing sector that will likely place further pressure on Thailand's logistics and freight sector is the pharmaceuticals industry. The pharmaceuticals sector is heavily reliant on air freight to meet its supply chain needs and so we believe Thailand's air freight market will need to expand over the medium term, with the country's pharmaceuticals imports and exports forecast to increase by 7.3% and 6.2%, respectively, over this period.