Freight Diversification Offers Growth Potential
Belgium's freight transport sector will benefit from projected growth in freight as the country emerges from a double dip recession. Belgium is an established and developed freight market and so fewer growth opportunities exist compared with the emerging markets that BMI also covers. The country's freight sector has developed beyond catering for its relatively small population; it is heavily tied to catering for transshipment and transit, with the country's port of Antwerp one of the top three container facilities in Europe.
Belgium's freight transport operators face a brighter 2013 as the twin forces that placed pressure on the sector in 2012 start to recede; namely, domestic recession and the slowing demand for Belgium exports from its key eurozone trade partners.
Although projected to witness an expansion in its economic growth of just 0.38%, this will be viewed as positive in comparison to the 0.51% contraction that we estimate for 2012 and is the beginning of steady growth over the medium term, with Belgium's real GDP forecast to expand by an average projected 1.5% per annum.
Aiding this recovery is the positive outlook we hold for consumer demand, good news for freight transport operators exposed to the container sector (shipping, road haulage and rail haulage). The country's population level is set to remain static at around 10.8mn people but unemployment is coming down, thereby strengthening spending power.
|Domestic And Export Story Looking More Positive|
|Belgium and Eurozone Real GDP Growth, % Change y-o-y|
Belgium's export outlook, a core sector, which the country's freight transport operators cater for, is also looking more positive. Belgium's top three export partners are eurozone members. The eurozone is estimated to have dipped into recession in 2012, with a contraction of 0.7%. A slow but steady recovery is forecast to get underway in 2013, with real GDP forecast to grow by 0.5% and expand by an annual average of 1.5% over the medium term.
Belgium's three main export partners are its neighbours and so road, rail and inland waterway freight stand to benefit from the Eurozone's recovery. A wider European recovery will also benefit these modes, as well as Belgium's freight transport role in European freight transshipment and transit.
|Trading With Neighbours|
|LHC: Belgium Top Export Partners. RHC: Belgium Top Import Partners.|
Road: In Recovery But Diversification Is A Long-Term Trend
In line with our macroeconomic outlook, BMI believes that road freight volumes will once again start to increase after five consecutive years of decline. In 2013 we forecast freight volumes carried by road will grow by 0.52% to 281mn tonnes, the start of a recovery after road haulage volumes have been in decline since 2008.
Over the medium term we project this recovery to continue, with road freight volumes forecast to expand by 2.8%, an annual average increase of 0.55%, to reach a projected 287.3mn tonnes in 2017. After five consecutive years of decline however, we do not believe that the growth over the medium term will be strong enough for the sector to make a full recovery, with road freight volumes recorded at 352mn tonnes in 2007.
We believe this inability of Belgium's road freight sector to recover will be in part due to the country's relatively weak economic growth outlook, but also due to an EU-wide push for the removal of freight off road and onto rail and water.
The EU drive for greater diversification in the region's freight transport mix is being pushed as a means to decrease pollution and congestion issues on European roads.
BMI highlights that while road freight dominates, as it does in most European states, Belgium's freight transport mix is already fairly diversified with road predicted to account for 54.4% of the total freight carried in 2013. The country's inland waterways and rail networks also play a vital role in Belgium's freight transport mix, forecast to account for 34.3% and 11.3% respectively of total freight.
|Diverse, But Road Dominates|
|2013 Belgium Freight Transport Breakdown By Mode|
Over the medium term we believe that greater diversification in Belgium's freight transport sector will take place, with road freight's market share declining as those of inland waterway and rail increase. However, we do expect road to retain its dominate position in the freight mix over the medium term.
Inland Waterway: Already Playing A Major Role And Set For Further Expansion
As highlighted Belgium's inland waterways' freight role stands to benefit from the country's diversification away from road haulage. In 2013 we project that freight carried by waterway will account for 34.3% of the total, by 2017 we project this to increase to account for 35%.
|Inland Waterway In Line To Benefit From Move Away From Road|
|LHC: 2013 Belgium Freight Transport Breakdown By Mode. RHC: 2017 Belgium Freight Transport Breakdown By Mode|
The country's inland waterways already play a considerable role in the country's freight transport sector, with the mode the second-largest freight mode in Belgium's mix, unusually beating rail freight.
Belgium's inland waterway freight role has developed to the point of handling the second-largest amount of freight in the country despite having the smallest network, in comparison with road and rail at just 2,043km, of which 1,528km is in regular commercial use.
|Mode||Network Length (km)|
|Source: CIA World Factbook|
The country's waterways have developed to not only meet Belgium's internal freight needs, with the inland waterway network created out of the two main rivers that cross the state, the Scheldt and Meuse, but also as links to Belgium's neighbours; the Meuse links Belgium with its second and third-largest export partners: France and the Netherlands.
BMI also highlights that inland waterway connections on the river Scheldt link into Belgium's main port of Antwerp, which is a major transit and transshipment hub for container shipping in Northern Europe.
We believe that considerable growth opportunities exist in Belgium's inland waterway network. The mode stands to benefit greatly from further diversification in the country's freight transport mix away from road. The sector's links with neighbouring countries, which are also Belgium's main trade partners and their connection with another freight mode, namely maritime, offer even greater upside potential for development.
Our positive growth outlook for Belgium's freight network is also in evidence in our forecasts for the mode. As already highlighted we believe that as the push to move freight off road onto other modes, inland waterway's market share percentage in Belgium's freight mix will increase.
Following a year which saw an estimated slowdown in growth y-o-y at just 0.5% in 2012, we expect freight volumes on Belgium's inland waterways to pick up. In 2013 we forecast freight levels to expand by 1.8% to 176.9mn tonnes. Over the medium term we forecast a robust growth of 10.4% to lift freight volumes carried on the nation's inland waterways to 191.8mn tonnes, an annual average increase of 2%.
Rail: Prepared For Growth And To Pick Up The Slack
Ranked third in terms of BMI's forecast Belgium freight market share, with a projected 11.3% of the mix in 2013, rail freight growth will also benefit from the expected diversification of freight away from road.
This positive view is highlighted in our forecasts for rail freight volumes. In 2013 we predict rail freight cargo growth to strengthen with a y-o-y increase of 2.7%, up from an estimated growth of 1.6% in 2012 to reach 58.3mn tonnes in 2013. Over the medium term we project this growth to continue with rail freight volumes forecast to increase on average by 3.6%, a growth of 19.6% over the medium term forecast period to reach a projected 67.9mn tonnes in 2017.
BMI highlights that Belgium's railway network, which is well developed, will be able to take this extra strain. The country's railway stretches for 3,233km with 91.2% electrified.
|Country||Railway Network Length (km)||Railway Gauge|
|Source: CIA World Factbook|
|Belgium||3,233 km||Standard gauge|
|Netherlands||2,896 km||Standard gauge|
|Germany||41,981 km||Standard gauge|
|Luxembourg||275 km||Standard gauge|
|France||29,640 km||Standard gauge|
BMI also believes that the EU-wide push to move freight off the roads will also place further pressure on the European-wide rail network to take up the slack. This will impact Belgium's railway network as it plays a rail transit role, linking into its four neighbours' railway networks with a seamless connection, as these neighbours operate on the same standard-gauge system.
Air Freight: Hub Role To Drive Uptick
Belgium's aviation sector is well developed and the country, as in other freight modes, has expanded beyond catering for domestic demand to become a northern European hub for air freight, offering global connections.
As highlighted, Belgium offers strong land connections to Germany, France and the Netherlands; these have enabled the country's role as a transit nation to develop. BMI expects this trend to continue and offer further growth for the sector in the medium term.
In the short term the outlook for Belgium's air freight sector is one of recovery. In 2013 we project growth to strengthen, with a y-o-y increase of 3.9% to reach 1mn tonnes, up from an estimated 2.2% growth in 2013.
|Belgium Air Freight, '000 Tonnes and y-o-y % Change.|
Belgium's continued attraction to foreign operators is in evidence with Finnair Cargo announcing in January 2013 that it will increase its use of Brussels as a hub.
Over the medium term we project robust growth, as both regional and global air freight volumes pick back up. Between 2013-2017 we project Belgium's air freight volumes to increase by 30.5%, an annual average increase of 5.5% to reach 1.3mn tonnes in 2017.
Maritime: Regional Hub Role Driving Growth, But Must Continue Investing To Ensure Position
Belgium's ports have developed to become some of the largest in Europe. They also play a role in the global shipping supply chain. The country's maritime facilities (specifically the port of Antwerp) have developed well beyond solely catering for domestic demand, becoming major hubs and gateways for transshipment and transit within Europe.
According to 2011 data (2012 data is available for the port for the port of Antwerp, but not for all major northern European ports so making comparison difficult) Antwerp ranked as Europe's second-largest port in terms of total tonnage and 18th globally in 2011. In terms of container throughput the facility ranked third in Europe and 15th globally.
|Playing A Major Regional Role|
|LHC: Top Ten Europe Ports Total Tonnage Throughput (mn tonnes). RHC: Top Ten Europe Ports Total Container Throughput ('000 TEU)|
This regional and global role exposes them to global trade trends, as can be seen in the port of Antwerp's throughput for 2009, when during a global downturn in trade, total tonnage volumes and container throughput levels declined by 16.7% and 15.6% respectively. However, this role also exposes the country's ports to further growth opportunities.
To ensure that the port makes the most of these growth opportunities and retains its regional and global role, Antwerp must continue to adapt to shipping trends.
In April 2012, after dredging the Scheldt River, the port was able to handle the largest class of container vessel afloat at that time , the Edith Maersk. However, this puts the port considerably behind some of its peers, as by the end of 2012 its rivals of Zeebrugge, Rotterdam, Bremerhaven and Hamburg were all handling the current largest containership afloat, the CMA CGM Marco Polo. Antwerp will also be left off the rotation for the launch of the new largest container vessel, due to take place in June 2013, when the first of Maersk Line's 18,000TEU ships is due to come online.
In order to catch up Antwerp is seeking to increase its draught, with construction of the Deurganckdock lock underway, to ensure that the port can meet the new dimensions of ocean-going ships.
In another development area the port of Antwerp is out in front. The use of liquefied natural gas (LNG) as bunker fuel for ships has long been touted as an alternative to fuel oil. Sea trials of LNG-powered container ships are planned and so ports must keep up with this trend and ensure they have the facilities to re-fuel these ships. Antwerp is already ahead of the curve, bunkering its first barge ship in 2012.
The ability of Antwerp to keep up with shipping trends will ensure that throughput at the facility continues to increase. As highlighted, the port is heavily exposed to downturns in global and regional trade; in 2013 the port will be recovering from the 1.6% and 0.3% decline in tonnages and container respectively in 2012 as demand from Europe for containerised goods fell. In 2013 we forecast tonnage volumes to grow by 3.8% to 191mn tonnes and container throughput to increase by 5.7% to 9.1mn TEUs on the back of the improving macroeconomic outlook in Europe.
Over the medium term we forecast that the port's total tonnage throughput will grow by an annual average of 4.4%, 24% over the period to reach 228.5mn tonnes in 2017. Over the same period we predict container throughput levels to increase by 36.2% to reach 11.8mn TEUs, an annual average of 6.4%.