Growth Set To Rise At Laem Chabang
Growth in box and total tonnage throughput at the Thai port of Laem Chabang, the largest in the country, will grow at a faster rate in 2014 than in 2013. We believe growth is set to remain healthy between 2014 and 2018, in line with our positive views on Thailand's macroeconomic outlook. However, there are risks from the continuing political impasse in the country between the government and the opposition movement.
We believe that total tonnage volumes at the port of Laem Chabang will rise 3.0%, to 69.08mn tonnes, this year, up from 67.07mn tonnes in 2013, when volumes rose 2.4%. This forecast is predicated on an improved trade forecast. We project that total trade will see real growth of 4.6% in 2014, following 2013's estimated expansion of 3.3%.
In terms of box handling, we forecast growth of 2.4%, following 1.9% in 2013. If realised this growth rate would see Laem Chabang handle 6.18mn twenty-foot equivalent units (TEUs) over the year. However, the political turmoil in the country means there are serious risks to all of our forecasts for Thailand at present, both on a macroeconomic level and in terms of the country's ports.
The country has been in political stalemate since general elections scheduled for February 2013 were disrupted by protests. This has had a devastating impact on investor confidence and economic growth, and with no signs of a possible resolution in the near term, we expect economic activity to remain depressed in H114.
Latest data published by the Bank of Thailand (BoT) show that the Thai economy expanded by 0.6% year-on-year (y-o-y) in Q413, translating into full-year growth of just 2.9% for 2013. Crucially, we highlight the sharp contraction in gross fixed capital formation (GFCF) and private consumption in Q413 (which fell 11.3% and 4.5% y-o-y respectively), which suggests that businesses and households are keeping their spending plans on hold as they await further clarity on the political situation.
|Political Risk To Port's Imports|
|Laem Chabang Throughput, Tonnes '000|
The latest data has reaffirmed our view that economic growth in Thailand will be weak in 2014, and we have downgraded our real GDP growth forecast from 3.8% to 3.2%.
The longer the political impasse continues, the greater risk to our growth forecasts at Laem Chabang in 2014. Over US$15bn that had been planned for investment into Thailand has been put on hold, according to the Financial Times.
Given that a considerable part of this investment was for infrastructure projects and for stocking of inventories, the political situation will impact both our gross tonnage outlook and our forecast for container handling over the year.
In terms of exports, however, especially for boxes, we see some upside potential from a forecast return to growth in the eurozone, following two years of economic contraction, and an ongoing recovery in the US.
Thailand is South East Asia's manufacturing hub, and a pickup in growth and consumer demand in these two key markets will help support exports of containerised goods through Laem Chabang. Upside risk to our box throughput outlook is also presented by the fact that the port has been added to the rotation of service operated by market-leading container shipping company Maersk Line.
In July 2013, it was announced that Maersk's Horn of Africa service was set to be extended to the Thai port. The extension will offer a direct linkage between Thailand and Port Sudan. The round-trip time will also be raised to 49 days from 42 days, and an addition of a seventh ship will take place to accommodate the extra steaming distance. The revised rotation of the service is Tanjung Pelepas, Jebel Ali, Djibouti, Jeddah, Port Sudan, Laem Chabang, Djibouti and Tanjung Pelepas.