Poland's role in the global supply chain has rocketed. The country continues to be a major exporter of dry bulk commodities, specifically coal to its European neighbours, but increasingly, with the development of a consumer class, has become an importer of containerised goods. This has seen investment in Poland's ports and the country, once reliant on feeders, has been added as a direct call on a container service linking Asia with Europe. The projected cooling in the country's economic growth 2013 will be a worry for its logistics sector, but the country's development as a gateway into Central and Eastern Europe will ensure, in BMI's opinion, that Poland's freight transport operators are able to ride out this blip, with a brighter growth outlook in the medium term.
A weakening in Poland's robust growth story, with the country one of the few in Europe to avoid dipping into recession during the downturn, will be a worry for the freight transport sector. The country's economy, while still forecast to expand in 2013, will grow by just 1.9%, a slowing on the 2% and 4.3% growth that was recorded in 2012 and 2011 respectively.
| Getting Bumpy |
|Poland Real GDP Growth, % change y-o-y|
BMI believes that the major worry for freight transport operators in 2013 is the uncertain outlook of the Polish consumer, which has been a major driver in the logistics sector's growth in the last five years. A contraction in retail sales of 2.5% y-o-y occurred in December , which is deeper than at any point in the last five years.
We also highlight the uncertain outlook in Poland's key export market - the eurozone - which was behind the slowing in Poland's exports in 2012 with a growth of 2.1% y-o-y estimated , a slowing in comparison with the 7.5% growth in 2011. In 2012 we project a recovery to get underway, but warn it will be slow , with GDP real growth for the eurozone forecast at 0.5% y-o-y increase in 2013 following a dip into recession in 2012 when real GDP contracted by 0.7%. The positive growth outlook in the eurozone will , in BMI 's view , enable Poland's export growth to tick up by 4.3% in 2013, but BMI highlights the eurozone recovery is not yet assured and looks set to be bumpy.
| Export Fortunes Tied To Eurozone |
|Eurozone Real GDP Growth, % Change y-o-y and Poland Exports, Real Growth, % y-o-y|
Over the medium term (2013-2017) the outlook is a lot more positive for Poland's freight transport sector. Economic growth is forecast to pick up, with an annual average real GDP growth of 3.8% projected. Consumer indicators also look positive. The unemployment level is forecast to continue dropping from a projected 11% of the total workforce in 2013 to 8.3% in 2017. The percentage of Poland's active population, which makes up the country's workforce and consumers is also set to remain high at around 70%.
Poland's domestic demand and regional export role will continue to drive the country's logistic s sector growth ; BMI highlights that Poland's geographical position will also offer freight transport growth opportunities, which we are already witnessing and expect to continue over the medium term.
The development of the country's main port, Gdansk , into a direct port of call on an Asia-Europe route offers not only direct connections for Polish importers and exporters, but also logistics options for neighbouring countries. The port is steadily becoming a maritime gateway for containers into Central and Eastern Europe and is not only benefitting Poland's maritime sector, but is also boosting road freight and rail freight volumes via transit needs.
Road: Dominating The Mix
Like most countries in Europe road freight dominates Poland's freight transport mix, with the country's trade needs benefitting from road links with its seven neighbours, one of which is its main trade partner Germany.
| Trading Partners Close By |
|LHC: Poland's Export Partners. RHC: Poland's Import Partners|
In 2013 we forecast road freight to account for 83.4% of the total freight (road, rail and inland waterway freight volumes measured) carried in Poland in 2013 with 1.4bn tonnes forecast to be carried for that year. This marks a 1.8% increase y-o-y, a strengthening on 2012's estimated annual increase in road freight of 1.2%, as although Poland's domestic macro outlook is looking weaker , a gradual recovery in demand from its EU trade partners and the country's role as a gateway for transit freight will bolster road freight volume growth in 2013.
Over the medium term we forecast road freight volumes to grow by 21.8% to 1.6bn tonnes, an annual average of 4%. Over this period we also project road freight to increase its market share in Poland's freight transport mix although we would highlight that there is a downside risk to this specific projection.
| Road Reliant |
|Poland 2013 Freight Transport Breakdown|
The downside risk stems from pressure on EU members to decrease their reliance on road haulage, in a bid to tackle CO2 emissions and the growing problem of congestion on the region's motorways. Poland has a lot to do if it is to decrease its reliance on road freight, but BMI highlights further diversification and a more balanced freight transport mix would be in the country's best interest and would reduce risks to the supply chain - for example , if road haulers went on strike or major road s were blocked the country's logistics network would be adversely affected.
Rail: Greatest Growth Opportunities
The major beneficiary of any diversification away from road freight would be Poland's rail freight sector. Rail freight is projected to account for 16.4% of the total freight carried in Poland in 2013 and has developed not only to cater for the country's domestic transport needs, but also those of its export and transit supply chain. The country's rail freight network has attracted the interest of Europe's largest rail freight operator, with DB Schenker founding a Polish unit DB Schenker Rail Polska in 2001, which has increased competition in Poland's rail freight sector, although the national firm PKP Cargo still dominates.
In 2013 we forecast rail freight volumes to grow by 4.2% to 268.4mn tonnes , an increase on the 3.7% growth that we estimate for the sector in 2012.
Over the medium term we project a further growth of 21.9%, an annual average increase of 4%, which would take Poland's rail freight volumes to a projected 314mn tonnes.
Driving this growth is the diverse role rail freight plays in Poland's supply chain and developments by the companies that operate in the sector. Domestically , rail freight's role is dominated by catering for the internal and export transit needs for Poland's coal sector, with PKP Cargo recording that coal accounted for 44.8% of the total freight it carried in 2011 (latest available data). Poland is the world's ninth- largest producer of coal and the commodity is one of the nation's major exports and plays a dominate role in Poland's power sector, with BMI 's Power Team projecting that coal generation will account for 82.43% of total electricity generation in 2013.
| Coal Playing A Major Role |
|LHC: Top Ten Coal Producers (2011e) (Mt). RHC: Poland Power Generation, % of Total Electricity Generation.|
BMI highlights that the reliance on coal in Poland's power sector is gradually decreasing, although it will still take some time before another fuel source can take its place. Rail freight is already diversifying however, with the sector expanding its role in meeting the logistics needs of the container sector, which have developed as the number of the country's consumers has increased.
| Coal: The Major Cargo |
|PKP Cargo 2011 Cargo Breakdown|
Rail freight container options can be split into two; there is box rail, which transits Poland, and box trains, which link the country with its trade partners. Box trains now link Poland with Asia and Europe, including the UK.
This development has been in part spearheaded by the growing competition in Poland's rail freight market, a trend which has aided in driving rail freight growth and will continue to do so, with competition to be heightened further with plans in place for the privatisation of PKP Cargo.
BMI believes that our rail freight forecasts hold the greatest upside risk.
Inland Waterway: Small, But Still With A Role To Play
Although offering the smallest network coverage, 3,997 km compared to Poland's road network of 423,997 km and rail network measuring 19,428 km, the country's waterways have carved out their own role in Poland's logistics sector.
Poland Transport Network
| Transport Mode || Network Length (km) |
|Source: CIA World Factbook |
|Road ||423,997 km |
|Rail ||19,428 km |
|Inland Waterway ||3,997 km |
We project that Poland's inland waterway will only cater for 0.2% of the entire freight transport volume on Poland's transport network, but that this will equate to 3.3mn tonnes, a y-o-y increase of 2.7% in 2013.
Over the medium term we forecast freight volumes carried by inland waterway to increase by 14.8%, an annual average growth of 2.8% to reach 3.7mn tonnes in 2017.
Air Freight: International Interest Taking Off
Volumes of air freight are relatively small in comparison with other freight modes, but tend to be more high-value items, with BMI highlighting the pharmaceutical sector in Poland and its continued development as a potential impetus to growth in Poland's air freight sector.
In 2013 we forecast Poland's air freight volumes to grow by 3.47% y-o-y to reach 73,210 tonnes. Over the medium term we project air freight levels to increase by 40.9% to 99,710mn tonnes, an annual average of 7.12%.
| Interest Continues To Pick Up |
|Poland Air Freight, '000 Tonnes and y-o-y % Change|
The major driver of growth of the medium term, in BMI's view, will be international air freight operators' increased interest in the country. Poland's air freight links have already been well developed by the national carrier LOT Cargo and by European majors. As Poland's role in the global supply chain increases, BMI expects interest from Asian and Middle East carriers keen to link the country with these regional markets. We have already started to see this prediction start to play out, with UAE's Emirates Sky Cargo planning to launch a service between Warsaw and Algiers in March 2013.
Maritime: Maritime Gateway Role A Development Option
As highlighted above a major factor behind Poland's growing global logistics position is the development of the country's port sector, with the port of Gdansk able to handle some of the largest container ships afloat, an ability coupled with growing demand, which has seen the facility added an Asia-Europe route. This has meant that Poland's importers and exporters have been able to make time and cost savings by going direct instead of being completely reliant on feeders.
The investment and development of Poland's ports has also placed the country in the running to develop into a maritime gateway for central and Eastern Europe, further boosting Poland's role in the regional and global supply chain.
For more analysis and data on Poland's maritime sector please see BMI's Poland Shipping Report.