Strike Offers Downside Risk To Forecasts
BMI View: BMI believes that downside risk is presented to our freight transport forecasts for Argentina as a general strike has been implemented. Although the action is only scheduled to last for 24 hours the disruption to shipments could be severe. Further, the strike is not the first to take place in Argentina in recent years, and could impact upon future growth at the country's ports should shipping companies become wary with regards to the market.
The strike of November 21 was called by two of the country's largest unions, the CGT and the CTA. Both organisations have recently withdrawn support from Christina Kirchner's embattled government, and are seeking lower income taxes. Taking part in the strike are workers from a large number of sectors, many of which have a direct bearing on the freight transport industry; customs workers, agricultural staff, port administration employees are all involved.
In addition to the strikes, roadblocks were put in place around in the country, particularly around the capital, Buenos Aires. The effect of the absent workers and the roadblocks has been to shut down transport in much of the country. Inchcape Shipping Services' local subsidiary, ISS Argentina, has confirmed to customers that the strike will affect the country's ports, and ships are expected to be kept at anchorage for the duration.
|Downside Risk From Strike Action|
|Port of Buenos Aires Tonnage Throughput|
The strike offers downside risk to our throughput forecasts for Argentine ports. We are already bearish on the 2012 growth prospects for the country's largest port. In terms of total tonnage we forecast a decline in volumes of 2.2%, from an estimated 12.01mn tonnes in 2011 to 11.75mn tonnes. In terms of containers we see an even greater decline. According to the port authority, in the January to July period, the port handled 597,200 TEUs, 7.0% less than the 642,500 TEUs handled in the same period in 2011. Indeed, this is the lowest the seven-month total has stood at since the global economic crisis of 2009, and has led to our forecast of a 5.1% contraction in volumes this year.
With industrial action closing the port and causing delays, this might have to be revised down further. We acknowledge that 24 hours might not cause major damage to a port's throughput in the course of a year. However, the action could cause shipping companies to become wary of using the facility, fearful over future disruptions to their services. The Uruguayan port of Montevideo, just across the Rio Plata estuary, could become a more attractive proposition for major carriers, making Buenos Aires more reliant on feeder services.
It is not only ports that are affected. Both Argentine flag-carrier Aerolineas Argentinas, and Chilean/Brazilian airline LATAM have both had to cancel or reschedule flights to and from Argentina, and rail has been affected also as barricades have been set up over tracks. This offers similar downside risk to our growth forecasts for rail and air freight in 2012, which currently stand at 1.9% and 2.1% respectively.